“The good news is that mankind clearly has the ability to suspend rational judgment long and often”
Good news, if you’re Bernie Madoff. The quote above was attributatble to erstwhile hedge fund manager Hugh Hendry on the eve of 2015, informing us that China GDP was imploding, an event that would soon ignite a powerful stock rally in China, I have to admit I was a tad skeptical at the time. He called this of course “the power of imagined realities”. And he was right, in spades. Within months the Shanghai composite was vertical and soon day-trading housewives were pouring their life savings into Chinese small caps. They went straight up, and straight down. Moreover, it was a harbinger of a global risk bubble that was about to implode. Fast forward to today, and the signature imagined reality of this era is/was Bitcoin.
Here we see Chinese small caps (red) circa 2015, and Bitcoin (blue) circa now. Identical. Biotech (grey) lagged a bit and then went risk off. Gamblers then sought the safe haven of big cap tech (lower pane), and then that imploded.