I think all assets (stocks, bonds, real estate, copper, zinc, gold, silver, etc.) are hitting new highs due to one reason, liquidity.>
It is obvious the perception of real or imagined excess liquidity is driving speculation in all these Bubbles, and as Mish put it, "drawing in the last fence sitter". It explains why both gold and bonds can constantly catch a bid, because they are just one more asset the funds and speculators "can go long". What I wonder though is just how real the perceived liquidity is right now, or could enough of it disappear in a credit revulsion event? Is it enough to support silly prices on these assets, when suddenly those assets fail to deliver real economic returns as opposed to just electronic trading returns (I've used the term synthetic economics)? For example:
washingtonpost.com
The reason to ask this, is that the liquidity is mostly just more speculative borrowing to rent (trade) as opposed to invest in these assets. It's not "loyal money", it's Humpty Dumpty and wild man money, and the moment there is a problem or a failure, that capital will become a coward. Think you put this well in an earlier post: there is a fine line between boom and bust in this kind of environment. |
