Friday, June 10, 2011

Oh Yes We Can

Who says we can't spot a bubble?

1 comment:

Ken Houghton said...

Spotting a bubble is easy; I've noticed 9 of the last 5 of them...*

More seriously, Dean Baker correctly noted the housing bubble and sold his DC condo. I have a mate from B-School who did the same thing in Hoboken.

But both did it around 2003-2004--before the peak, and before the bursting.

It's a trade with implicit negative carry ("money left on the table") until it isn't.

Which is a fairly clear summary of the difference between the market and the "real world": the former is often irrational long after the latter has seen a marked shift in ex ante correct decision-making.

*Which is better performance than the WaPo, which appears to have only noticed one of the last five.