It turns out, quite a lot. The ability of real assets to retain their inflation-adjusted value over time is hugely valuable. Relatively small differentials in annual returns can compound up into huge differences in outcomes over long periods of time. However, knowing whether an asset is in a bubble comes down to a debate about appropriate discount rates.
Markets are grinding higher and many investors are looking to call the top of the market cycle. In this light we ask ourselves what causes bubbles and more importantly how do we spot them? Over time I have collected a range of indicators that seek to have some predictive value in spotting bubbles emerging. I modestly call this the Heiligenberg Index.