Bubble, Bubble, Here Comes Trouble

The following chart neatly shows the various asset bubbles that have occurred since Nixon completely decoupled the dollar from gold in the 1970s.

Notice how the bubbles have increased in frequency;

  • the gold/oil bubble (~1980) and the NASDAQ tech bubble were separated by 18-years;
  • the housing bubble came 7-years later;
  • the oil bubble came 3-years later;
  • the gold bubble followed 4-years later;
  • and now, 5-years later, the NASDAQ (equities) could be forming the next bubble.

It is also interesting to note that the NASDAQ is well ahead of gold, housing, and oil in the formation of a bubble.

In addition to the NASDAQ bubbling at the moment, there are two other assets that have been inflating in tandem for the last 35 years: the S&P 500 and the 10-year bond (yield is inverse to price).

Both of these bubbles have been inflated by the loose money coming from central banks. There is NO CONNECTION to the real economy; earnings don’t matter, sales don’t matter, military coups don’t matter, cracks in the EU don’t matter. This is the stuff that bubbles are made of.

We all need to remember that bubbles always pop and release a whole lot of trouble.

ANG Traders

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Forty years of private equity trading, and still learning.

Forty years of private equity trading, and still learning.