Wednesday , July 17 2019
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Jesse Colombo

Jesse Colombo

Analyst at Clarity Financial & Forbes contributor. Warns about dangerous bubbles. Recognized by the London Times for predicting the 2008 Financial Crisis.

Articles by Jesse Colombo

#WhatYouMissed On RIA This Past Week

19 days ago

We know you get busy and don’t check on our website as often as you might like. Plus, with so much content being pushed out every week from the RIA Team, we thought we would send you a weekly synopsis of everything that you might have missed.

The Best Of “The Lance Roberts Show”

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Podcast Interview Of The Week

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Our Best Tweets Of The Week

Just a matter of time before Trump/Mnuchin Tweet using Algo codes instead of english to get more direct results.— Michael Lebowitz, CFA (@michaellebowitz) June 26, 2019Our Latest Newsletter

What You Missed At RIA Pro

RIA Pro is our premium investment analysis, research, and data service. (Click here to try it now and get 30-days free)

See you next week!

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Trump Praising Today’s Stock Market Would Be Like Bush Praising Housing In 2006

21 days ago

Despite all of the controversies, drama, and staff turnover, one thing has been consistent throughout Trump’s presidency: his frequent praise of the stock market’s performance and taking credit for it. As someone who has been warning that our stock market boom is really a dangerous, debt-driven bubble that is going to end disastrously, I have been publicly cautioning that it is extremely unwise and irresponsible for President Trump to be encouraging and taking ownership of this irrational speculative boom. In this piece, I will explain why Trump’s praise of today’s stock market bubble would be like President George W. Bush praising the housing bubble in the mid-2000s before it crashed and sunk the country into a deep recession.

Trump uses the stock market as one of the main

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Why Interest Rates Don’t Need To Rise Much To Cause Recessions Now

23 days ago

As the probability of a U.S. recession in the next year grows rapidly (it may be as high as 64%), many bullish economists and financial commentators are unsurprisingly downplaying this risk. One of their main arguments is that interest rates have not been hiked aggressively enough to tip the economy over into a recession. While it is true that U.S. interest rates are still very low by historic standards, the reality is that rates do not have to rise anywhere near as high as they did in the past to cause recessions due to America’s debt load that has grown dramatically over the past several decades.

Since the early-1980s, total U.S. debt – both public and private – has been growing at a faster rate than the underlying economy, as measured by the nominal GDP:

As a result of debt

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#WhatYouMissed On RIA This Past Week

26 days ago

We know you get busy and don’t check on our website as often as you might like. Plus, with so much content being pushed out every week from the RIA Team, we thought we would send you a weekly synopsis of everything that you might have missed.

The Best Of “The Lance Roberts Show”

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Podcast Interview Of The Week

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Our Best Tweets Of The Week

Is it prospects for a recession or possibly war with Iran that pushed investors to buy today?— Michael Lebowitz, CFA (@michaellebowitz) June 20, 2019
In case you think that the surging stock market means that we have nothing to worry about and that the economy is wonderful, see Venezuela:https://t.co/m0RH9iDigk— Jesse Colombo (@TheBubbleBubble) June 18, 2019Our Latest Newsletter

What You Missed At RIA

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Trying To Prevent Recessions Leads To Even Worse Recessions

27 days ago

Deutsche Bank strategists Jim Reid and Craig Nicol wrote a report this week that echos what I and other Austrian School economists have been saying for many years: actions taken by governments and central banks to extend business cycles and prevent recessions lead to even more severe recessions in the end. MarketWatch reports –

The 10-year old economic expansion will set a record next month by becoming the longest ever. Great news, right? Maybe not, say strategists at Deutsche Bank.Prolonged expansions have become the norm since the early 1970s, when the tight link between the dollar and gold was broken. The last four expansions are among the six longest in U.S. history .Why so? Freed from the constraints of gold-backed currency, governments and central banks have grown far more

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Why The Odds Of A Recession In The Next Year Are Even Higher Than You Think

28 days ago

I recently wrote a piece that was widely read called “Why You Should Not Underestimate The Severity Of The Coming Recession.” In that piece, I argued that the odds of a recession in the not-too-distant future were increasing rapidly and that mainstream economists are incorrect for assuming that it will be a mere ebb of the business cycle rather than a more powerful economic crisis like we experienced in 2008 or even worse. The reason why I am worried about a much more powerful than usual recession is because of the tremendous risks – namely bubbles and debt – that have built up globally in the past decade due to ultra-stimulative central bank policies. In the current piece, I will argue that the probability of a recession in the next year is likely even higher than indicated by the

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#WhatYouMissed On RIA This Past Week

June 14, 2019

We know you get busy and don’t check on our website as often as you might like. Plus, with so much content being pushed out every week from the RIA Team, we thought we would send you a weekly synopsis of everything that you might have missed.

