But, we never really know what the fundamentals are, other than they are
not too euphoric or not too pessimistic.
Julio Huato wrote:
I don't see the inconsistency in saying that speculation disconnects
asset prices from long-run fundamentals and that their collapse bring
them down to earth. In that sense, the up is like moving to a fantasy
world ("meaningless speculation") while the down is like coming back
to reality ("fraught with meaning"). We may not know with certainty
what the fundamentals are at a given time, but if there were no
fundamentals, how would we explain the system's permanence?
Just like extreme emotions unglued asset prices from their
fundamentals, extreme emotions may be snapping them back in place --
somewhat and temporarily.
--
Michael Perelman
Economics Department
California State University
michael at ecst.csuchico.edu
Chico, CA 95929
530-898-5321
fax 530-898-5901
www.michaelperelman.wordpress.com
