Liveblogging World War II: May 17, 1943
"Jilted"

Today's I-See-Bubbles Crowd

Usually the fact that Gillian Tett is an anthropologist rather than an economist serves her well. It means that she sees things that others do not see, and that she is sensitively attuned the beliefs and expectations of those who make up the economy.

Usually.

Most days.

But I do not think that today is one of those days.

An economist confronting today's I-See-Bubbles crowd would cast her mind back to the last major bubbles: the dot-com bubble that peaked in 2000 and the housing bubble that peaked in 2006. In both cases, market participants generally foresaw unprecedented future price increases while measures of fundamental yields--rents, and dividends plus stock buy-backs--we're at all-time lows. Today long-term Treasury yields are low in absolute terms but not low relative to short-term yields, and nobody is expecting a strong rally in long-term bonds. Today nobody is expecting anything like the rate of stock price appreciation that the loonies like George Gilder and their many many clients were firmly anticipating in 2000, And stock yields are high both in absolute and extraordinarily so in relative terms. Yet Gillian Tett hears today's I-See-Bubbles crowd and interprets what they say as information not just about their beliefs about the objective state of the markets.

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