Question: How do you recognize a bubble that’s ready to burst?
The answer is twofold:
a. When people start going crazy over a certain asset—even the ones who couldn’t have cared less a year earlier.
b. When people start doing insane things with that particular asset.
For example, in 2006, I read that some homeowners were taking out home equity loans to purchase Super Bowl tickets.
Using your house as an ATM was just fine, because everybody knew that home prices would always go up. It was almost a natural law, like the sun rising in the East.
When I read the Super Bowl story, I remember thinking: This is going to crash.
That people were willing to risk the roof over their head to buy tickets for a football game (yes, even that football game) seemed to be the epitome of irrational exuberance.
This week, I had a similar A-ha moment when I first heard about Jesus Coin.