Katja Taipalus: Detecting Asset Bubbles 12 Months Before the Burst
Taipalus said her model, or indicator, utilizes dividend yields along with rent and housing prices.
Regulators had some models and based their analysis on sectoral information, according to Taipalus.
“I’m convinced that a bubble is actually people believing that prices will go up and that they will be the ones who can exit the market before it crashes,” she said. “That thinking has been built into this indicator.”
SMA Comment: Ben Bernanke could learn something from this young lady. Remarkably, he claims to have missed the housing bubble developing in the years 2004-2006. He has now inflated another bubble in risk assets and will likely depart before it bursts and inflicts massive pain on the bottom 90%. However, Taipalus’ dream of predicting when the burst will occur is likely wishful thinking. Nonetheless, one can’t do much worse than the Federal Reserve.