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pragmatic and I enjoy pretending to be a perma-bear as much as the next guy, but if the macro environment leads to more currency being created or distributed th

pragmatic and I enjoy pretending to be a perma-bear as much as the next guy, but if the macro environment leads to more currency being created or distributed than prior times, then nothing is overvalued yet relative to how much money has to be placed into them when it is seeking yield, so that means here I will have to disagree: "But this bubble will burst in due time, no matter how hard the Fed tries to support it" this either needs to be weighted much lower, can't be the crux of the article, or has to be called out for its ambiguity and uselessness in predictive ability

neffy 6y ago
Yes, the bubble readers seem to ignore the money creation. However that said, the default bubble is potentially a lurking time bomb, so it's a race between inflation and loan defaults, essentially. (Inflation tends to make loan defaults less likely as it reduces the relative cost of existing loans.)
- papabrown 6y ago
  >the default bubble is potentially a lurking time bomb Many things are potential lurking time bombs. I can't think of a single period during any bullish market where you could not point to something and claim that that could be a potential end to the bull run. The problem is when you are in the business of making predictions, if you just scream "Bear" long enough, eventually you'll be right and then you can write a book subtitled, "By the man who called the 2021 (or 2022 or 2023 or 2024 ...) stock crash" and people think you're some sort of genius.
  - webmaven 6y ago
    > The problem is when you are in the business of making predictions, if you just scream "Bear" long enough, eventually you'll be right and then you can write a book subtitled, "By the man who called the 2021 (or 2022 or 2023 or 2024 ...) stock crash" and people think you're some sort of genius. I think the point the article is making is that successful Bears, even though they can't call the peak accurately, are able to say "I am reasonably certain that if I exit the market now and wait for the bubble to go higher and then burst, the correction will drive prices below the current high, and I will have made money overall, even though I'll miss out on the tail end of the bubble rising." If you call the bubble too early (and if you are always screaming "Bear", you are by definition always too early) , the prices after the crash will still be higher than when you exited, you're completely screwed, and so is anyone who listened to you. It isn't particularly difficult to say that the next crash, even if it happens a year or two from now, will probably drive the market below the current level. You would experience major FOMO by exiting now and watching the market continue to climb, but you won't actually lose money. If it happens sooner than a year from now, it will certainly dip significantly below current valuations, and you'll be ahead by quite a bit. In this particular game of Chicken, opinions will differ as to whether it is time to lock in your gains yet, but it shouldn't be too controversial that it is definitely time to start thinking about it. If I were currently in the market, I would keep an eye out for large and quirky M&A activity along the lines of AOL+Time-Warner. Eg. Tesla decides to buy a consumer appliance, rideshare, or financial services company. Or all of the above).
    - bzbee10 6y ago
      How about Tesla buying $1.5B bitcoin?
      - webmaven 6y ago
        I don't see that as fundamentally different than any other large Forex transaction. A bit unusual for a manufacturing company, but hardly unprecedented, and for all we know this is just a signal that Musk is betting he can call the Bitcoin bubble, rather than an actual hedge against USD.
        ethbr0 6y ago
        I think that's Musk realizing that the announcement that Tesla bought Bitcoin will boost Bitcoin's value. And therefore cashing out that reality by making the trade. It's not technically illegal afaik, but it certainly is making a trade because of realities inherent in the trading, rather than the underlying.
lumost 6y ago
A potentially more productive view is that the fed cannot support the bubble indefinitely. It's becoming clear that money can be printed without causing inflation if its unevenly distributed in the economy. This amounts to large scale wealth redistribution to support asset price increases. If you earn dollars for a living, your purchasing power in terms of future dollar income is being eroded. You will purchase a home later or never, you may not be able to afford an education, and your medical expenses will rise ( as will anything that affects future earning power ). When this ends is anyones guess, it's entirely plausible that we revert to the social systems of prior less equal times, foreign trade moves off the dollar, assets converge to an effective price of infinite dollars, or populists demand their own redistributive policies such as UBI or wealth taxes. Or the fed meets tomorrow and cuts QE entirely. What is assured is that the current trend is unsustainable and must end eventually.
- TuringNYC 6y ago
  >> A potentially more productive view is that the fed cannot support the bubble indefinitely. The interesting thing is whether "cannot" means the point when they literally can not because the market and inflation wont bear it...or when they wise up to the tinder box they have created. The problem with the latter is -- which administration would allow this to be under their watch. Once a problem is bad enough, you might as well just kick the can a bit more until you literally can not. (yes, i realize the Fed is independent but there is still quite a bit of control)
  - lumost 6y ago
    There are many situations where the fed is forced to end its current policies prior to the expected triggers of market stability or increased CPI. Political and social risk is likely underestimated. That being said, examining the exit paths and forcing functions which would force Fed policy to change is something I'd like to see more of. There is a certain mentality floating around that there are no alternatives to being in the market, and that it's become too politically difficult to end Fed market support. If the latter is true, then there are a lot of consequences - such as returns becoming decoupled from cash flow see TSLA, Unicorns, or Hertz.

