South Sea Company Bubble (Pre And Post Pop) Redux
In our holiday abbreviated week, there is one piece of data we wanted to highlight not so much to our constant, non-Fed originating readers, but to our constant-Federal Reserve fan base, with the hope that they may point it out to their chairman, whose recent remarks indicate that he is unaware of any bubbles forming anywhere. For a distinguished historian of Bernanke's stature, we are confident that he has heard of the original stock bubble, and in particular, the South Sea Company. The chart below demonstrates the relative indexed performance of the South Street Company and of Buffett darling, BYD (1211.HK). The Buffett investment is not alone: there are hundreds if not thousands of companies whose fundamentals, no matter how hard one tries, can never be spun enough to justify their ludicrous valuations. We all know what happened to the South Street Company. The only question remaining is when will the very first market bubble pop experience its most recent reincarnation in the form of BYD and all its brethren, whose only purpose in life is to make the top ticker, and so many others, lose fortunes (with a little nudging from the all seeing prop, and otherwise trading, market makers).
But why worry. This time it is different (someone is probably about to publish a book under that title), and all those who keep chasing the momentum are certain to find buyers when everyone turns seller, thank to the infinite liquidity provided by High Frequency Traders.
h/t Geoffrey Batt