Where Will All the Money Go When All Three Market Bubbles Pop?

Summary:
Since the stock, bond and real estate markets are all correlated, it’s a question with no easy answer. The Everything Bubble Everyone who’s not paid to be in denial knows stocks, bonds and real estate are in bubbles of one sort or another. The Housing Bubble Real estate is either an echo bubble or a bubble that exceeds the previous bubble, depending on how attractive the market is to hot-money investors. S&P / Case-Shiller 20-City Composite Home Price Index(see more posts on S&P 500, ) - Click to enlarge Margin Debt Sustains the Bubbles Here’s a look at the inflation-adjusted S&P 500 (SPX) and margin debt: yep, a bubble. Margin Debt and S&P 500(see more posts on S&P 500 Index, ) - Click to enlarge Bonds Bubble With the Fed funds rate pinned to near-zero, bonds are in a bubble as well. One of the consequences of eight years of central bank easing and intervention is that these asset classes are tightly correlated. Free money for financiers has sought a yield wherever it can find one, and the result is every asset class with a yield has become tightly correlated. This moots the time-honored strategy of managing risk by shifting capital from an over-valued asset class into an under-valued asset class.

Topics:
Charles Hugh Smith considers the following as important: Featured, Housing Bubble, margin debt, newslettersent, Stock Market Bubble, The United States

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