Just how much have world stocks suffered in the past year or so? Try this. According to the World Federation of Exchanges, the market capitalisation of global stock markets has halved. It was $63 trillion in October 2007. At the end of January this year it was only $31 trillion.
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.