Allan, i personally think a third way is a virtual impossibility. it would be a historic first. as i have mentioned in the past, a bubble needs ever increasing amounts of money and credit to keep going. as soon as that is overwhelmed by the paper on offer, i.e. the exhaustion point is reached, it simply bursts. the ingrained bubble psychology of course leads to violent counter trend rallies after it has burst, as people just can't let go of what seemed like a perpetuum mobile for making money.
the current US bubble hasn't really burst yet. aside from the Nasdaq, the big cap bubble is alive and well. once it bursts however, i expect it not to recover for years, maybe even a decade. it will take a long time to wring out the excesses and the malinvestment.
interestingly, the bubble in brand name stocks (eg. Kellogs, Philip Morris, Coke, Gilette,Procter and Gumball, etc.) HAS already burst. the icons of modern marketing have all been taken to the cleaners. that foreshadows perhaps what will happen to the market, and even society as a whole. the social and cultural phenomena and precepts of the bull market will give way to a different world...
technological progress will of course proceed apace nevertheless. and once the excesses have been cleared out and stocks are once again despised as an investment choice, the groundwork for the next big mania will have been laid.
regards,
hb |
