Bloomberg Businessweek says”World markets are frothing like shaken Champagne, and doomsayers argue that today’s bubbles need to be deflated now before they get dangerously large.”
Peter Coy and Roben Farzad write that the prices of everything from U.S. farmland to cemetery sites in China have blown far beyond economic fundamentals. The S & P is trading at 23 times earnings and the historical average is 16. Doug Noland, who runs the Federated Prudent Bear Fund fears “this is the granddaddy of them all, an almost-encompassing bubble right at the heart of monetary systems.”
However the authors point out that Ben Bernanke isn’t concerned and Janet Yellen hasn’t said a thing about bubbles, and by the way She said the Fed has nothing to do with commodity price run ups. “She’s right,” Coy and Farzad contend: “Commodities aren’t being hoarded, as they would be if investors were speculating on them. Inventories have fallen since last summer.”
Jaume Ventura and Alberto Martin of Barcelona’s Universitat Pompeu Fabra are trotted out with their theory that bubbles are manifested optimism that generate growth, more hiring, investment and higher prices. “The bubble has costs. But you prefer the world with the bubble over the one without the bubble,” says Ventura.
CNBC favorite James W. Paulson of Wells Capital Management says markets are just greed and animal spirits, so bring on the bubbles, otherwise capitalism will be crushed.
Coy and Farzad write that good bubbles produce things that survive the crash, like…Amazon? No, they point to the Apollo space program?
Bad bubbles are like the mania in China for old wine, which only transfers “wealth to whoever was lucky enough to own the bottles before the Chinese got interested,” notes Harvard economist Edward Glaeser.
The current tech craze is no bubble, says Bloomberg, because this time it is different.
Considering whether Justin Bieber (among other things) is a bubble, Bloomberg provides this anlaysis:
JUSTIN BIEBER
Increase in Bieber’s Twitter followers over the past year, to almost 9 million: 450%Why It’s a Bubble: Someone paid $40,668 for the heartthrob’s hair clippings in a charity auction this year.
Not to Worry: L.A. Reid, the head of Island Def Jam, predicts Bieber “will go beyond the teenage puppy-love thing.”
Bloomberg doesn’t say whether Bieber is a good bubble or a bad one.
