8 ms·

The Everything Bubble [infographic]

tootie 9y ago
This is extremely unconvincing.
- TACIXAT 9y ago
  I don't know, these big numbers completely out of context are pretty intimidating. It feels a lot like when people talk about the national debt without putting it into context of GDP.
  - tootie 9y ago
    There's been a 211% increase in statistics being posted out of context.
  - madamelic 9y ago
    The housing index went from 53 to 453. Wooaaaaah. Totally on-board. A lot of these numbers are really silly. Comparing the # of UN recognized currencies to # of cryptocurrencies is like comparing the number of kindergarteners to the number of world-renowned physicists; it doesn't make sense. I could spin up a cryptocurrency in about 10 minutes, I can't do that with a UN-recognized currency.
lifeisstillgood 9y ago
Whoa - five stocks (Amazon, Facebook, google, Apple and ?) account for most of the gains in SP500 this year?! Seriously?
- empath75 9y ago
  Netflix
  - joubert 9y ago
    In fact, Netflix was the #1 performer twice in the last 5 years. https://www.fool.com/investing/general/2017/01/22/will-netflix-stock-be-the-sp-500s-top-gainer-in-20.aspx https://www.fool.com/investing/general/2017/01/22/will-netfl...
- traviscj 9y ago
  I'd buy that index.
  - deleted 9y ago
    [deleted]
- deleted 9y ago
  [deleted]
- jplewicke 9y ago
  It's actually completely normal for a small group of stocks to account for most of the index gains -- see https://www.aqr.com/cliffs-perspective/still-not-crazy-after-all-these-years https://www.aqr.com/cliffs-perspective/still-not-crazy-after... .
- tgb 9y ago
  This isn't what it looks like! Because when you take the whole S&P500 you get stocks that go up and stocks that go down. If you pick just stocks that go up, you can get numbers well over 100%. Or negative numbers - imagine if the S&P 500 had fallen slightly but Apple had gained slightly - you'd have that Apple was -1000% of the S&P500's gains! Though I just checked the data: in order to get past 100% with YTD from [1] you need to go to around top 112 companies, so my complaint isn't that valid. Only 159 of the S&P 500 lost value this year and almost all of those were very modest, so there isn't as large a cancellation as you might otherwise see. Nonetheless, you can always select the top performers and point out how they're outperforming the rest. If this were an honest infographic it would compare this value (% of total gains obtained by top N performers) to previous years. [1] https://www.investing.com/indices/us-spx-500-components https://www.investing.com/indices/us-spx-500-components
cjoh 9y ago
The great thing about predicting bubble bursts is eventually you’ll be right! (And if you’re wrong, so what)
0xcde4c3db 9y ago
I have no great difficulty believing we're due for another pop, but the only one of these that I find remotely alarming is the auto loan one. The rest seem to be one of: utterly irrelevant (number of cryptocurrencies in circulation?), lacking any frame of reference, or readily attributable to the economy still not being really recovered from the 2008 crisis.
- protonfish 9y ago
  I'm not concerned. Auto loans are inherently secured - they just repo your car. And unlike houses, auto prices are not drastically over valued.
  - heisenbit 9y ago
    The underlying assumptions of the value of the used cars may well be too optimistic particularly during a crisis period. That is not counting the systemic risk from regulation e.g. my diesel car is has lost considerable value and there is a non zero risk that I may not be allowed to drive to the city center in two years. The used car market for diesel cars tanked in Germany. The widespread adoption of electric vehicles makes calculating the remaining value of a car difficult for any period beyond 5 years. When the buyers fully understand that and factor that into discounting future values the regional used car markets will move a step down.
  - EvilGrin 9y ago
    So when they repo lots of cars due to a downturn the second hand market will crash. Which means the book value for all cars goes down the toilet.
    - sigstoat 9y ago
      > Which means the book value for all cars goes down the toilet. which isn't that big a deal, because average people aren't buying their cars as investments (or repeatedly refinancing them). your car still gets you to work just fine even if it is worth less than you owe. and that state of affairs would resolve itself in <5 years, even if you just bought it. > So when they repo lots of cars due to a downturn the second hand market will crash. that would only happen if folks could no longer service the debt on their vehicles. the amount of auto loan debt isn't evidence that will happen any time soon. folks were able to "suddenly" develop problems servicing their mortgage debt because they'd gotten adjustable rate mortgages. adjustable rate loans for automobiles are much less of a thing.
karllager 9y ago
