@RobinBHarding Waiting at the hospital for an ECG. Thought I’d throw in my tuppence re Robin’s excellent FT piece on detecting fin bubbles…
The financial implications of the house price crash have left a legacy of a mild depression which has fed a bull market for fear. Risk free collateral has literally become priceless. This can be seen by the daily manoeuvrings of the Fed to avoid market rates turning negative.
The stunning spectre of the alien body invasion demonstrated some biz models that weathered covid with profits intact. These have also been ordained riskless, and investors happy to countenance v low future returns for security.
Elsewhere, everything else that trades with the hint of commercial risk is less obviously highly or “over” rated, many equity household names trade at prices which prevailed 20 years ago.
Hence, I conclude that there is a coterie of riskless equity models whose combined valuation accounts for a disproportionate amount of the total stock market
Should the mild depression conditions persist, it seems likely that risk averse investors will continue to rationally forgo future returns for today’s certainty
I don’t see anything to disrupt today’s dominant deflation centrifuge…and hence I don’t believe that The Big Short is an apt descriptor of today’s financial markets
P.s., the cardiogram is for an insurance program although that damn fast has messed up my metabolism
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