Tyler Cowen: belief

Transcript context

…Rather than five. Is that a bubble? I can’t prove to you that that’s a bubble. That’s an expensive market versus history. So, most likely, when you take a whole bunch of expensive things and they get very expensive, and you put them together, you are right. You always can pick a most. But if you ask me the follow up question, “do you think it’s a bubble?” I will say no. I think it’s an expensive market. A bubble is something where you say this cannot last, and I would not say that. Let me tell you my biggest worry. Maybe you can set me at ease on it. I’m not ready to call it a bubble, but bubble related. I look at the carry trade. Companies, especially in emerging economies, borrowing in US dollars, typically at quite low rates, and forgetting a bit about future currency risk or future revenue and growth risk on their side. And there being this extreme flow of liquid financial capital into those companies, not really quite backed by forthcoming realities which will match the expectations behind that borrowing. I’m not sure exactly what’s the single asset price here I want to call a bubble, but that’s my biggest worry, where I think maybe the market isn’t pricing that whole combination correctly. Now, are you less worried than I am? I am less worried than you are. It’s hard for me to know how metaphysically worried you actually are.…

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