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Mar 21

Asset bubbles

There has been a lot of talk about asset bubbles around the world despite the Global Financial Crisis still being with us. I thought I’d provide a list off the top of my head and perhaps this represents a list of where most downside investment risk resides…

  • Australian Residential Property…see Business Spectator article here
  • Gold…see Bookstaber’s blog here
  • Sovereign debt (European, Japanese, and US)…just read any newspaper
  • China (Shares and Property)
  • Emerging Markets

With private sector credit drying throughout the world and being replaced with public debt there is little surprise that sovereign debt is of concern. For those who are investing, clearly the funds are flowing into emerging markets, whose emergence from the GFC was significantly faster than the developed world. And, of course, Australia does what Australia does…invest in residential property…interesting article from Steve Kean in Business Spectator on Tuesday (click here)…although he overlooks the supply issues a little.

Anyway, to paraphrase Keynes, markets can stay irrational longer than most can say solvent, so we don’t know what’s next but keep a close eye on these asset classes.

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