Paul Lim and the Unwinding of a Bubble (It Takes a Long Time)

By on August 30, 2009

Paul Lim has written an article for the N.Y. Times which points out that the process of deflating a bubble is a very long process. The reason is that investors will usually return to the assets that were in a bubble after an initial deflation, only to get burned when the ultimate collapse follows. Lim uses the examples of the large cap growth companies which were trading at PEs over 40 in the late 1990’s, but didn’t reach their normal valuation until November 2008. The large cap growth names now appear to be relatively undervalued as small caps have risen to a significant premium.

Lim concludes that the winners from 2003 – 2007 which include commodities, emerging-market shares and real estate, could prove to be tough areas to make money in over the coming years.

Source:

http://www.nytimes.com/2009/08/30/your-money/stocks-and-bonds/30fund.html?ref=business
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