Bears anxious, bulls victorious and a poll

Poll first. I am trying to work out how many readers I have. Google analytics may double count some folks who use different computers to access the site, therefore please take a millisecond to click ONCE on the poll to the right.

Now to the bubble graph I posted the graph a week or so ago:

http://fishyre.blogspot.com/2009/07/bubble-graphs.html

In the post I said that most bubbles follow this pattern though there are of course variations in shape and duration as the authorities try their best to keep the bubble inflated, having completely ignored it while it was being pumped up (and even taking credit for it).

I did mention that the bubble doesn't have to resolve this way but could plateau or run up again. In fact I have to admit that I do not recall any bubbles that have NOT burst in this manner. From railroads at the turn of the 20th century to the stock-market bubbles, gold, oil...every crazy run-up seems to follow this path.

For it not to follow this graph would suggest:

1) We are not in a bubble but are just moving up to fair market value

2) We still have more inflation to go in the bubble.

Clearly Vancouver RE was way underpricing on an international basis about 15 years ago. As we have moved up the ranks of the most expensive cities the same cannot be said now.

Could the bubble have further to go? Possibly. As I mentioned in one of my comments the dramatic drop in interest rates came as a result of the catastrophe that was unfolding in the US, and before the full effects were felt here. We therefore had the bounce in RE all across the country. However the effects are now being felt here with rising unemployment and bankruptcies.

If we do not get a bounce in the worldwide economy soon, we will feel it full brunt.

Our governments have already fired their bullets of low rates, increased spending and tax cuts. We have nothing left to throw at the fire.

Policy makers around the world, are doing what they have done best for years, try and prevent the cleansing action of a recession - which BTW punishes speculation and over-capacity- and by doing so have built up the mother-of-all-purges.

So I would not bank on the bull resuming, but of course I cannot completely rule it out.

In fact if you look at the graph, the time of maximum anxiety for bears is during the peaks of the bubble. Like Spring 2008 when bears where getting completely despondent, watching a US RE market melting down and ours hitting new highs.

There was a brief sense of relief and vindication from Summer 2008 to Winter 2009 and now the anxiety is back up to fever pitch as prices have stabilised and moved up. That is to be expected. This graph could chart human emotions, as much as the price of an asset.

Most bubbles end with a quick drop, a bounce and then a long drawn out downward path. We will know if that is our fate in a few months.