- A remarkable feature of extended bull markets is that investors come to believe – even in the face of extreme valuations – that the world has changed in ways that make steep market losses and extended periods of poor returns impossible.
- The ironic truth of the current bubble is this: it’s not the effectiveness of Fed policy that rules out market losses. Rather, it’s the willingness of speculators to rule out market losses that makes Fed policy effective.
- The problem with a speculative bubble is that you can’t make the short-term outcomes better without making the long-term outcomes worse, and you can’t make the long-term outcomes better without making the short-term outcomes worse. Now it’s just an unfortunate situation.
For further details see:
The Folly Of Ruling Out A Collapse