""I don't pretend to be a bubble predicting genius, the Parrot and others said Apple was a bubble and I said bubbles are only obvious in retrospect.""
I used to think that you could only see bubbles in retrospect - but I think differently now.
I do NOT believe gold has been in a bubble or anywhere near it. Following is what I think was and is a bubble and how you can tell if you are in one. The example is real estate and I don't want to open up a discussion about real estate - my points are just about the beliefs involved in a long term rising market.
eg. Aussie residental real estate.
About late 1970's early 80's -- you buy a piece of land for say $7000 and you build a house on it for say about $14,000.
Right or wrong - that's the norm then.
In the 2000's - a complete reverse - you pay twice the cost of the house for the land it sits on.
A new norm - something has changed fundamentally.
All through until only a couple of years ago since the 1970's you FULLY EXPECT the real estate prices to be higher at the end of the year compared to the start of the year. If you do have a rare bad year - you JUST KNOW it will pick up next year or the year after at absolute worst.
You KNOW that if you borrow even to the hilt - that as long as you can afford the repayments - you WILL get capital growth - and not only that but MORE than indexation.
Now 'that' is a bubble - you are in it up to your neck and most haven't got a clue.
Now, to gold -------------------- has anyone felt like that in the last 10 years? None that I met.
Did gold have a massive parabolic blow off like the vast majority of bubbles? Nope.
Did gold have a manic phase where there were que's lined up into the street to buy? Nope.
Do all of your neighbours own gold for investment? Nope. In fact the majority haven't got a clue what the price is - even to the nearest $500.
Gold is as far from being in or been in a bubble as you can get.
It might go up or it might go down - but whatever it does it sure won't be a bubble bursting.
It may well go into a bubble - that is to be seen - and if it does? Just keep an eye on those day to day and year to year beliefs - you just might recognise them if you live long enough and you notice them.
