Post
by pmward » Mon Mar 02, 2020 4:36 pm
Yeah, the bond bubble is real, haha. Rates and liquidity are driving everything these days. At 1% nominal (~-1% real) on the 10 year, stocks deserve to be highly valued. As long as central banks keep rates suppressed this will continue. That's why I said earlier, inflation is really the only thing that can break this cycle. Right now, there's no fear of inflation, so they can just keep lowering rates, keep doing QE, keep deficit spending, keep cutting taxes, and even go to full scale MMT. Eventually they will test the limits of that and break the system (as they always do). I don't think we are at the limits yet though. This virus, if it becomes pandemic, will be deflationary, which actually is supportive of the current craziness. All things considered, demand still way outstrips supply for U.S. dollars, debt, and their derivatives. There's no doubt it's insane, there's no doubt it makes no sense, and there is also no doubt how this eventually will end. But the time it will end is not now. If inflation stays tame and they manage things well, this insanity could go on for another 5, 10, ... maybe even 20 years. It all comes back to inflation. Who would have ever thought the bond bull market could go on this long or to this extreme? When is it going to end? When is inflation going to return? I have no clue personally. But I would be willing to bet that when the bond bubble finally bursts it will spill over into a stock bust as well.