Our City correspondent reads the tea leaves of the imminent economic meltdown.


Forever Blowing Bubbles

Our City insider tells us why the markets are behaving so damn strangely.

Something doesn’t smell right. More than a decade on from the last global crisis, financial markets are looking decidedly weird. Hordes of day traders are flooding the system with big bets on ropey companies. Crypto-currencies are rising and falling and rising again. Companies are able to stretch the truth through sneaky financial engineering. All of this weirdness indicates one thing: we’re in bubble town, and it looks like bursting.

The most famous historic example of a financial bubble is the Tulip Mania of the early 1600s. This began, rumour has it, when a Dutch botanist brought tulips back from Constantinople, looking to conduct research on the multicoloured flowers. His neighbours began stealing the exciting plants and selling them on to others in Holland. As the demand for tulips increased the price began to surge, reaching a peak in late 1636. And then in weeks it collapsed in spectacular fashion.

This pattern has often rippled through the financial markets. An asset becomes desirable. Everyone wants a piece of that desirable thing. The mood changes and sentiment sours. That souring becomes contagious, much like the desirability was. Suddenly no one wants bloody stupid tulips anymore.

Bubbles are likely to grow when there hasn’t been a financial crisis for a while, when people are at their most gung-ho with their money. They are really easy to spot retrospectively, but have historically been trickier to gauge as they are developing. But right now the world is not short of signs.

Bubbles thrive when assets are bought on faith rather than analysis; where stories are more impactful than financial results; in which charismatic leaders are trusted above all else; where critics are derided as people who just don’t get it; in which money is treated frivolously. It seems remarkably similar to the climate we’re in right now.

Here are a handful of signs we’re in a big fat bubble.

Everyone’s a trader

Since the pandemic began, there’s been a surge in people working from home, grabbing their phones and getting into trading stocks. Anecdotally speaking, everyone seems to think they are pretty bloody good at it. But obviously it’s very easy to be ‘pretty bloody good at stockpicking’ when the market is positive.

The day traders don’t act like the white-collar investors. They hunt in packs. They can stomach much more risk. They tend to eschew complex financial analysis for ‘what smells right’. The subthread on Reddit WallStreetBets, which defines itself as ‘like 4chan found a Bloomberg terminal’, became the day traders’ favourite place to share ideas.

Here’s a few of the more hopeful day traders I’ve bumped into over the last few months:

•      A masseuse from Guildford who spoke to me about ‘US meme stocks’

•      A delivery driver who had put half his cash in the crypto-currency Solana

•      A guy at a pub who’d got a Google Alert on Cathie Wood, the founder of ARK Invest, famous for making big bets on risky tech stocks

•      A vague friend who stopped investing in stocks as they ‘weren’t high-growth enough’ and put his money into trading vintage champagnes and wines on the so-called Bordeaux Index.

NFTs: Not Fucking Tenable

What do Salvador Dalí, Henri Matisse, Frida Kahlo, Edgar Degas, Johannes Vermeer, Georgia O’Keeffe and Francisco Goya have in common? Answer: no single piece of artwork of theirs has ever sold for more than a piece of work by an artist called Beeple.

Bitcoin Bonds

It would be hard to write an article about bubbles without referencing cryptocurrencies. It would be like writing about the seven dwarves without giving a hat-tip to Snow White.

Cryptocurrencies were once a pipe dream of libertarian anarchists in Silicon Valley. Even with the current dip, cryptocurrencies have under a trillion dollars worth of market cap.

Beyond the obvious insanity of an asset increasing its value 15,000 times over in the last five years, the latest news is that a clutch of pretty ropey countries have decided to make massive gambles on crypto-boom.

El Salvador announced its intention to sell $1bn of so-called Bitcoin bonds, after making Bitcoin legal tender. The leaders of the country said it plans to build a ‘Bitcoin city’ – a cryptopia if you will – at the base of a volcano called Conchagua. I wonder what the International Monetary Fund thinks of these fascinating plans.

Buy now, (hopefully) pay later

It’s really easy to have a surging business that offers the general public cheap and easy loans. But it’s really hard to make the business successful. That’s because if you offer someone a cheap loan, they’ll probably take it. But it doesn’t mean they’ll pay it back.

For centuries, gung-ho entrepreneurs have been trying to make buy-now, pay-later models work. The idea is quite simple: people often want things they can’t immediately afford. So if someone has the stomach to offer credit to those people, there will be plenty of demand and plenty of sales.

In walks Swedish buy-now-pay-later firm Klarna, one of Europe’s only tech companies known globally. Klarna makes it very easy for people on the street to rack up debts to pay for things like clothes and jewellery. Along with other firms like Affirm and Quadpay, Klarna is switching the old adage ‘if you can’t afford to buy it twice, don’t buy it at all’ to ‘if you can’t afford to buy it once, click a button and borrow the money’.

Anyone who’s watched The Big Short may remember the last time a large portion of the general public started signing up to debt they couldn’t afford to pay back. It didn’t end well – for everyone apart from those short sellers.


Special-purpose acquisition companies, a clunky phrase clunkily abbreviated to SPACs, are shell companies that look to acquire other companies. Without getting too technical, it works like this: an investor will launch a SPAC, get money from a bunch of different investors, buy a private company and then list it on the stock exchange, hopefully killing a cash cow for everyone.

They are obviously opaque, with often complex structures which are quietly lucrative for the people at the top at the expense of the people at the bottom. But, hey presto, in 2020 they were all the rage again, with more than £164 billion raised by SPACs since the pandemic began.

A ton of celebrities started jumping into the boom: Richard Branson and Bill Gates, Paul Ryan (Mitt Romney’s running mate), Jay Z, Serena Williams and Martha Stewart are also affiliated with different SPACs.

Warren Buffett, the renowned investor who is particularly critical of SPACs, once said that if you’ve played poker for half an hour and you still don’t know who the patsy is, you are the patsy. This may be worth thinking about if Celine Dion ever approaches you for investment.

Salt bubble

Nusret Gökçe, who otherwise goes by the moniker Salt Bae, is a Turkish chef- stroke-influencer that, among other things, puts salt on meat in a funny, idiosyncratic way. He opened a restaurant in Knightsbridge last year, which raised eyebrows for the extraordinarily high prices for the food on offer.

Its self-proclaimed ‘Crazy Menu’ offers diners steaks costing as much as £680. This is 14 times the value of the most expensive steak at the Savoy. A baby rocket salad will set you back £23. And you can wash it down with some Red Bull for £11.

A perfect climate for a bubble is when consumers, or a part of the general public, seem to not really care about money. Consumers have flocked to the restaurant often because it’s so expensive. The bubble isn’t that there’s a restaurant serving £680 steaks. It is that people are going to it.

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