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>> There is no mechanism that will force a quick contraction I'm curious - what do you think the mechanisms are for unraveling private investment over exuberan
by duncanawoods 12y ago
>> There is no mechanism that will force a quick contraction
I'm curious - what do you think the mechanisms are for unraveling private investment over exuberance?
Just for example, if we assumed that valuations are 100x above reality and things will continue getting worse for a few years. Is it effectively like sub-prime rather than 2000?
Sub-prime was pretty sudden with banks rushing to exit their positions. What could happen here? A couple of fire-sale IPOs and then all these investors have to admit their balance sheets are nonsense? Would this cause economic contagion or will it be the pension-funds that are left holding the bag?
- lmm 12y agoAIUI a lot of the private investment is sovereign wealth funds and wealthy individuals; some of it is large pension types but those are increasingly just indexing. Note how few hedge funds exploded in the 2008-9 crisis. Rather what we've seen from the hedge funds is several years of underwhelming returns. I wonder if part of that is slowly meting out the losses that they never declared back in '09. Banks are hopefully doing less of the big private investments? (I don't actually know). In that case this might be the kind of bubble, like the Tokyo property bubble of the late '80s, that never actually pops, just slowly deflates.