On 25 June, John offered a bottle of champagne for the best word for the opposite of a market bubble. This week, he reviews readers’ many entries and announces the winner
Life has changed for market participants over the past year. More time for reflection, less champagne. I completely underestimated the response to my offer of a bottle of bubbly for the best word to describe the bear market analogue of a bubble. Before dawn had broken in London, entries from Asia were speeding over the internet. Several hundred e-mails later, suggestions are still trickling in.
I thought it might be appropriate to base the rules on the interwar newspaper beauty competitions famously described by John Maynard Keynes, in which the winner was the contestant who chose the six faces most popular with all contestants. The result, Keynes observed, was that the task was not to choose the most beautiful face, but the face that average opinion would think that average opinion would find the most beautiful. In this way beliefs feed on themselves and become divorced from any underlying reality.
No better metaphor for the processes that can give rise to bubbles and anti-bubbles has ever been formulated. But under Keynes’ rules the runaway winner would have been elbbub – bubble reversed – and that did not quite do it for me. So I decided to seek fundamental value rather than be carried away by market momentum.
If a new coinage was to be the answer, my choice would have been David Osman’s suggestion of trubble, which has an attractive sound and a subtle allusion to Shakespeare’s witches’ brew. But I was looking for the features that make bubble such a powerful metaphor. Bubble involves the repeated “b”. It invokes size without substance. Bubbles attract people of all ages who have not quite grown up. Charles Monneron pointed out another critical requirement – the word must be short enough to be part of the vocabulary of Jim Cramer of CNBC.
A bubble inevitably contracts to nothing, but the anti-bubble snaps back to something, even if we are not sure what. Many physical analogues, as with vortex, whirlpool, implosion or crater, did not adequately capture this reversal. Phoenix goes too far in the opposite direction, suggesting that what finally emerges may be even more splendid than what went before.
Our readers are expert in cosmology. Collapsars, white dwarfs and singularities all seem to have characteristics familiar in financial markets. I am grateful to David Manheim for his suggestion of pair instability pre-supernova contraction, though I fear it fails the Cramer test. Still, if we developed it as an acronym into pipsqueak, it has the right sound and goes well with bubble.
Strong commendations go to several readers who, even if they did not come up with the best single-word descriptor, identified features of our current crisis. Sean Guerin pointed out that a sponge can be compressed to a tiny fraction of its initial volume and drenches whoever happens to be holding it at the time. Lawrence Kelty describes our travails as limbo, the anteroom to hell where nothing really happens. The image of Chuck Prince, Citigroup’s former chief executive, limbo dancing, reaching lower and lower beneath the stick without ever touching the floor, was almost worth the prize. Graham Cox was eloquent in his description of the Titanic. The process starts with a collision with something apparently small but actually large and immovable. The situation steadily deteriorates, the band plays on and those in authority give the false statements of reassurance everyone wants to hear. Finally the first-class passengers disembark, leaving others to drown.
But the most compelling image is surely the bungee. You are in free fall. You expect that fall will end and reverse before you hit the ground, but you do not know when. And bungee jumping offers the same kind of immature pleasure as blowing bubbles in the air. Five readers proposed this metaphor. But bungee is the cord, not the process. So copies of my collected columns, in two volumes, Everlasting Light Bulbs and The Hare & the Tortoise, go to the runners-up, Danny Callaghan, Rohan Chindooroy, Nicholas Shaxson and John Shemeld. And congratulations to Iain Martin for his winning entry – the bunge. Some champagne is on its way to Société Générale, where, I guess, it is in short supply these days.