The Daily Blog

The Best Of “The Lance Roberts Show”

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Podcast Interview Of The Week

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Our Best Tweets Of The Week

Since 1995, 25 years ago, corporate income has tripled while taxes paid to the government by corporations has stayed the same. pic.twitter.com/TZEwQPuGQz— Michael Lebowitz, CFA (@michaellebowitz) June 12, 2019
So, these same economists are saying that we shouldn’t worry about bubbles after 10 years of record low global interest rates and trillions of dollars worth of QE. Yeah, that’s

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Why U.S. Commercial Real Estate Is Another Dangerous Bubble In The Making

June 14, 2019

While most people – including mainstream economists – seem to believe that our bubble problems ended when the U.S. housing bubble burst in 2008, the reality is that there are even more bubbles forming today than before the Great Recession. I listed the bubbles that I am warning about in a detailed piece that I wrote last week called “Why You Should Not Underestimate The Severity Of The Coming Recession.” I believe that the bursting of these numerous bubbles is likely to cause another recession that may be even more severe than the Great Recession was. In the current piece, I will discuss the bubble that is currently forming in U.S. commercial real estate and how it is likely to burst.

In order to understand the bubble that is currently forming in U.S. commercial real estate, it is

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Here Are The Recession Warning Signs To Watch

June 12, 2019

Last week, I wrote a detailed piece in which I explained that U.S. recession risk was rising quite rapidly and that the coming recession is likely to be far more severe than most economists expect because there are so many dangerous new bubbles inflating currently and because the global debt burden is much worse today than it was before the Great Recession. In the current piece, I will show more warning signs of the coming recession as well as discuss reliable recession indicators to keep an eye on as we get closer to the recession.

The first chart is of the New York Fed’s recession probability model, which is warning that there is a 27% probability of a U.S. recession in the next 12 months. The last time that recession odds were the same as they are now was in early-2007, which was

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#WhatYouMissed On RIA This Past Week

June 7, 2019

We know you get busy and don’t check on our website as often as you might like. Plus, with so much content being pushed out every week from the RIA Team, we thought we would send you a weekly synopsis of everything that you might have missed.

The Daily Blog

The Best Of “The Lance Roberts Show”

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Podcast Interview Of The Week

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Our Best Tweets Of The Week

Can we continue to borrow from the future? Our monetary and fiscal leaders say why not. We present 2 simple examples to show the flaw in their perverted logic. Our latest- Pulling Forward vs. Paying Forwardhttps://t.co/dJ8LsefQ21 pic.twitter.com/LBWxssraDu— Michael Lebowitz, CFA (@michaellebowitz) June 5, 2019Our Latest Newsletter

What You Missed At RIA Pro

RIA Pro is our

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Why You Should Not Underestimate The Severity Of The Coming Recession

June 7, 2019

The financial world has been buzzing nervously about the rapidly rising risk of a recession as warning signs mount. Though many mainstream economists and commentators are finally starting to concede that a recession in the next year or two is likely, almost all of them downplay the likely severity of the coming recession by saying “but it will be short-lived!” and “we’re due for a healthy slowdown after a ten year expansion!” (economists were saying the same thing in 2006 and 2007 too). My view, however, is that virtually everyone is underestimating the tremendous economic risks that have built up globally during the past decade of extremely stimulative monetary policies. I believe that these unknown risks are going to rear their ugly heads with a vengeance in the coming recession and

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The Trade War Is Threatening To Pop Hong Kong’s Property Bubble

June 6, 2019

The escalating trade war between the U.S. and China is creating numerous unintended consequences around the world and this conflict may only be in its infancy. One of those serious risks is that that the trade war may burst a massive property bubble that has been developing in Hong Kong over the past decade, as Bloomberg reports –

Record high home prices in Hong Kong have prompted some economists to forecast a bursting of the bubble.Residential property values in the city reached an all-time high last week after relentless gains over the past three months. Prices have risen by 8.6% since the beginning of the year, Centaline data show.However with Hong Kong exposed to the trade war between China and the U.S. and the city’s stock market taking a hit, analysts say the likelihood of home

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#WhatYouMissed On RIA This Past Week

May 31, 2019

We know you get busy and don’t check on our website as often as you should. Plus, with so much content being pushed out every week for the RIA Team we thought we would send you a weekly synopsis of everything that you might have missed.

