Financial markets might be in distress and stocks are falling through the floor, but according to James Montier, global strategist at Societe Generale, we are not in the final stage of bubble burst yet. For one thing, the Financial Times is still too big.
At a fund managers conference in London today, Montier — a renowned bear — noted a thesis by economists Hyman Minsky and Charles Kindleberger that bubbles go through five stages — displacement, credit creation, euphoria, critical stage/financial distress and revulsion.
Every month, the financial services company State Street studies the trillions of dollars in institutional investor money it looks after as custodian and tries to gauge where things stand. Over the years, it has come up with a map consisting of five different regimes, or moods, to reflect this. They range from the bullish “Liquidity Abounds” in which investors buy equities and focus on growth, to the uber-risk averse “Riot Point”.
Every month, Merrill Lynch asks a few hundred fund managers around the world what they think of the state of things. Not surprisingly, this month’s survey is probably the gloomiest yet. Everyone, says Gary Baker, the strategist charged with explaining the poll, is a macro bear suffering from hyper risk-aversion.