'To rise above one's wall of resistance is to bare witness far beyond the horizon, behind the veil of life'- DGGibson
Bubble Spotting- Remember the Carpenters Rule, Always Keep The Bubble in the Middle
Robert Shiller, a Professor of Economics at Yale University and Chief Economist of MacroMarkets LLC, is a frequent writer on market bubbles. He is one of several writers sharing intelligent economic views which can be read here . He is often asked where the next speculative market bubble is likely to be. Housing? The stock market? He admits he does not know for certain but does have some hunches. Robert’s Shiller’s view is that bubbles are social epidemics, fostered by a sort of interpersonal contagion. He states that a bubble forms when the contagion rate goes up for ideas that support a bubble. But he further states that contagion rates depend on patterns of thinking, which are difficult to judge. Besides the obvious choices for a bubble, Robert sees a favorite dark horse candidate for such an event- land values. Our preconceived notion that the housing market and farmland always move together are inaccurate. Robert states that,from 1911-2010, in the US, the co-relation between annual real growth of prices of homes and farmland was only 5%. Real farm prices have only fallen 5% from their 2008 prices levels vs. the 37% decline in real home prices since their peak in 2006. Since food abundance/shortages are the flavor of new stories, attention is directed to it with emotion.
So, why am I putting attention to this?