Fun fact: Capitalism depends on crises - they are not the exception, they are the rule. People forget that and treat it as something that happens, like a natural catastrophe. This is unfortunate, because this is a purely man-made thing, but still, even the high end media is kind of left in the dark about this central theme (let alone economists, who sometimes get lost in the details of their specialisation). Now the real analytic question to ponder is: where exactly does this destructive element of capitalism originates from (left as an exercise for the reader).
- mercer 9y ago
  Well I'm glad you cleared all this up for us!
  - karllager 9y ago
    I'm sorry for being short on content, but I wish, more people would really go deeper into theory and open their eyes on the things around them and realize, that capitalism is an extremely aggressive beast that has sucked up everything, that is not itself. Three days ago, I wondered (time and again) about all the fuzz about this site called facebook - within ten years it took something, that was not really exploited (social relations) and made it a first class business. Startup hubs are still dreaming of the next social startup - meaning exploiting special kind of relations (neighbours, potential partners, coworkers, what have you). And we won't stop here. Think your dreams belong to you? Maybe today, but I can see large enterprises exploiting your very being for profit, soon. You find that disturbing? But why?
    - kristiandupont 9y ago
      There are several issues to be aware of with the way society and technology is evolving for sure, but when you just shout "wake up sheeple!" and offer nothing but hand waving, you are not contributing much in that regard.
      - karllager 9y ago
firebird84 9y ago
Meh to almost everything here except maybe housing. Corporate debt is high because DEBT IS STILL CHEAP (fed is changing that). Of course they're going to borrow fuckloads of money, it's practically free by some measures! The indexing "bubble" is actually a correction for a lack of value from active funds. I don't expect the correction to be corrected. The cryptocurrency bubble is tiny. 65 billion? That's a rounding error. 5 Stocks accounting for most of growth is troublesome when corrected, but still not catastrophic. If we lose ALL of that growth then we go back to 2016 levels? Ok.
- mcknz 9y ago
  > 5 Stocks accounting for most of growth is troublesome when corrected, but still not catastrophic. Yes -- this is the whole point of owning a broad index. You get exposure to the highest-performing stocks -- what those actual companies are changes over time. And there's usually another company to step up and fill the gap when one of the leaders falls.
- Toidiu 9y ago
  > Meh to almost everything here except maybe housing. Care to elaborate more on the housing.
  - Varcht 9y ago
    You know, the last 10 years? Housing bubble pops hurt, the rest? Meh
- thinkMOAR 9y ago
  practically free indeed, vs the practically have to pay for keeping my savings on a savings account... shrugs in discontent (tax is higher on my savings then the interest i get, for those that didn't understand)
  - oneeyedpigeon 9y ago
    You have to pay tax on your savings? What country are you in?
huntermeyer 9y ago
The VW logo above "BMW"...
- lvoudour 9y ago
  lol But honestly, I've grown tired with all the doom-and-gloom oracles every year, they irritate me much more than the "everything is fine, nothing to see here" ilk. And when a recession finally happens, you'll see all those broken watches on a daily basis in the media proclaiming they "predicted" it in 201x and nobody listened and I'll have to really hold myself not to smash the monitor... On a side note, who (apart from the few investing) cares if cryptocurrencies are a bubble? It's currently not even a footnote to the global economy
agentultra 9y ago
This infographic is about as useful as that "legendary investor" who claims the world is going to end in chaos every year. What indicators are predicting a "pop" or that this is a "bubble?" What exactly are they predicting will happen? Just seems like a lot of numbers and infographic fear mongering otherwise.
- BatFastard 9y ago
  And a lot of cherry picking of data.
guaka 9y ago
It is a fiat bubble.
jasonmaydie 9y ago
The "worth" of something is an irrelevant metric. What is the actual debt value?
thriftwy 9y ago
We have ever-increasing amount of money in the system (banks figure out ways to create money) But there isn't much real growth in useful, appreciating assets. E.g. most of production capacity these days operates with ever-thinner profit margins. Therefore money flows in a few vehicles still considered performing. Such as real estate. This creates a lot of bubbles in the absense of real growth. This is not unlike to when a ship sinks, everybody clutters at the ever-smaller area still over water.
smashingfiasco 9y ago
They missed the higher education bubble to include in the list.
- ianleeclark 9y ago
  It's not a bubble in the traditional sense, just a tremendous burden on up-and-coming generations.
bhouston 9y ago
This is sort of a mashup of ideas of varying quality. I think that you could make an infographic like this at any time in history.
relaunched 9y ago
