By way of example, when the the UK was in recession the FTSE dropped to incredible lows, despite its constituents suffering (apart from the Banks) only mild distress, at times of strong positive psychology we get asset bubbles and the dot com boom.
Yesterday saw another outbreak of irrational markets in the world of Premier League Football. Across Europe clubs were spending as little as possible, with the highest transfer fee being £12 million.
In the UK, super rich Roman Abramovich decided his beloved Chelsea were in need of a refresh and spent £50 million on a Spanish Superstar who has not shined since injuries caught up with him and another expensive Portuguese player. Liverpool, owned by supposedly canny Americans, took this cash and spent all of it immediately and more; and on not one, but two replacements for Torres. One being Andy Carroll, a young English man famed as much for drinking and fighting as much as for his success (which is limited) on the pitch.
The power of fear, fear of not qualifying for the Champions League and fear of Manchester City's rich Sheikh's, drove these clubs mad. None of the players was worth the kind of UK record fees being paid; but in a tight market and with high pressure, poor decisions get made by supposedly clever people. They made these mistakes despite there being a litany of evidence suggesting that January transfers do not work out.
It certainly is an odd market the Premier League.
