Higher starting valuations usually lead to lower returns, but the most important part of a bubble is “highly skewed psychology” – and investors remain anchored to sanity.
Sir Isaac Newton was one of the greatest scientists in history; he founded classical mechanics and the law of universal gravitation. For all that, he lost his life savings in the South Sea Bubble of 1720.
The analysis required to distinguishing the hot from the irrationally over-heated is about more than numbers, according to Ruffer’s Lauren French.