Some of the debt statistics fail to account for the cash Corp America is holding on their balance sheets, so that's an incomplete picture. Also, I posit that a lot of the inflation in indexes relate to redistribution of wealth. When fewer people have more, they are willing to pay more for just about everything: cryptocurrencies, stocks, houses in prime areas, etc. Bubble status would require some proof points suggesting we have reached systematically unserviceable levels of an underlying fundamental.
- rayuela 9y ago
  I think that definition of Bubble status is only useful when looking at things in retrospect. Money is only drawn to an asset because at present it's valuation looks sustainable.
twobyfour 9y ago
The reason? Too much capital, not enough growth to invest in because demand isn't growing. Demand isn't growing because 60% of the population is barely scraping by. How do you increase demand? Roll back the tax cuts to the wealthy who have nowhere to put that money except into speculation and bubbles. Redistribute it back to the working class in the form of tax cuts, credits, higher minimum wage, and social programs. They will immediately put it to work by spending on things they need to get by. Demand increases. That money trickles back up to the wealthy who receive the profits from that spending, and invest it back into the industries where demand is actually growing. Voila, more growth, fewer bubbbles.
- Pxtl 9y ago
  The problem is that conservatives find working-class-specific programs offensive, and liberals construct elaborate social programs where a hefty chunk of cash vanishes into overhead. Just give the money back to the working poor - if the problem is a shortage of money in the economy creating demand, then put the money directly into the economy by the most direct method possible.
  - geon 9y ago
    coughUBI
    - VintageCool 9y ago
      cough EITC
      - geon 9y ago
        Wouldn't that be a "working-class-specific program"? My point was that UBI applies to everyone, an therefore is not specific to any group.
- saint_fiasco 9y ago
  Among the things that people can't afford and really need, the most common ones are healthcare and housing. The problem with giving people more money to stimulate demand for those things is that it only solves half of the problem. Healthcare is limited by the supply of doctors so no matter how much government subsidizes it, the amount of people who can be seen by the constant number of doctors will be the same. In practice, this means the price will increase every time you try to give people more money for healthcare. Housing is similar in that even if you give people money for new houses, everyone wants their house to be in a nice location and there are only so many houses that can fit in a constant amount of desirable real estate. Without reforms to medical school and medical residency programs, healthcare might never be affordable. Without reforms to zoning laws, housing might never be affordable. Without at least allowing for an increase to the supply of nice things, increasing the demand of nice things won't be very helpful.
FLUX-YOU 9y ago
"The Stock Index bubble" Okay, does that actually mean anything unless the companies maintaining the index portfolios are at risk of going under? Is Vanguard about to go bankrupt? (lololol)
EGreg 9y ago
Maybe the Austrian economists warning about easy credit were onto something... or maybe it's just crypto currencies?
lukewrites 9y ago
Why is more investors indexing a “bubble”? Is it just because of the growth line? While there surely must be some crappy indexes out there, one could argue that more indexing by (individual) investors is a sign of a more people understanding the difficulty of stock picking and harsh effects of management expenses on investment returns. I’m very happy indexing in my retirement portfolios, but am curious as to what the arguments against it are. The few I’ve read have seemed to be active fund managers scared at the prospect of losing their livelihood to a better product.
- mcguire 9y ago
  By definition, almost all investment money is in an index. What proportion of it is in low-cost index mutual funds vs. high-cost employer retirement and managed mutual funds is of interest only to the financial services industry, which makes more money in the latter case.
- colorint 9y ago
  >but am curious as to what the arguments against it are There's a "philosophical" problem to the effect of, at some point, what are you indexing? But what seems to me to be the more practical issue, and forgive me for this being half-formed, is that it seems like indexing is subtly the wrong thing to do (in a world consisting of only bad choices). The things being indexed are basically weights, for example, the relative capitalization of various stocks, based on some filtering criteria. In order to keep a fund on target with an index, they have to buy and sell according to those weights, and in principle, if the weights change, then the fund's holdings have to change accordingly. This would seem to me to introduce problems like, if there's a sell-off of some stock so that its price drops, then its capitalization will also drop (capitalization being number of shares times price per share), which would seem