THe SUPER BUBBLE - How do you find value?

Ever since Paul Volker droves nominal interest rates up to the point that they reflected the real cost of money back in 1980 at 20 percent, every subsequent Federal Reserve Bank head has dropped rates systematically to compensate for economic woes.

Now we have zero percent interest rates with the Fed Heads here and in Europe perpetually buying stocks, bonds and funds to prop up zombie companies, busted municipalities, and a cronic lack of growth in the broad economy.

The so called Fed Put has driven up the asset prices across all asset classes to the point where the richest 10 people in the world now own more than the bottom 40 percent or 3 Billion people.  And what are those 10 people doing with all that?  Taking joy rides into outer space, as the media cheers them on.

The top 10 percent own about 75 percent of the world's wealth,

Every asset class has been driven into a super bubble.  Stocks, bonds, commodities. 

WHich brings us to Hard Assets.  Art, Classic cars, watches, Coins, baseball cards, rare books and documents, antiquities etc,

These have all benefited mightily from the same trend,  The difference with hard assets though is that at the high end, many of these things are unique.  There are several paintings by Da VInci you could try to buy.  They are all different.  Though certain cars or watches or baseball cards may appear the same,  they will be differntiated by condition and at the high end they may not be unique but may be one of five or ten in existence.  

The same is true with coins.  Especially hand struck ancient and medieval coins from engraved dies.  There may be a few that seem nearly identical but the strike and condition and often even the die will be materially different.

So how do you judge a bubble for unique or nealy unique itmes?

Well, it's difficult.  You can judge by past prices.  But when the central banks of the world have no choice but to perpetually and competitively debase their currencies, past prices are only of value in comparison to the real past value of the currency.

And it is not easy to determine the real rate of currency devaluation.  Especially not when the entire Financial Apparatus has a vital stake in hiding it, or at least downplaying it as far as possible.

Apart from that you can try to analyze comopents of value.  Popularity.  Historical Importance.  Aesthetic Excellence.  Rarity.

Popularity is most fickle.  Historical Importance takes the most education  Aesthetic Excellence requires a different type of education and can be hotly debated by experts and novices alike.   Rarity is probably the easiest for an expert to determine.

The best way to judge a bubble is to look at the level of Popuilarity,  If it is very high chances are the item will be in a bubble.  Everyone usually wants the same thing at the same time.

So if you are looking for Value in a bubble, it is probably best to go for Aesthetic Excellence, Historical Importance and Rarity,  And let Popularity discover the item in its own good time.

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