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GSEs may be bigger but also healthier than before. Though still a huge market, I also think the global OTC derivatives market has become smaller since 2014 (you
by unknown_apostle 8y ago
GSEs may be bigger but also healthier than before. Though still a huge market, I also think the global OTC derivatives market has become smaller since 2014 (you can check some estimates at the BIS). That being said, it's 10 years after 2008 and there are plenty of signs that we're in the 3rd bubble in 20 years time.
Nosebleed valuations in tech. Second highest Shiller PE in S&P. The median PE of the S&P is higher than in 2001; so it's more broadly carried (can't find source right away).
It's also the age of the ETF, which was a good thing. Except that by now the industry may have created some real beauties. Remember XIV?
Also government bonds; as much as I love Italy, somebody bought the 10yr of that country for a 1% yield in 2016. Somebody also bought those Mexican 100yr bonds.
Even something as silly as Dogecoin's marketcap standing at $600 million suggests that the entire world is in the middle of a speculative binge.
- cm2187 8y agoAlso a lot of warning signs of excess credit are showing up. Covenant light leverage finance trades, hotel CMBS deals, payment in kind securities.
- Josh379 8y agoIt’s absolutely crazy bonds are being bought at negative real rates but large sums of money must be parked somewhere by huge funds. Plus they often have bond to equity to commodity to fixed asset mandates so they have to enter what they know to be money losing positions.
- unknown_apostle 8y agoWhat's also interesting this time is the relationship between bond markets and modern ETFs. Especially in Europe, ETFs can be synthetic. In some cases this means they're made up of generic filler material (e.g. German bunds), with some secret hobo spices (derivatives) to provide the ETF's specific flavouring. Because of 10 years of central bank buying, all these bonds have been priced to perfection for deflationary scenarios. And as the world is mostly calibrated for small, well-announced yield changes, I wonder what an unexpected discontinuous "jerk" in yields would do to such ETFs.