EDITORIAL: Record market boom makes no noise
Have investors’ ‘animal spirits’ run wild?
On Monday, US economist Richard Thaler was awarded the Nobel Prize in Economic Sciences for his work on incorporating insights from psychology into economic theory and policy making. Thaler’s work encouraged the development of the new field of behavioural economics and inspired others to investigate ideas about the "animal spirits" John Maynard Keynes mentioned long ago. It’s an auspicious moment for Thaler to win the prize because this week stock markets around the world, including the JSE, hit records. Have investors’ "animal spirits" run wild? The Economist magazine points out that the cyclically adjusted price:earnings ratio — a useful measure of how expensive stocks have become — has been higher only twice before in history. Both ended in calamity. The first was the crash of 1929, then the dotcom bubble of 2000. Yet if you had to measure the level of nervousness in stock markets around the world, or the level of excitement for that matter, you would probably be disappointed. Th...
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