By Dennis Purcell, Founder and Senior Advisor, Aisling Capital LLC
“If something cannot go on forever, it will stop.”
— Herbert Stein
Herbert Stein, the noted economist, observed that when everyone believes that something won’t change, it most certainly will. Throughout economic history, irrational excess in valuations and costs of assets has been a common occurrence. Recent expressions of this phenomenon include the soaring interest rates in the 1970s, the dot-com bubble of the 1990s, the housing bubble in the early 2000s, and the oil price shocks. During all of these bubbles, the prevailing sentiment was that price rises would go on forever in spite of collective intuition and plain common sense. And, as Dr. Stein observed, all these bubbles not only ended, but reversed — generally in spectacular and, not infrequently, disastrous fashion.