The Souk Al-Manakh: The Anatomy of a Pure Price-Chasing Bubble

Levy Economics Institute, Working Papers Series

39 Pages Posted: 23 Mar 2021

See all articles by Frank Veneroso

Frank Veneroso

Bard College - Levy Economics Institute of Bard College

Mark Pasquali

affiliation not provided to SSRN

Date Written: March 22, 2021

Abstract

It is widely agreed that the Nasdaq during the dot-com era 20 years ago was a full-fledged stock market bubble. Recently, the US stock market according to many metrics has become significantly more speculative and overvalued than it was at the dot-com peak 20 years ago. In both instances, a very broad subset of stocks became so highly valued that speculation in them had to be untethered from all fundamentals: the essence of what we call a “pure price-chasing bubble.”

This paper, drawn from a book in progress, examines the history of stock markets for comparable pure price-chasing bubbles, finding nine or so which have ever reached such a speculative extreme, with an over-the-counter market in Kuwait in the early 1980s called the “Souk al-Manakh” representing the most extreme example. Based on my personal exposure to this Souk al-Manakh almost 40 years ago, I describe this anatomy and thereby make transparent the recurrent dynamics—on the way up and on the way down—of these greatest asset bubbles in human history. When one applies this framework to the current US stock market, one sees that the stock market in the US today will likely follow the disastrous path of the dot-com market.

Keywords: Asset Bubble, Stock Market, Over-the-Counter Markets, Price-Chasing Bubble, Conventions

JEL Classification: D84, E12, E5, E71, G1

Suggested Citation

Veneroso, Frank and Pasquali, Mark, The Souk Al-Manakh: The Anatomy of a Pure Price-Chasing Bubble (March 22, 2021). Levy Economics Institute, Working Papers Series, Available at SSRN: https://ssrn.com/abstract=3809955 or http://dx.doi.org/10.2139/ssrn.3809955

Frank Veneroso (Contact Author)

Bard College - Levy Economics Institute of Bard College ( email )

Blithewood
Annandale, NY 12405

Mark Pasquali

affiliation not provided to SSRN

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