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11 Jan 2018 (AFR) – How long can this share market boom last? – It’s all about the psychology

(11 January 2018, AFR, p28, by Karen Maley)

‘As investors try to work out how long this stunning share market rally can possibly last, would they be better off consulting the history books, or even leafing through the annals of psychology, rather than listening to economists? The question occurred to me as I read the latest comments from Citigroup’s chief economist Willem Buiter.’ <snipped…>

‘His logic, what’s more, is impeccable. A huge sea-change is about to hit financial markets, with seven of the world’s biggest central banks to raise interest rates this year. At the same time, central banks are exiting the bond-buying business, with their net bond purchases set to drop to zero over coming months, down from $US180 billion a month in mid-2016. “Tighter monetary and financial conditions are a major risk,” he said. “We think the direct effect of global tapering on the real economy is limited, but major asset market corrections could trigger or cause a global slowdown.” The problem for Buiter, and economists more generally, is that they operate within the sphere of rationality, whereas emotion is the most powerful driver of bull markets.’ <snipper…>

‘… inner workings of bubbles…’

Read more at (might need AFR login access, or try:


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