Tuesday, May 27, 2008

High Oil Prices Spur Thoughts About Bubbles,

Follow the link for complete text of this article.

Don't bubbles usually occur after several years of people crying "wolf"? When they burst you usually see a massive short capitulation and then hear those famous words, when it gets back to (name a price well above the market) I'm getting out.
clipped from online.wsj.com

A bubble, says The New Palgrave Dictionary of Economics, "refers to asset prices that exceed an asset's fundamental value because current owners believe they can resell the asset at an even higher price."

But figuring out whether a commodity exceeds its fundamental value is difficult: Because there is no income stream, there is no equivalent to the price-to-earnings ratios that people use to value stocks.
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