The Daily Blog

The Best Of “The Lance Roberts Show”

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Podcast Interview Of The Week

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Our Best Tweets Of The Week

The S&P 500 has broken below its 2,800 support level I’ve been watching, which is a very worrisome sign (it’s at 2,784). I want to see if it can close below 2,800.https://t.co/AXwfFmtLv7— Jesse Colombo (@TheBubbleBubble) May 29, 2019Our Latest Newsletter

What You Missed At RIA PRO

RIA PRO is our premium investment analysis, research, and data service. (Click here to try it now and get

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The Automobile Bust Is Upon Us

May 31, 2019

The U.S. automobile sales boom has been one of the most important economic growth engines since the Great Recession. The boom kicked off with the federal government’s “cash for clunkers” rebate program and was fueled by cheap auto loans and leases, which were a result of the Federal Reserve’s ultra-low interest rates in the past decade. American consumers borrowed almost a half-trillion dollars to buy new cars in the past decade, which helped to pull struggling U.S. automakers out of the deep existential slump that they were in earlier this decade. Unfortunately, rising interest rates are putting an end to this debt-driven auto boom, which can be seen in rising auto loan delinquencies, a spike in auto industry layoffs, and sharply falling U.S. vehicle sales.

As the chart below shows,

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Why Tesla At $10 Is Not Far-Fetched

May 29, 2019

Last week, Morgan Stanley analyst Adam Jonas shocked the investing world by cutting his worst-case forecast for Tesla stock from $97 to just $10 per share (it was trading at approximately $200 per share at the time of the announcement). Jonas cited the company’s heavy debt load and exposure to China as the main reasons for his downgraded outlook –

“The reduction in our bear case to $10 is driven primarily by our concerns around Chinese demand for Tesla products.”“Our revised bear case assumes Tesla misses our current Chinese volume forecast by roughly half to account for the highly volatile trade situation in the region, particularly around areas of technology, which we believe run a high and increasing risk of government/regulatory attention.”

Tesla’s stock price has plunged by

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#WhatYouMissed On RIA This Past Week

May 24, 2019

We know you get busy and don’t check on our website as often as you should. Plus, with so much content being pushed out every week for the RIA Team we thought we would send you a weekly synopsis of everything that you might have missed.

The Daily Blog

The Best Of “The Lance Roberts Show”

[embedded content]
Podcast Interview Of The Week

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Our Best Tweets Of The Week

Tesla stock continues its plunge to multi-year lows. This action is not surprising – this stock’s high prices in recent years was the byproduct of the massive Fed-driven tech bubble. People are starting to wake up…$TSLA $TSLAQ pic.twitter.com/3alo1MYh0H— Jesse Colombo (@TheBubbleBubble) May 20, 2019Our Latest Newsletter

What You Missed At RIA PRO

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Watch This Pennant Pattern Forming In Bitcoin

May 24, 2019

One month ago, I pointed out that $6,000 was the key hurdle to watch in Bitcoin. I said that further gains were likely if Bitcoin could close convincingly above that level. Since then, it has exploded to over $8,000, where it has been struggling recently. Bitcoin may be forming a pennant pattern, which may lead to an even more powerful surge if the cryptocurrency can break out of this pattern in a decisive manner with high volume:

For now, I am waiting to see if Bitcoin can break out of this pattern.

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Here Are The Key Levels To Watch In The Market Right Now

May 24, 2019

Market volatility has reared its ugly head once again in recent weeks as the trade war with China took a turn for the worse and global economic data continues to weaken. On Thursday, the Dow lost 286.14 points, or 1.1%, the S&P 500 fell 34.03 points, or 1.2%, and the Nasdaq Composite dropped 122.56 points, or 1.6%. From a technical perspective, the S&P 500 is sitting just above a key support level at 2,800. The S&P 500 has bumped its head or bounced off of this levels quite a few times since early-2018. If the S&P 500 closes below 2,800 in a decisive manner, it would increase the likelihood of further downside.