to reduce its weight in the index. This should then lead to index funds having a follow-on sell-off. (And likewise for exuberant buying.) So this would suggest to me that, if index funds come to dominate stock holdings, then they should both increase volatility, and result in their holders systematically "buying high and selling low." That is, because an index fund is not the same as an index, but it's in active feedback with the index computation method. There's also a potential issue, again depending on the level of buy-in, that one should see systematically increasing P/E ratios because of increased overall buying of stocks. That is, in the past, it was not typical for normal people to engage in regular stock purchases (which are held for decades). This would suggest lower dividend yields, which leaves one wondering whether 401ks will become what people think Social Security is, i.e., ever-rising P/Es serving as a transfer from the young to the old that requires continual workforce increases to maintain. Though I'm not in finance, these are just the things that occur to me in thinking, how would I implement an index fund, and what might that do to the system's dynamics.
akeck 9y ago
I prefer the Shiller PE for my doom-and-gloom. ;-) http://www.multpl.com/shiller-pe/ http://www.multpl.com/shiller-pe/
jgalt212 9y ago
ZIRP is the root of all evil.
ocfnash 9y ago
Can the figures for "Real Residential Housing Price Index for Canada" be correct? The quoted index values are: 2010: 36.3 2016: 413.9 I simply cannot believe there was an 11-fold price increase on this index over this period. Googling I cannot match either of these figures to various Canadian real estate indexes reported on the web.
molestrangler 9y ago
One issue: Big business have got drunk on low interest rates and corp. debt so cheap, making it very good for big business but negative for the majority of the worlds population. So they like to see interest rates to remain very low, and have leverage with governments saying their business it at serious risk if interest rates were to return to 'more sensible levels'. Which is kinda true! Also: People with sufficient savings or disposable income have choose one of the few obvious/easy investment options and buy into property, either upgrading or buying more properties. The wealthy who have access to good financial tools have also invested into property, both commercial and residential. Hence so many empty properties in London, that people complain about. Driving up the price, so further squeezing the population who are not able to follow. Hence the rise of Trump and others, promising to make America great again, cuz so many voters are being squeezed. Low interest rates is like a drug addiction, but the addicts (big business) are not the ones suffering. Hence the rise of popularism and the likes of Trump into powerful positions, but he is sitting on the side for businesses and not the person. He incorrectly believes recovery can only be found with big business, but I believe this just perpetuates the addiction. Interest rates need to rise (ouch!) and companies must be forced to pay the taxes they owe. Also giving individuals with big investments (risks) into property to exit gracefully without the property market crashing, which hurts everyone.
arbuge 9y ago
As bubbles go, this one seems rather localized. Looking at that infographic, one can see than in the real estate and stock market sections most clearly. In the former, most of the gains went to certain select markets, mostly in coastal cities. In the latter, most of the gains went to the usual few suspects such as AMZN, FB, and GOOG. It might follow that we might see localized bursting rather than a system-wide meltdown if this "bubble" pops.
mcguire 9y ago
"More cryptocurrencies than fiat currencies in circulation." Yeah. Well, no, that's a completely meaningless point. Even "marketcap" for Bitcoin is useless---a marketcap is the marginal price that the greatest current fool is willing to buy one thingy for, multiplied by the number of thingys. There may be too much money in cryptocurrencies, but this chart isn't showing that.
fludlight 9y ago
The increase in corporate debt is worth watching because most of that will have to be refinanced and is thus sensitive to rising interest rates. Much of the proceeds were used for questionable purposes like repurchasing stock near historic highs instead of investment in the underlying business. This is a proven way to boost short term stock price and EPS, but not so much the capacity to repay. That said, it's disingenuous to compare 10yr treasuries to indices comprised of bonds with a maturity of >=1yr. Issuance skews shorter term that 10 so those indices probably do, too.
chaoticmass 9y ago
Bitcoin 'market cap' is almost meaningless to compared to the market cap of a stock. It's a misleading term in this usage.
kirykl 9y ago
crypto will pop if/when interest rates rise
yuhong 9y ago
My favorite is the ad bubble of course. I have a Twitter thread discussing it with BrendanEich: https://twitter.com/BrendanEich/status/912750677331283968 https://twitter.com/BrendanEich/status/912750677331283968

