Long run returns

upward phase. But they could also be a trigger for a deeper reversal. Here a harsh reappraisal of the Trump presidency may be an avalanche moment – the bursting of the Trump bubble.

A ‘Minsky Moment’, then? The term was named after economist Dr Hyman Minsky. It is describes the period when a market fails or falls into crisis after an extended period of market speculation or unsustainable growth. A Minsky moment is based on the idea that periods of speculation, if they last long enough, will eventually lead to crises.

Many critics of capitalism have focused on dramatic periods of volatility and turbulence in financial markets that spill over into the real economy as proof of its fundamental instability. But the real danger is to be found in the complacency created by long runs of rising values. It is the complacency, not the turbulence, that kills.

That said, not all bubbles end in busts. As Authers pointed out the other week, there are 460 examples of markets doubling in three years. In the following five years only 10.4 per cent of them halved.

Pricking bubbles before they get too big begins to look threadbare. In the UK in 1975 UK shares doubled that year – and trebled again by the end of the decade.

Attempting to time the market (sales and purchases) based on market valuation measurements more often ends in failure. Markets can easily grow even more overheated, proving the lugubrious conclusion of Maynard Keynes: “The market can remain irrational longer than you can remain solvent”. It is always a treat to read the Credit Suisse Global Investment Returns Year Book. The 2017 edition, released last week with statistics going back to 1900, is a mine of information. We learn that the total real return on an investment of $1 in US shares in 1900 would have