Irrational Exuberance.
December 6, 1996, with the NAZ at around 1000, Alan Greenspan shook the investment markets with his "Irrational Exuberance" speech.
Yes, the NAZ was at only 1000. Today it stands at just above 2300. We have all just seen the growth and bursting of a stock market bubble, the like of which we won't see again in our lifetimes, but we are still up over 100% from the level characterized as irrationally exuberant only four years ago. Perhaps this is why Alan Greenspan isn't loosening up, we're still too exuberant.
Where do we go from here? The 10 year chart for the NAZ is somewhat encouraging:
siliconinvestor.com
Draw a straight line through the first 7 years of that period, and extend it until today. We only just got back onto the 'normal' growth curve for the stock market during this ten year economic expansion.
Now for the scary bit. Do the same for this 20 year chart and you'll see we need to drop to around 1200 to include the recession years in the 1980's.
siliconinvestor.com
What does this all mean? Absolutely nothing. The market could go back to 1200, and Alan Greenspan could argue that it simply had no remaining irrational exuberance built in. It could go back up to 5000, and we'd all be slapping each other on the backs for our "good decision to ride this one out".
From here out, however, my guess (and it's only a guess), is that we've crossed the limit from whence we will start to recover, but slowly, and at sustainable rates.
And if we do manage to hit the 20-year line, at around 1200, then I'm buying everything I can get my hands on.
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