Seeing Bubbles Before They Burst
“Sell all exposure to the American mortgage securities market,” Christopher Wood advised clients in his weekly Greed & Fear. What’s interesting is that he said this back in October of 2005.
Wood has called the end of other financial bubbles. He urged investors to sell just as the Nasdaq tech wave was cresting in early 2000. Also, he sent out an alarm on the problems in Thailand before the 1997 currency devaluation brought about the Asian financial crisis.
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While a correspondent in Japan for the Economist, he wrote his first book, Boom and Bust: The Rise and Fall of World Financial Markets, published in 1988. His next book, The Bubble Economy, was first published in 1992 and updated in 2005. (It has been recommended by expats who moved to Japan and used to book to gain insight into the economic situation there).
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Wood believes the credit bubble is just as bad as the 2002 tech bubble and the Asian Bubble of the 80s. Why? The reason, he says, is “securitization” where mortgages and other loans are repackaged and sold to investors. Bubbles aren’t necessarily bad, however, he maintains. Another one in the offing is in the Asian markets but it will take several years to reach to burst, he says.
Greed & Fear runs about 10 pages long and has about 7,000 readers, most of them clients of Hong Kong-based brokerage CLSA Asia-Pacific Markets, majority-owned by French bank, Crédit Agricole. Wood has published Greed & Fear since 1996, taking it with him when he moved to different investment banks. He joined CLSA in 2002. Now based in Jakarta, the British-born Wood travels about ten months of the year.