Matolcsy: The new tulip mania will also burst

English2021. feb. 3.GOVERNOR MATOLCSY100WORDS

In the U.S., retail investors led the dramatic market recovery from the Covid-19 shock resulting in the most remarkable bull run in financial history. /FT, Big Read. Equities, 3 December 2020/

One of them, actually. We had the tulip mania in Europe just 400 years ago, between 1634 and 1637. The main sources of both are the same: easy money, relatively sophisticated money/stock markets and human nature. At both times, the stock market rally developed into an "everything rally".

By definition it doesn't bode well for the future. Indeed, there is as much craziness now as there was in late 1999 or 1929 - soon the markets were hit both times.

In my view, the single most clear-cut warning is that only classic havens, like gold and US Treasuries have taken a hit.

Classics always need to be studied.

Governor Matolcsy, MNB, the Central Bank of Hungary

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