This is extremely unconvincing.

TACIXAT 9y ago
I don't know, these big numbers completely out of context are pretty intimidating. It feels a lot like when people talk about the national debt without putting it into context of GDP.
- tootie 9y ago
  There's been a 211% increase in statistics being posted out of context.
- madamelic 9y ago
  The housing index went from 53 to 453. Wooaaaaah. Totally on-board. A lot of these numbers are really silly. Comparing the # of UN recognized currencies to # of cryptocurrencies is like comparing the number of kindergarteners to the number of world-renowned physicists; it doesn't make sense. I could spin up a cryptocurrency in about 10 minutes, I can't do that with a UN-recognized currency.

Whoa - five stocks (Amazon, Facebook, google, Apple and ?) account for most of the gains in SP500 this year?! Seriously?

empath75 9y ago
Netflix
- joubert 9y ago
  In fact, Netflix was the #1 performer twice in the last 5 years. https://www.fool.com/investing/general/2017/01/22/will-netflix-stock-be-the-sp-500s-top-gainer-in-20.aspx https://www.fool.com/investing/general/2017/01/22/will-netfl...
traviscj 9y ago
I'd buy that index.
- deleted 9y ago
  [deleted]
deleted 9y ago
[deleted]
jplewicke 9y ago
It's actually completely normal for a small group of stocks to account for most of the index gains -- see https://www.aqr.com/cliffs-perspective/still-not-crazy-after-all-these-years https://www.aqr.com/cliffs-perspective/still-not-crazy-after... .
tgb 9y ago
This isn't what it looks like! Because when you take the whole S&P500 you get stocks that go up and stocks that go down. If you pick just stocks that go up, you can get numbers well over 100%. Or negative numbers - imagine if the S&P 500 had fallen slightly but Apple had gained slightly - you'd have that Apple was -1000% of the S&P500's gains! Though I just checked the data: in order to get past 100% with YTD from [1] you need to go to around top 112 companies, so my complaint isn't that valid. Only 159 of the S&P 500 lost value this year and almost all of those were very modest, so there isn't as large a cancellation as you might otherwise see. Nonetheless, you can always select the top performers and point out how they're outperforming the rest. If this were an honest infographic it would compare this value (% of total gains obtained by top N performers) to previous years. [1] https://www.investing.com/indices/us-spx-500-components https://www.investing.com/indices/us-spx-500-components

cjoh 9y ago

The great thing about predicting bubble bursts is eventually you’ll be right! (And if you’re wrong, so what)

0xcde4c3db 9y ago

I have no great difficulty believing we're due for another pop, but the only one of these that I find remotely alarming is the auto loan one. The rest seem to be one of: utterly irrelevant (number of cryptocurrencies in circulation?), lacking any frame of reference, or readily attributable to the economy still not being really recovered from the 2008 crisis.

protonfish 9y ago
I'm not concerned. Auto loans are inherently secured - they just repo your car. And unlike houses, auto prices are not drastically over valued.
- heisenbit 9y ago
  The underlying assumptions of the value of the used cars may well be too optimistic particularly during a crisis period. That is not counting the systemic risk from regulation e.g. my diesel car is has lost considerable value and there is a non zero risk that I may not be allowed to drive to the city center in two years. The used car market for diesel cars tanked in Germany. The widespread adoption of electric vehicles makes calculating the remaining value of a car difficult for any period beyond 5 years. When the buyers fully understand that and factor that into discounting future values the regional used car markets will move a step down.
- EvilGrin 9y ago
  So when they repo lots of cars due to a downturn the second hand market will crash. Which means the book value for all cars goes down the toilet.
  - sigstoat 9y ago
    > Which means the book value for all cars goes down the toilet. which isn't that big a deal, because average people aren't buying their cars as investments (or repeatedly refinancing them). your car still gets you to work just fine even if it is worth less than you owe. and that state of affairs would resolve itself in <5 years, even if you just bought it. > So when they repo lots of cars due to a downturn the second hand market will crash. that would only happen if folks could no longer service the debt on their vehicles. the amount of auto loan debt isn't evidence that will happen any time soon. folks were able to "suddenly" develop problems servicing their mortgage debt because they'd gotten adjustable rate mortgages. adjustable rate loans for automobiles are much less of a thing.

