December 27, 2005

The six characteristics of bubbles (check, check, check, check, check, check)

Besides the now-famous "Biggest Bubble Ever" article in the Economist earlier this year, I feel this article breaking down the six "bubble proofs" is an excellent read, from an albeit interesting source. Enjoy.

Merrill Lynch economist, David Rosenberg, identifies six characteristics of any kind of asset bubble:

1) Overheated prices
2) Over-ownership
3) Too much debt
4) Speculation
5) Complacency
6) Denial

Some, including famous investor Sir John Templeton, predict that, when the bubble bursts, housing prices will plummet at least 20 percent just for starters. He expects that 20 percent of homeowners with a mortgage will lose their homes when the bubble pops and has even told investors to prepare for a crash similar to the stock market crash of 1929 that led to the Great Depression! (Daily Reckoning, April 1 and August 18)


Anonymous said...

Funny, that article is over a year OLD. I agree with the analysis, however that advice could have lost a lot of opportunity over the last year.

keith said...

As any great investor will tell you - always sell too early.

Best advice I ever heard.

Anonymous said...

It is impossible to time a market.

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