Over the next few weeks, I will be writing a series of pieces on trends in the global economic landscape, and what the implications of these trends are for investors. Before we begin, however, a brief history lesson is in order…
What goes up must come down
– Sir Isaac Newton (1642-1727)
Gravity is a conceptually simple, but mathematically complex physical phenomenon where in its presence, what goes up eventually must come down. Financial markets are no different, and our world is chock full of examples of speculative frenzies. While it is never fun to be involved when asset bubbles burst, history may provide some insight as to the conditions under which asset prices bubbles can develop, grow, and disappear. What I present below is a mere sketch of selected well-known asset bubbles. For more in-depth reading on the subject, I would recommend starting with Charles Kindleberger’s Manias, Panics, and Crashes: A History of Financial Crises.
