From Bubble to Bubble

Bubble to bubble - at www.moneyweek.com - the best of the international financial media

It seems like yesterday. But it's only been a little over five years since we were going through the same drill that is playing out today -- bemoaning the excesses of an asset bubble and hunkering down for the inevitable post-bubble shakeout. Five years ago, it was the equity bubble. Today, it's the property bubble. These are not isolated events. As night follows day, one bubble has spawned the next. And we have the Federal Reserve to thank for this grand continuum and the cumulative toll it is taking on the US economy. Sadly, as America lurches from bubble to bubble, the endgame is looking all the more treacherous.

The debate has an eerie sense of dj vu. Today, there are those who dispute the very existence of a US property bubble. Similarly, five years ago, there were many who argued that US equities were not over-valued -- that, in fact, they were fairly valued on the basis of the powerful earnings potential of a high-productivity growth New Economy. Today, we hear tales of a "fundamentally-driven" housing boom -- supported by increased homeownership, immigration, low unemployment, and, of course, low interest rates. And there are those who repeatedly caution against characterizing property as a broad asset class -- especially in the context of fragmented real estate markets that are always distinguished by their "local" idiosyncrasies.

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