The Dow Jones Industrial Average is sitting just above its 25,250 support level that it has bounced off of in recent months. If the Dow closes below this level in a convincing

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How Tech Unicorns Are Just Like China’s “Ghost Cities”

May 23, 2019

Since the Great Recession, there has been an explosion of interest and activity in the tech startup arena. Tens of thousands of tech startups have been founded in recent years and there are now over three hundred new “unicorn” startups that have valuations of $1 billion or more. The startup gold rush began as countless entrepreneurs attempted to follow in the footsteps of Facebook founder Mark Zuckerberg and the “Google Guys,” Larry Page and Sergey Brin. Unfortunately, the majority of today startups – including today’s hottest unicorns – are burning copious amounts of cash. In this piece, I will make the case that today’s startup phenomenon is very similar to China’s construction of countless empty “ghost cities” for the purpose of creating jobs and economic growth.

Though the U.S. was

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Record-Setting Art Sales Confirm Global Liquidity Bubble

May 17, 2019

Art and collectibles prices have exploded in the past decade as a result of the extremely frothy conditions created by central banks. Hardly a week goes by without news headlines being made about ugly, tacky, or just plain bizarre works of art fetching tens of millions, if not hundreds of millions, of dollars at auction houses like Sotheby’s and Christie’s (often sold to rich buyers in China or Hong Kong). Make no mistake: we’re currently experiencing a massive art bubble of the likes not seen since the Japan-driven art bubble of the late-1980s that ended disastrously. Two art market records were made in the past week: the $91.1 million “Rabbit” sculpture by Jeff Koons, which set the record for the highest amount paid for a piece of art by a living artist, and the sale of Monet’s ‘Meules’

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New Silicon Valley Stock Exchange Is A Warning Sign For The Startup Bubble

May 15, 2019

For the last several years, there has been a tremendous amount of activity and hype in the tech startup arena. In addition to the tens of thousands of startups that been founded in recent years, there are over three-hundred new “unicorn” startups that have valuations of $1 billion or more. Most of these unicorns came of out virtually nowhere and amassed tremendous valuations despite hemorrhaging cash, which is a tell-tale sign of a bubble. The recent announcement of a new Silicon Valley stock exchange for “hot startups, particularly those that are money-losing” is an indication of the amount of hubris and hype there is in the startup arena right now –

Long-Term Stock Exchange CEO Eric Ries

The U.S. Securities and Exchange Commission approved the creation of the Long-Term Stock

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Trump Is Asking For A 1999-Style Stock Market Melt-Up

May 10, 2019

Last week, President Donald Trump reiterated his call for the Fed to cut interest rates:

President Trump is technically correct in saying that the economy (or, more accurately, the stock market) would “go up like a rocket” if the Fed cut rates by 1%, but only because doing that would supercharge the dangerous bubbles that are driving our growth. If Trump theoretically got his way and the Fed cut rates by 1% (assuming it was a preemptive move rather than a reaction to a sharp economic slowdown), the stock market would most likely launch a powerful 1999-style melt-up, which would ultimately culminate in an equally devastating bust like we experienced in the early-2000s.

Here’s what led to the 1999 market melt-up: the Asian financial crisis, the Russian debt default, and the

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Beware Of The ‘Permanently High Plateau’ Fallacy

May 8, 2019

Last week, venture capitalist Chamath Palihapitiya said that central banks have virtually eliminated recessions through their aggressive monetary stimulus programs such as quantitative easing (QE) and record low interest rates –

“I don’t see a world in which we have any form of meaningful contraction nor any form of meaningful expansion. We have completely taken away the toolkit of how normal economies should work when we started with QE. I mean, the odds that there’s a recession anymore in any Western country of the world is almost next to impossible now, save a complete financial externality that we can’t forecast.”

Former Fed Chair Janet Yellen made a similar statement in 2017 –

“Would I say there will never, ever be another financial crisis? You know probably that would

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Here’s The Next Hurdle To Watch In Bitcoin

April 26, 2019

After Bitcoin’s poor performance since its peak in 2017, crypto bulls are getting excited again after Bitcoin surged 75% from its December lows. In order to help determine if this bullish trend has legs, Bitcoin hopefuls should watch the $6,000 resistance level that is just overhead. That $6,000 resistance levels was an important support level for much of 2018 until Bitcoin sliced below it in November and promptly dropped nearly 50%. If Bitcoin can manage a convincing close above $6,000, further gains are likely. On the other hand, if Bitcoin bumps its head at $6,000, it may fall back down and re-test the lows of the past few months.

