Thursday, July 24, 2014

No one is thinking clearly when everyone is thinking the same

Everyone thinks alike in the sense they say central banks will continue to print money and as a result asset prices will go up. When everyone thinks alike, no one is thinking clearly. 

We have seen cases where interest rates remain low or went down and markets still fell, like in Japan or the U.S. after March 2000. In 2001, they slashed the fed funds rate from 6.5% to 1%, yet the Nasdaq COMP +0.48%  still fell, the housing market still fell...the fact that you have low interest rates doesn't mean low asset prices cannot go down.