Popular delusions in the everything bubble

The cruelest part of treacherous pricing cycles in asset markets is that the longer they persist, the smarter the reckless, oblivious and sociopathic players appear and the more the naive, gullible and greedy are sucked in–the more carnage is ‘locked-in’ for the future. The universal truth was ever thus: the higher the price we pay, the less we will receive in compensation and the more likely we will evaporate large chunks of savings in the process. Time to wake up. Wake up…before it’s too late, again.

This article from The New York Times yesterday reminds those who wish to see of the truly global nature of present asset bubbles. See: Welcome to the everything boom, or maybe everything bubble.

“Around the world, nearly every asset class is expensive by historical standards. Stocks and bonds; emerging markets and advanced economies; urban office towers and Iowa farmland; you name it, and it is trading at prices that are high by historical standards relative to fundamentals. The inverse of that is relatively low returns for investors.

…Safe assets, like United States Treasury bonds, have been offering investors paltry returns for years, ever since the global financial crisis. What has changed in the last two years is that risky assets, like stocks, junk bonds, real estate and emerging market bonds, have also joined the party.

Want to buy shares of American companies? At the current level of the Standard & Poor’s 500 index, every dollar invested in stocks buys you about 5.5 cents of corporate earnings, down from 7.4 cents two years ago — and lower than just before the global financial crisis in 2007-8.

Also see the story slide show here for an overview.

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