This blog is founded on the premise that ALL bubbles burst, sooner or later. The rule of thumb is pretty simple: to paraphrase the old Crazy Eddie TV ad, if prices are INSAAAAAANE then the bubble is to pop sooner rather than later.
And there is always some form of loony "fundamental" hype which pops up as "analysis" to goose things along and provide that last HURRAH that produces forced short position liquidation.
Cases in point:
- Peak Oil!, the theory that global oil production was about to peak and head inexorably down. A large number of innocents were caught up in this, even publishing thousands of articles in The Oil Drum, a site which propagated the scientific version of the hype. Oil zoomed to $145 per barrel and then melted down to $35.
- No Boats!, the notion that the world didn't have enough boats to carry the increasing cargo needs of China and other developing nations. Spot charter rates for large Capesize ships went as high as $150.000/day, and prices for new vessels skyrocketed to almost $200.000.000. There was a flood of newbuildings just as the economy went south and charter rates sank to$7.000/day.
- Bitcoins Are Best!, the belief that "regular" money was somehow unsafe and would eventually become worthless as a storehouse of value and wealth, whereas computer-generated cryptobits had rarity going for them. Duh... anyone with a computer could come up with a catchy name, generate a new crypto and go to town mining away - and did.
- Rule Brittania!, the idea that, somehow, in this globalized world a (now rather smallish) former empire can become Great again all by itself. This is different from the aforementioned cases, obviously ongoing - and Britons are ultimately sensible people. So, who knows.. they may yet come to their collective senses.
- Make XXX Great Again!, the wave of global populism is still in its early stages, I'm afraid, and has a lot of room to grow and become a poisonous bubble before it too - hopefully - bursts.