I would like to highlight the topic of asset bubbles and the numerous past posts I have written concerning them. This topic is particularly apropos given that my analysis indicates that various asset bubbles are very “mature,” i.e. very close to ending or “popping.” As well, I have been writing of my analysis concerning the building financial danger in the financial system, which also poses a grave danger to the sustenance of these asset bubbles. Among these mature asset bubbles are those in both the stock and bond markets.
There are two aspects of asset bubbles that are of great importance. The first is the impact such bubbles have on investors. The second is what impact these bubbles have on the overall economy.
It should be noted that asset bubbles are often widely seen as attractive and/or beneficial during their expansion phase. For instance, during the housing bubble, few people were wary of the “bubble” trend; in fact, the vast majority – including professional economists and policy makers – thought such price appreciation was “great” (i.e. highly beneficial), and such appreciation was “natural” as opposed to constituting a “bubble.” The vast majority also believed such house price appreciation would last indefinitely, with few risks posed. Exceedingly few (especially on a percentage basis) predicted the “top” of the bubble or the economic ramifications of its aftermath.
My analysis continues to indicate that the peril presented by the current asset bubbles can’t be overstated.
The Special Note summarizes my overall thoughts about our economic situation
SPX at 1314.53 as this post is written