Jim Rogers: How to identify a bubble
Jim Rogers has been in the news a lot over the last couple of years, and one of the more recent issues he has been tackling has been the China housing market and whether it's in a bubble or not.
While he acknowledges the China housing market is overheated, especially in urban areas, it doesn't mean the Chinese economy as a whole is approaching a bubble.
What was important in this discussion is Rogers' instruction on what a bubble is (no matter what the sector).
Here's the official Jim Rogers definition of what a bubble is:
“Maybe you have too much inflation and credit creation. But that doesn’t mean there’s a bubble. A bubble is when everybody is buying everything every day, and people can hardly wait to get more.”
This is why Rogers correctly states that gold isn't in a bubble, as the average investor hasn't really began to invest in gold, making the idea of a bubble, as Rogers defines it above, largely irrelevant.
The bottom line when looking to see if a sector or company may be in a bubble (which I agree with), is if everyone has gotten on the bandwagon and is investing in it as a herd, with no other reason that everyone else is doing it.
Jim Rogers: How to identify a bubble
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