karllager 9y ago

Fun fact: Capitalism depends on crises - they are not the exception, they are the rule. People forget that and treat it as something that happens, like a natural catastrophe. This is unfortunate, because this is a purely man-made thing, but still, even the high end media is kind of left in the dark about this central theme (let alone economists, who sometimes get lost in the details of their specialisation). Now the real analytic question to ponder is: where exactly does this destructive element of capitalism originates from (left as an exercise for the reader).

mercer 9y ago
Well I'm glad you cleared all this up for us!
- karllager 9y ago
  I'm sorry for being short on content, but I wish, more people would really go deeper into theory and open their eyes on the things around them and realize, that capitalism is an extremely aggressive beast that has sucked up everything, that is not itself. Three days ago, I wondered (time and again) about all the fuzz about this site called facebook - within ten years it took something, that was not really exploited (social relations) and made it a first class business. Startup hubs are still dreaming of the next social startup - meaning exploiting special kind of relations (neighbours, potential partners, coworkers, what have you). And we won't stop here. Think your dreams belong to you? Maybe today, but I can see large enterprises exploiting your very being for profit, soon. You find that disturbing? But why?
  - kristiandupont 9y ago
    There are several issues to be aware of with the way society and technology is evolving for sure, but when you just shout "wake up sheeple!" and offer nothing but hand waving, you are not contributing much in that regard.
    - karllager 9y ago

firebird84 9y ago

Meh to almost everything here except maybe housing. Corporate debt is high because DEBT IS STILL CHEAP (fed is changing that). Of course they're going to borrow fuckloads of money, it's practically free by some measures! The indexing "bubble" is actually a correction for a lack of value from active funds. I don't expect the correction to be corrected. The cryptocurrency bubble is tiny. 65 billion? That's a rounding error. 5 Stocks accounting for most of growth is troublesome when corrected, but still not catastrophic. If we lose ALL of that growth then we go back to 2016 levels? Ok.

mcknz 9y ago
> 5 Stocks accounting for most of growth is troublesome when corrected, but still not catastrophic. Yes -- this is the whole point of owning a broad index. You get exposure to the highest-performing stocks -- what those actual companies are changes over time. And there's usually another company to step up and fill the gap when one of the leaders falls.
Toidiu 9y ago
> Meh to almost everything here except maybe housing. Care to elaborate more on the housing.
- Varcht 9y ago
  You know, the last 10 years? Housing bubble pops hurt, the rest? Meh
thinkMOAR 9y ago
practically free indeed, vs the practically have to pay for keeping my savings on a savings account... shrugs in discontent (tax is higher on my savings then the interest i get, for those that didn't understand)
- oneeyedpigeon 9y ago
  You have to pay tax on your savings? What country are you in?

huntermeyer 9y ago

The VW logo above "BMW"...

lvoudour 9y ago
lol But honestly, I've grown tired with all the doom-and-gloom oracles every year, they irritate me much more than the "everything is fine, nothing to see here" ilk. And when a recession finally happens, you'll see all those broken watches on a daily basis in the media proclaiming they "predicted" it in 201x and nobody listened and I'll have to really hold myself not to smash the monitor... On a side note, who (apart from the few investing) cares if cryptocurrencies are a bubble? It's currently not even a footnote to the global economy

agentultra 9y ago

This infographic is about as useful as that "legendary investor" who claims the world is going to end in chaos every year. What indicators are predicting a "pop" or that this is a "bubble?" What exactly are they predicting will happen? Just seems like a lot of numbers and infographic fear mongering otherwise.

BatFastard 9y ago
And a lot of cherry picking of data.

guaka 9y ago

It is a fiat bubble.

jasonmaydie 9y ago

The "worth" of something is an irrelevant metric. What is the actual debt value?

thriftwy 9y ago

We have ever-increasing amount of money in the system (banks figure out ways to create money) But there isn't much real growth in useful, appreciating assets. E.g. most of production capacity these days operates with ever-thinner profit margins. Therefore money flows in a few vehicles still considered performing. Such as real estate. This creates a lot of bubbles in the absense of real growth. This is not unlike to when a ship sinks, everybody clutters at the ever-smaller area still over water.

smashingfiasco 9y ago

They missed the higher education bubble to include in the list.