The weekly chart shows the significance of Bitcoin’s $6,000 level:

For now, I am waiting to see if Bitcoin can stage a decisive close above $6,000. I

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Why Warning About A Bubble For A Decade Is Completely Rational

April 25, 2019

In my experience as someone who warns about the development of dangerous economic bubbles (both the mid-2000s U.S. housing bubble and the post-2009 “Everything Bubble“), I have been criticized literally thousands of times as the stock market surges year after year and the economy continues to grow. The criticisms typically take the form of “you’ve been warning about bubbles for years – you’re a broken clock!,” “you’re a permabear!,” and “you’ve been missing out on tons of profits!” I’ve heard every criticism in the book and I’m completely unfazed by them because those criticisms are based on misunderstandings of my approach and because I know that my analyses are correct.

The number one mistake that my critics make is assuming that I am calling to sell the market and go short at the

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Here’s The Painful Irony Of The FIRE Early-Retirement Movement

April 24, 2019

Over the past few years, a new movement has become popular with millennials: the Financial Independence/Retire Early, or FIRE, movement. Those who follow the FIRE lifestyle aspire to escape the soul-crushing rat race of debt, unfulfilling jobs, consumerism, and keeping up with the Joneses. FIRE movement members aim to achieve their goals through a combination of regular salaries, building additional entrepreneurial income streams, extreme frugality, and investing in the stock market. Considering the challenges we millennials have faced in the past decade due to the Great Recession and the increasing difficulty of attaining comfortable middle class lives, it’s not hard to understand the appeal of the FIRE philosophy. Unfortunately, there is a major blind spot in most FIRE disciples’ plans

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Contrarian Alert: “Is Inflation Dead?” Makes The Cover Of Businessweek

April 18, 2019

In the financial world, those who subscribe to the contrarian school of thought (including myself) keep an eye out for certain cues or indications that a trend has become overcrowded and is nearing its end. Some examples of these contrarian indicators are investor sentiment indexes, fear gauges such as the CBOE Volatility Index or VIX, the construction of record-breaking skyscrapers, and also the topics that are chosen for finance and business magazine covers. The last example is called the Magazine Cover Indicator and the logic behind it is that, by the time a trend has gained enough momentum or attention to justify its own cover story, it is about to become passé. In an infamous example, Businessweek published the cover story “The Death Of Equities” on August 13, 1979, right before the

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The Smart Money Are Bullish On Volatility Again

April 17, 2019

At the end of 2018, the global financial markets were reeling, the S&P 500 briefly fell into official bear market territory, and fear gauges were spiking. Sure enough, the Fed started to panic and backpedal on its previously hawkish tone regarding future rate hikes and quantitative tightening. Around the same time, Treasury Secretary Steven Mnuchin summoned the “Plunge Protection Team” or PPT to help shore up the U.S. financial markets. Since then, the S&P 500 is up over 24% and mainstream investors naively think “everything is great again!”  

As a result of the Fed’s flip-flop and resulting market surge, investors are very complacent once again (“why worry? the Fed has our backs!”). For example, the Volatility Index or VIX – a popular investor fear gauge – has been below 15 for the

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Where Is Inflation Hiding? In Asset Prices

April 15, 2019

A very dangerous fallacy has taken the world of economics by storm over the last several years: the idea that there is very little inflation in the U.S. economy, therefore interest rates should remain at unusually low levels for an even longer period of time. As I will prove in this piece, the people who believe in the “low inflation” myth are being fooled by the fact that inflation in this unusual, central bank-driven economic cycle is concentrated in asset prices rather than in consumer prices. By holding interest rates too low for too long, a massive asset bubble has inflated and is poised to inflate even further as long as economists and central banks like the Fed continue to be fooled by the “low inflation” myth. Unfortunately, the ultimate bursting of this unprecedented asset bubble

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“Bubble Drunk” Asian Millennials in Hoodies Blow $28 Million on Simpsons Art

April 10, 2019

During an economic bubble like the late-1990s dot-com bubble or the U.S. housing bubble, frivolous, hubristic investments and business decisions become appealing to many people who are what I call “bubble drunk.” In a bubble, money is flowing, the social mood is euphoric, and asset prices are surging – greed is the dominant emotion and risk is barely an afterthought. In this type of environment, speculation in art and collectibles becomes popular, often leading to an art bubble (for example, Japan’s bubble fueled an art bubble in the late-1980s). Of course, after a tremendous surge, the bubble eventually bursts and speculators are left holding works of art that are worth a fraction of what they paid. For the past several years, there has been an art bubble that has been primarily driven

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