In his interview earlier with year on the Invest Like The Best Podcast, Jeremy Grantham provided a great illustration of what happens in a bull market. Here’s an excerpt from the interview:
And the consequences will we might be approaching a rather similar Minsky moment in the not too distant future. You know the market tops out when in a sense the last bull has put his last money in. I know that’s an oversimplification. Everyone is getting a little richer all the time. Some people are. And so there’s always extra money can push the stock price. But in terms of a general cycle, there is a moment of maximum enthusiasm and the next day there’s plenty of enthusiasm but less than the previous day.
And so the the buying pressure is released a little bit like the famous water jets under the ping pong balls. You know, you turn the faucet down a little bit and the ball is still way up in the air, but it’s just dropped a couple of inches. It’s that process of slowly lowering the pressure and the overpriced ping pong ball, if you will, slowly descend until it hits the proper level.
You can listen to the entire interview here:
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