neffy 6y ago

Yes, the bubble readers seem to ignore the money creation. However that said, the default bubble is potentially a lurking time bomb, so it's a race between inflation and loan defaults, essentially. (Inflation tends to make loan defaults less likely as it reduces the relative cost of existing loans.)

papabrown 6y ago
>the default bubble is potentially a lurking time bomb Many things are potential lurking time bombs. I can't think of a single period during any bullish market where you could not point to something and claim that that could be a potential end to the bull run. The problem is when you are in the business of making predictions, if you just scream "Bear" long enough, eventually you'll be right and then you can write a book subtitled, "By the man who called the 2021 (or 2022 or 2023 or 2024 ...) stock crash" and people think you're some sort of genius.
- webmaven 6y ago
  > The problem is when you are in the business of making predictions, if you just scream "Bear" long enough, eventually you'll be right and then you can write a book subtitled, "By the man who called the 2021 (or 2022 or 2023 or 2024 ...) stock crash" and people think you're some sort of genius. I think the point the article is making is that successful Bears, even though they can't call the peak accurately, are able to say "I am reasonably certain that if I exit the market now and wait for the bubble to go higher and then burst, the correction will drive prices below the current high, and I will have made money overall, even though I'll miss out on the tail end of the bubble rising." If you call the bubble too early (and if you are always screaming "Bear", you are by definition always too early) , the prices after the crash will still be higher than when you exited, you're completely screwed, and so is anyone who listened to you. It isn't particularly difficult to say that the next crash, even if it happens a year or two from now, will probably drive the market below the current level. You would experience major FOMO by exiting now and watching the market continue to climb, but you won't actually lose money. If it happens sooner than a year from now, it will certainly dip significantly below current valuations, and you'll be ahead by quite a bit. In this particular game of Chicken, opinions will differ as to whether it is time to lock in your gains yet, but it shouldn't be too controversial that it is definitely time to start thinking about it. If I were currently in the market, I would keep an eye out for large and quirky M&A activity along the lines of AOL+Time-Warner. Eg. Tesla decides to buy a consumer appliance, rideshare, or financial services company. Or all of the above).
  - bzbee10 6y ago
    How about Tesla buying $1.5B bitcoin?
    - webmaven 6y ago
      I don't see that as fundamentally different than any other large Forex transaction. A bit unusual for a manufacturing company, but hardly unprecedented, and for all we know this is just a signal that Musk is betting he can call the Bitcoin bubble, rather than an actual hedge against USD.
      - ethbr0 6y ago
        I think that's Musk realizing that the announcement that Tesla bought Bitcoin will boost Bitcoin's value. And therefore cashing out that reality by making the trade. It's not technically illegal afaik, but it certainly is making a trade because of realities inherent in the trading, rather than the underlying.

lumost 6y ago

A potentially more productive view is that the fed cannot support the bubble indefinitely. It's becoming clear that money can be printed without causing inflation if its unevenly distributed in the economy. This amounts to large scale wealth redistribution to support asset price increases. If you earn dollars for a living, your purchasing power in terms of future dollar income is being eroded. You will purchase a home later or never, you may not be able to afford an education, and your medical expenses will rise ( as will anything that affects future earning power ). When this ends is anyones guess, it's entirely plausible that we revert to the social systems of prior less equal times, foreign trade moves off the dollar, assets converge to an effective price of infinite dollars, or populists demand their own redistributive policies such as UBI or wealth taxes. Or the fed meets tomorrow and cuts QE entirely. What is assured is that the current trend is unsustainable and must end eventually.

TuringNYC 6y ago
>> A potentially more productive view is that the fed cannot support the bubble indefinitely. The interesting thing is whether "cannot" means the point when they literally can not because the market and inflation wont bear it...or when they wise up to the tinder box they have created. The problem with the latter is -- which administration would allow this to be under their watch. Once a problem is bad enough, you might as well just kick the can a bit more until you literally can not. (yes, i realize the Fed is independent but there is still quite a bit of control)
- lumost 6y ago
  There are many situations where the fed is forced to end its current policies prior to the expected triggers of market stability or increased CPI. Political and social risk is likely underestimated. That being said, examining the exit paths and forcing functions which would force Fed policy to change is something I'd like to see more of. There is a certain mentality floating around that there are no alternatives to being in the market, and that it's become too politically difficult to end Fed market support. If the latter is true, then there are a lot of consequences - such as returns becoming decoupled from cash flow see TSLA, Unicorns, or Hertz.