Actually your just wrong about that and the example I mention in the essay demonstrates it. I’ve spent 20 years studying these market phenomenon, and I know as much about it as anyone alive.
Asset bubbles don’t occur just because of low rates or cheap money. It’s a behavioral phenomenon specific to publicly traded markets. If my suggestion were implemented we would never see a situation where credit spreads got so tight because it would impossible to build a large enough consensus about future expectations to drive them there.
But I confess that one would really need to know an awful lot about how markets actually work to understand that at a glance.
If you’d like to learn something about it try reading “Knowledge and Decision” by Thomas Sowell, and the book I mentioned in the essay is also very good.
If I’m as smart as you say I am, how come I don’t see your example? I think the essay demonstrates that going long in natural gas while JP Morgan is going short will put a company out of business. I agree that the asset bubble is behavioral, but it is a result of the low spreads, not the cause. The spreads were lowered as people chased yield to the point of insanity, buying traunches of junk with a fake “AAA” rating insured with fake insurance. That kind of excess can only occur from the credit excesses, and it drives the asset bubble. Your notion of future expectations depends on the reality (or nonreality) of the asset pricing. That is good and will help dampen the bubble in the extreme situations. But my expectations are based on the Fed lowering short term rates, and eventually the Fed jiggering longer yields lower. That’s what ultimately drives the tight yields.