Skip to main content


Showing posts with the label equities

Improving Economies Should Avoid Destructive Bubbles

Citi Analyst Rob Buckland published a diagram of the potential bubbles that are brewing in the credit and equities market. He sees markets moving into Phase 3 where unhealthy optimism is taking hold and people are failing to adjust to early signs of bubbles. If we continue to our course without adjusting and understanding where these bubbles are they will grow and potentially burst forcing the economy to reverse course. You may see his chart HERE . The phases are:  Phase 1: End of recession, interest is low and stocks are low.  Phase 2: Stocks rise in a bull market and credit speeds economic activity. Phase 3: Stocks are high, credit risks hedge, unhealthy optimism in stocks, early signs of bubbles show.  Phase 4: Low credit reverses value of stocks, credit and equities fall, lower company profits that cause a recession.  Economic bubbles are part of the boom and bust cycle of the economy. Economics define a bubble as an asset that’s prices can no longer be j