Asset Price Bubbles

Asset price bubbles are spontaneous communal Ponzi schemes: Early “investors” get their returns from later “investors”, not from any actual increase in the value of the “investment”.

There’s a fine line there, though, because the value of (for example) real estate does increase over time with scarcity relative to population, as well as other factors like (for example) somebody building Rockefeller Center next door. At some point any idiot can see you’re in a bubble, but “market value” is still usually a better proxy for “value” than any other information we have access too. I’d rather have occasional bubbles than permanent price controls.

I’m pretty sure there’s no actual value in that observation, but I wanted to practice typing.

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3 thoughts on “Asset Price Bubbles

  1. Buy what is valuable to you – instead of buying what other people tell you “might” increase in value.

    Just my two cents – no pun intended…

    • I agree. Greater-fool “investing” is a sucker’s game. Everybody I know who made money in the 90s NASDAQ bubble ended up losing at least half of it in the correction, and the ones who made the most lost it all.

      Virtually nobody has the balls to leave the table while he’s winning. But in a bubble, it’s the only way not to lose.

  2. The most interesting facet of ponzis is
    When CNBC shows its series
    “American Greed”
    89% of ALL ponzi schemes
    ARE RUN BY a certain
    1.4% segment of
    The population

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