ianleeclark 9y ago
It's not a bubble in the traditional sense, just a tremendous burden on up-and-coming generations.

bhouston 9y ago

This is sort of a mashup of ideas of varying quality. I think that you could make an infographic like this at any time in history.

relaunched 9y ago

Some of the debt statistics fail to account for the cash Corp America is holding on their balance sheets, so that's an incomplete picture. Also, I posit that a lot of the inflation in indexes relate to redistribution of wealth. When fewer people have more, they are willing to pay more for just about everything: cryptocurrencies, stocks, houses in prime areas, etc. Bubble status would require some proof points suggesting we have reached systematically unserviceable levels of an underlying fundamental.

rayuela 9y ago
I think that definition of Bubble status is only useful when looking at things in retrospect. Money is only drawn to an asset because at present it's valuation looks sustainable.

twobyfour 9y ago

The reason? Too much capital, not enough growth to invest in because demand isn't growing. Demand isn't growing because 60% of the population is barely scraping by. How do you increase demand? Roll back the tax cuts to the wealthy who have nowhere to put that money except into speculation and bubbles. Redistribute it back to the working class in the form of tax cuts, credits, higher minimum wage, and social programs. They will immediately put it to work by spending on things they need to get by. Demand increases. That money trickles back up to the wealthy who receive the profits from that spending, and invest it back into the industries where demand is actually growing. Voila, more growth, fewer bubbbles.

Pxtl 9y ago
The problem is that conservatives find working-class-specific programs offensive, and liberals construct elaborate social programs where a hefty chunk of cash vanishes into overhead. Just give the money back to the working poor - if the problem is a shortage of money in the economy creating demand, then put the money directly into the economy by the most direct method possible.
- geon 9y ago
  coughUBI
  - VintageCool 9y ago
    cough EITC
    - geon 9y ago
      Wouldn't that be a "working-class-specific program"? My point was that UBI applies to everyone, an therefore is not specific to any group.
saint_fiasco 9y ago
Among the things that people can't afford and really need, the most common ones are healthcare and housing. The problem with giving people more money to stimulate demand for those things is that it only solves half of the problem. Healthcare is limited by the supply of doctors so no matter how much government subsidizes it, the amount of people who can be seen by the constant number of doctors will be the same. In practice, this means the price will increase every time you try to give people more money for healthcare. Housing is similar in that even if you give people money for new houses, everyone wants their house to be in a nice location and there are only so many houses that can fit in a constant amount of desirable real estate. Without reforms to medical school and medical residency programs, healthcare might never be affordable. Without reforms to zoning laws, housing might never be affordable. Without at least allowing for an increase to the supply of nice things, increasing the demand of nice things won't be very helpful.

FLUX-YOU 9y ago

"The Stock Index bubble" Okay, does that actually mean anything unless the companies maintaining the index portfolios are at risk of going under? Is Vanguard about to go bankrupt? (lololol)

EGreg 9y ago

Maybe the Austrian economists warning about easy credit were onto something... or maybe it's just crypto currencies?

lukewrites 9y ago

Why is more investors indexing a “bubble”? Is it just because of the growth line? While there surely must be some crappy indexes out there, one could argue that more indexing by (individual) investors is a sign of a more people understanding the difficulty of stock picking and harsh effects of management expenses on investment returns. I’m very happy indexing in my retirement portfolios, but am curious as to what the arguments against it are. The few I’ve read have seemed to be active fund managers scared at the prospect of losing their livelihood to a better product.

