Investing: Every decade has its star
Globe and Mail Update
Last updated on Tuesday, Sep. 22, 2009 07:31PM EDT
CHART OF THE DAY
If the market meltdown of 2008-2009 threw you for a loop, you probably haven’t been around very long.
Independent market research firm BCA Research notes that in every decade since 1960, at least one asset class has formed a “bubble” – which it defines as a tenfold-plus price increase. Each time, a different asset class catches investors’ fancy. (While several asset classes showed bubble-like qualities in the past decade, BCA cites oil’s climb from barely $10 (U.S.) a barrel to nearly $150 as the most striking example. Today’s chart of the day shows a few others.)
At the root of all these bubbles, it says, is an overheated credit market– in which the oversupply of cheap money encourages speculation and fuels asset inflation.
BCA notes that U.S. credit growth “has been excessive for most of the post-war period” – hence the string of asset bubbles. One bursts, a new one comes up.
“Booms follow busts as sure as day follows night,” BCA says. “The only thing that changes is the object of speculation.” Regardless of where the next bubble surfaces, it won’t come until the credit market rebounds, it says.