In no particular order, these are some of the famous financiers warning that we are in a historic bubble.
They have decades of successful market experience and the billions to prove it.
Who’s on the other side? Cryptomaniacs, stock meme-ers, MMT-ers and the entire brokerage, fund management and investment banking industry (not surprising, that). What I find amazing is that the Fed is scrupulously avoiding the issue. Nothing, nada, zilch… not even a Greenspanesque “irrational exuberance”.
Dear Hell... I have been thinking about what you are saying about bubbles... and I think you may have missed something.... What we are seeing is not a bubble (at least in the usual sense).... It is a new reality... And the reason I say this is because I have seen something similar, albeit in a non financial market setting.ReplyDelete
Let me talk about academia, where the objective is to float new (correct) ideas... In most years, most ideas are somewhat flawed and some are just dead wrong... However, the few correct ones eventually gain more traction and are followed up. The resultant papers have more citations and their authors are celebrated for it.
Starting about ten years back, a bunch of researchers (unfortunately invariably Chinese), discovered that they can exploit social media to gain traction for bad or even wrong work... This phenomenon has exploded, with huge sub-fields that everyone privately agrees are ridiculous but have a life of their own... In fact, the percentage of nonsense every year is growing... My rough (conservative) estimate is that 70% of the current work is not put forward in good faith... A more aggressive estimate would put it at 99%.
We are seeing the same thing in politics too... ideas do not gain currency because they are right; they gain currency because they are popular... And social media makes it easy for really stupid ideas (Trump?) to become popular... What percentage of political ideas are not put forward in good faith? 70% or 99%?....
I think what we are seeing in the market is this same phenomenon. It used to be that when a politician lied (Nixon); or a researcher faked his papers / results; or a startup over promised; it would be impossible for he / she / it to gain traction.... No more... Will the bubble ever pop?... Maybe not.... The fake politicians and researchers are so powerful that they now control the system.... The stock market bubble is so big that it can influence monetary policy and force the Fed to keep printing, making its valuation a self-fulfilling promise...
Tesla is not a bubble... it is a promise of the world that is coming....
There is no question in my mind that markets today have a hugely outsized influence on the “real” economy, monetary and fiscal policies and ultimately politics. I’ve said this before, the tail is now wagging the dog.
But equity markets, in particular, are mostly a discount mechanism for future projections, aka prophesies or hopes.
Right now we have two elements working together to produce higher prices:
a) near zero interest rates, which mathematically result in higher present values of future earnings. That’s the “scientific” foundation of TINA.
b) a new generation of very young “investors” (video gamers) who have NEVER experienced a crash or, even worse, a long bear market.
I’ll leave it at that… a + b = ?
everything that goes up must come down.... but then there is an escape velocity...Delete
I suspect finance has an escape velocity too. The question now is whether we have hit that escape velocity...
Lest I forget, the QE new cash, now at some $5 billion per day every day, is the most immediate cause for the momentum bubble. So better to say a+b+c = …Delete
… escape velocity… love it! You could say that the QE cash is the rocket fuel that produces high g’s to escape gravity. But, unlike physics, money is a subject more suited to psychology and theology 😄😄Delete
yup! you got my intended meaning... =)Delete
This is what it's come to... sheesh!Delete
Have you noticed the Russell 2000 index meet-up of the past few days? Everything's gone insane.ReplyDelete
(Or full-retard as the meme stonk boys at WSB would call it.)Delete
*melt-up, not meet-up.Delete