How do you know there’s a bubble?

Oft-maligned Fed Chairman Greenspan was widely maligned once again for observing that you only know that there was a bubble in retrospect - when it bursts.

But he was perfectly correct.

The violent price action of a bursting bubble is the clue. Is the housing bubble really a bubble? We’ll soon see.

Every real estate industry spokesman is busy inventing a new lexicon - “stabilizing”, “tempering”, “levelling-out” and so forth. But the cake was taken by the guy interviewed on Bubblevision this morning who had taken advantage of Centex’s $100,000-off 12-hour sale on new houses. He had, therefore, “instant equity”. What doesn’t he understand about markets? When he hit the offer, that was probably the high tick for a while. It makes as much sense as the signs advertising “Below Market”.