As we listen to the financial channels during the day, it seems that every hour there is some interview with a pundit around the “AI bubble”. Having been through 2000 and 2009, we know one individual that is, in our humble opinion the Greatest of All Time when it comes to identifying the signs of a potential “bubble”. Tom has started a new book “ How stories go viral and drive major economic events”. Early in the book he mentions 12 signals that you may be entering bubble territory, so we went to Google Gemini to give us a summary of these signals. We are happy to discuss any, or all, of the below.

 

While a definitive, static "twelve signs" checklist isn't attributed to Robert Shiller, his work, particularly the seminal book Irrational Exuberance, outlines a comprehensive list of psychological and structural factors that define and fuel speculative asset bubbles. The following is a synthesis of the key behavioral and systemic indicators Shiller identified through his analysis of market history. 

 

The psychological drivers

 

1.    "New Era" theories: A bubble is often accompanied by a compelling narrative that justifies unprecedented price increases, claiming that traditional valuation measures are outdated because the economy or a particular industry has entered a "new era".

 

2.    Psychological contagion: Investor enthusiasm, spurred by news of rising prices, spreads through social and psychological feedback loops. This often includes herd behavior, where individuals invest because others are doing so, regardless of their own analysis.

 

3.    Envy and gambler's excitement: Stories of people making easy money in the market trigger feelings of envy and fear of missing out (FOMO) among those on the sidelines. This draws in an ever-wider class of inexperienced investors.

 

4.    Overconfidence and overvaluation: Investor optimism becomes excessive, leading to the belief that recent price gains will continue indefinitely. This pushes asset prices to levels far beyond their intrinsic, fundamental value.

 

5.    Media frenzy and amplification: The media plays a significant role in broadcasting stories of success, which helps spread the narrative and intensify public excitement. 
 

The structural and economic indicators

 

6.    Rapid price increases: A bubble is most obviously signaled by a sharp and significant increase in the price of an asset over a relatively short period.

 

7.    Elevated trading volume: High speculation drives trading volumes to unsustainable levels as investors seek quick gains, rather than holding assets for their long-term value.

 

8.    Decline in lending standards: The increase in speculative demand is often fueled by cheap and easy credit. Lenders lower their standards to accommodate a wider pool of buyers, as seen during the 2000s housing bubble with practices like "NINJA" loans (no income, no job, or assets).

 

9.    Increased leverage: Investors use high levels of margin debt and other forms of leverage to increase their purchasing power and magnify returns. This makes the entire system more vulnerable to a crash.

 

10.    Tortured rationalizations: As prices become increasingly detached from fundamentals, investors develop convoluted and flimsy arguments to justify the continued rise.

 

11.    Focus on capital gains: The narrative shifts from the asset's underlying value—like dividends or rent—to the expectation of future capital gains. Investors begin to see assets purely as speculative objects to be resold for a higher price.

 

12.    Increased inequality: Historically, periods of extreme asset bubbles have coincided with a growing wealth gap. As a bull market progresses, a disproportionate amount of wealth flows to those at the top. 

 

TAG Partners
Feature of the Month

 

Alison Pang, MTI

Senior Trust and Estate Consultant

 

Alison Pang, our Senior Trust and Estate Consultant, has worked closely with many of our clients and their families, guiding them through the complexities of estate planning. Her approach is rooted in her warmth, empathy, and deep expertise, as she seeks to understand each family’s unique needs and concerns.

Her goal is to provide families with the confidence and peace of mind that their estate plan is thoughtfully designed and expertly administered. She specializes in helping clients navigate the process of appointing CIBC Trust as an executor, trustee, or attorney for property, which are roles that can be both time-consuming and complex.

 

Alison’s Expertise and Approach

 

As your wealth grows and life gets more complicated, so does your estate plan. Alison draws on the expertise of our CIBC partners, recommends external professionals when needed, and acts as an objective third-party to help develop tailored and customized solutions for even the most complex estate and trust issues. 

 

Administering an estate, trust, or acting as an attorney for property requires knowledge across many areas and can be a significant burden for families. Recently, one of our client families met with Alison, and the next generation was relieved to learn that CIBC Trust can take on the responsibilities of estate administration, freeing them from the weight of the process and allowing them to focus on what matters most. 

 

We value our partnership with Alison and the work her team does for our clients. Estate planning is connected to many components of the Life Wheel, and Alison’s guidance helps ensure that your family’s future is secure.

 

T.A.G. Eats

Recently, our team had the pleasure of celebrating our fiscal year-end with a wonderful dinner together. Among the many things we share, great food is something that truly brings us all together—even Stu is starting to come around!

 

 

We were delighted to receive this list via email and thought it would be enjoyable to share with everyone. Each year, ten restaurants distinguish themselves above the rest, surprising and inspiring us while reminding us why dining is such a meaningful experience.

With outstanding cuisine, bold creativity, and a unique sense of place, these Top 10 restaurants embody the spirit of Canadian dining today and offer an exciting glimpse into its future. (Courtesy of Air Canada)
Let us know if you’ve tried any of these.   
                                                  
1.    Mystic (Halifax, N.S.) 
2.    Le Violin (Montreal, QC)
3.    Akin (Toronto, ON)
4.    Sushi Hyun Omakase (Vancouver, BC)
5.    Maven (Toronto, ON)
6.    Nero Tondo (Vancouver, BC)
7.    Yan Dining Room (Toronto, ON)
8.    Sumibiyaki Arashi (Vancouver, BC)
9.    Pasta Pooks (Montreal, QC)
10.    Niwa (Vancouver, BC)