mcguire 9y ago
By definition, almost all investment money is in an index. What proportion of it is in low-cost index mutual funds vs. high-cost employer retirement and managed mutual funds is of interest only to the financial services industry, which makes more money in the latter case.
colorint 9y ago
>but am curious as to what the arguments against it are There's a "philosophical" problem to the effect of, at some point, what are you indexing? But what seems to me to be the more practical issue, and forgive me for this being half-formed, is that it seems like indexing is subtly the wrong thing to do (in a world consisting of only bad choices). The things being indexed are basically weights, for example, the relative capitalization of various stocks, based on some filtering criteria. In order to keep a fund on target with an index, they have to buy and sell according to those weights, and in principle, if the weights change, then the fund's holdings have to change accordingly. This would seem to me to introduce problems like, if there's a sell-off of some stock so that its price drops, then its capitalization will also drop (capitalization being number of shares times price per share), which would seem to reduce its weight in the index. This should then lead to index funds having a follow-on sell-off. (And likewise for exuberant buying.) So this would suggest to me that, if index funds come to dominate stock holdings, then they should both increase volatility, and result in their holders systematically "buying high and selling low." That is, because an index fund is not the same as an index, but it's in active feedback with the index computation method. There's also a potential issue, again depending on the level of buy-in, that one should see systematically increasing P/E ratios because of increased overall buying of stocks. That is, in the past, it was not typical for normal people to engage in regular stock purchases (which are held for decades). This would suggest lower dividend yields, which leaves one wondering whether 401ks will become what people think Social Security is, i.e., ever-rising P/Es serving as a transfer from the young to the old that requires continual workforce increases to maintain. Though I'm not in finance, these are just the things that occur to me in thinking, how would I implement an index fund, and what might that do to the system's dynamics.

akeck 9y ago

I prefer the Shiller PE for my doom-and-gloom. ;-) http://www.multpl.com/shiller-pe/ http://www.multpl.com/shiller-pe/

jgalt212 9y ago

ZIRP is the root of all evil.

ocfnash 9y ago

Can the figures for "Real Residential Housing Price Index for Canada" be correct? The quoted index values are: 2010: 36.3 2016: 413.9 I simply cannot believe there was an 11-fold price increase on this index over this period. Googling I cannot match either of these figures to various Canadian real estate indexes reported on the web.

molestrangler 9y ago

One issue: Big business have got drunk on low interest rates and corp. debt so cheap, making it very good for big business but negative for the majority of the worlds population. So they like to see interest rates to remain very low, and have leverage with governments saying their business it at serious risk if interest rates were to return to 'more sensible levels'. Which is kinda true! Also: People with sufficient savings or disposable income have choose one of the few obvious/easy investment options and buy into property, either upgrading or buying more properties. The wealthy who have access to good financial tools have also invested into property, both commercial and residential. Hence so many empty properties in London, that people complain about. Driving up the price, so further squeezing the population who are not able to follow. Hence the rise of Trump and others, promising to make America great again, cuz so many voters are being squeezed. Low interest rates is like a drug addiction, but the addicts (big business) are not the ones suffering. Hence the rise of popularism and the likes of Trump into powerful positions, but he is sitting on the side for businesses and not the person. He incorrectly believes recovery can only be found with big business, but I believe this just perpetuates the addiction. Interest rates need to rise (ouch!) and companies must be forced to pay the taxes they owe. Also giving individuals with big investments (risks) into property to exit gracefully without the property market crashing, which hurts everyone.

arbuge 9y ago

As bubbles go, this one seems rather localized. Looking at that infographic, one can see than in the real estate and stock market sections most clearly. In the former, most of the gains went to certain select markets, mostly in coastal cities. In the latter, most of the gains went to the usual few suspects such as AMZN, FB, and GOOG. It might follow that we might see localized bursting rather than a system-wide meltdown if this "bubble" pops.

mcguire 9y ago

"More cryptocurrencies than fiat currencies in circulation." Yeah. Well, no, that's a completely meaningless point. Even "marketcap" for Bitcoin is useless---a marketcap is the marginal price that the greatest current fool is willing to buy one thingy for, multiplied by the number of thingys. There may be too much money in cryptocurrencies, but this chart isn't showing that.

fludlight 9y ago

The increase in corporate debt is worth watching because most of that will have to be refinanced and is thus sensitive to rising interest rates. Much of the proceeds were used for questionable purposes like repurchasing stock near historic highs instead of investment in the underlying business. This is a proven way to boost short term stock price and EPS, but not so much the capacity to repay. That said, it's disingenuous to compare 10yr treasuries to indices comprised of bonds with a maturity of >=1yr. Issuance skews shorter term that 10 so those indices probably do, too.

chaoticmass 9y ago

Bitcoin 'market cap' is almost meaningless to compared to the market cap of a stock. It's a misleading term in this usage.

kirykl 9y ago

crypto will pop if/when interest rates rise

yuhong 9y ago

My favorite is the ad bubble of course. I have a Twitter thread discussing it with BrendanEich: https://twitter.com/BrendanEich/status/912750677331283968 https://twitter.com/BrendanEich/status/912750677331283968