Description
One might think that years after the bursting of the speculative bubbles that led to the 2007–9 world financial crisis, we should be living in a distinctly different post-bubble world. One might think people would have “learned their lesson” and would not again pile into expanding markets, as so many did before the crisis, thereby worsening incipient bubbles. But evidence of bubbles has accelerated since the crisis. Valuations in the stock and bond markets have reached high levels in the United States and some other countries, and valuations in the housing market have been increasing rapidly in many countries.
All this has been occurring despite a disappointing world recovery from the financial crisis, an increasingly tense international situation—with deadly wars in Gaza, Iraq, Israel, Syria, and Ukraine—and a wave of potentially disruptive nationalist sentiment and political polarization in the United States, Europe, and Asia. As of this writing, the International Monetary Fund has just put out a warning of overheated housing markets in Asia, Europe, Latin America, and in Australia, Canada, and Israel.1 A similar warning has been issued by the Bank for International Settlements.2
The bubbly and apparently unstable situation warrants some concern, although not yet generally as extreme as when the first edition of this book issued a warning about the overpriced and vulnerable stock market (see the reprinted 2000 Preface below), or when the second edition of this book issued a warning about the overpriced and vulnerable housing market as well (see the reprinted 2005 Preface below).
By the time this book finds its way into the hands of readers, the markets may be in a very different situation. Markets can change very rapidly, and the optimistic pricing we see at the time of this writing (in October 2014) is hard to predict. Current pricing may not last long when compared with publication lag and the time needed for an issue to become part of readers’ agendas. But I am writing for future readers, years hence, who will read about the markets in the mid–second decade of the twenty-first century as just one of many examples described in the book—examples of broader tendencies and uncertainties.