I ran across a great article in The Economist summarizing the current state of asset markets. Nothing earth-shattering in the article but it does summarize various issues and examines potential bubbles. As the year just started, investors are probably thinking about the same issues so I thought I would quote some key points from that article.
THE opening of the Burj Khalifa, the world’s tallest building, in Dubai on January 4th had symbolic as well as architectural significance. Skyscrapers have long been associated with the ends of financial booms. The Empire State Building opened in 1931, two years after the Wall Street crash. The Petronas towers in Kuala Lumpur were unveiled in 1998, in the depths of the Asian crisis. Such towers are commissioned when money is cheap and optimism about economic growth is at its height; they are often finished when the champagne has gone flat.
The past three decades have been good for skyscraper-building. The cost of borrowing money, in nominal terms, has fallen sharply (see chart 1).
Tags: bonds and credit instruments, China, economics, gold, market valuation, real estate