Excessive Exuburence
July 10th 2007 04:50
Alan Greenspan's "Irrational Exuburence" quote in the 1990s was interpreted as a warning sign of an overvalued market. Conditions back then could be, especially the dot-com boom, seen as irrational. Can we still use his quote made slightly more than a decade ago?
Today we are sitting on top of high asset valuations that are not so much of being irrational but powered by excess liquidity seeking returns and generally buoyant economic conditions. It is a matter of supply not catching up with over-demand. Perhaps we are in the period "Excessive Exuburence" flaunting our excessive wealth worldwide enhanced by globalisation, technology and fundamental workings of capitalism.
There is nothing wrong with being excessive exuburent if it was done with prudence, after all it is rational to seek the highest utilily possible, but it would be better if the new level reached could be sustainable, borrowing the concept of "sustainable development", and therefore the question, "How long can the excess be sustainable?"
Traditionally, mid-year is a time correction and some sideway performance for the stock markets but will this year be another conventional repeat of ordinary historical performance? Lets take a glance at the current conditions.
Recent data has show that the S&P 500 index in the US is nearing 52-weeks high while in Hong Kong, investors are gearing up for possible corrections in the summer months. Surveys conducted by JP Asset management in Hong Kong reveal investors are limiting their equity invesments for the coming periods suggesting a greater sense of caution. Nearer to the equator, the Thai Baht rose to its strongest to a 10-year high driven by speculators. Try to remember what happened to Thailand a decade ago.
Back home the uemployment figures are at its lowest with the potential spark off a round of wage hike that could further add inflationary pressure to the economy already surrounded by creeping inflation. The end result would be the Australian Dream of owning a home, through mortgage, being dampened and cause many unhappy families. Not too long ago the local dollar soared to an 18-year high which could close the doors of many factories. Furthermore, new research reports revised the mid-term demand outlook for oil from 2007 to 2014 to increase to 2.2% from previously forecasted demand of 2%.
It is rather clear that almost everything is pointing the arrow up. On a more trivial scale, the price of the pu-er tea in China soared as much as 800% on the back of excessive speculation as individual investors seek alternative forms of investments which is a case of too much money chasing too few investment products.
The picture may seem pretty at first glance but a closer look is needed to spot the gathering dark clouds. Can all these excesses be sustained? For all we know, we could already be in the depth of "Excessive Exuburence" period when you hear common goods like tea are being fried (Chinese colloquial term for speculation) like Yangchow friedrice. Now, is this a bit irrational?
Your say.
Today we are sitting on top of high asset valuations that are not so much of being irrational but powered by excess liquidity seeking returns and generally buoyant economic conditions. It is a matter of supply not catching up with over-demand. Perhaps we are in the period "Excessive Exuburence" flaunting our excessive wealth worldwide enhanced by globalisation, technology and fundamental workings of capitalism.
There is nothing wrong with being excessive exuburent if it was done with prudence, after all it is rational to seek the highest utilily possible, but it would be better if the new level reached could be sustainable, borrowing the concept of "sustainable development", and therefore the question, "How long can the excess be sustainable?"
Traditionally, mid-year is a time correction and some sideway performance for the stock markets but will this year be another conventional repeat of ordinary historical performance? Lets take a glance at the current conditions.
Recent data has show that the S&P 500 index in the US is nearing 52-weeks high while in Hong Kong, investors are gearing up for possible corrections in the summer months. Surveys conducted by JP Asset management in Hong Kong reveal investors are limiting their equity invesments for the coming periods suggesting a greater sense of caution. Nearer to the equator, the Thai Baht rose to its strongest to a 10-year high driven by speculators. Try to remember what happened to Thailand a decade ago.
Back home the uemployment figures are at its lowest with the potential spark off a round of wage hike that could further add inflationary pressure to the economy already surrounded by creeping inflation. The end result would be the Australian Dream of owning a home, through mortgage, being dampened and cause many unhappy families. Not too long ago the local dollar soared to an 18-year high which could close the doors of many factories. Furthermore, new research reports revised the mid-term demand outlook for oil from 2007 to 2014 to increase to 2.2% from previously forecasted demand of 2%.
It is rather clear that almost everything is pointing the arrow up. On a more trivial scale, the price of the pu-er tea in China soared as much as 800% on the back of excessive speculation as individual investors seek alternative forms of investments which is a case of too much money chasing too few investment products.
The picture may seem pretty at first glance but a closer look is needed to spot the gathering dark clouds. Can all these excesses be sustained? For all we know, we could already be in the depth of "Excessive Exuburence" period when you hear common goods like tea are being fried (Chinese colloquial term for speculation) like Yangchow friedrice. Now, is this a bit irrational?
Your say.
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