What's gonna pop this bubble ?

T

trade2live

It's 2006 all over again. People can debate over whether there is a bubble in stocks but in 2007 valuations weren't stretched either. There is a bubble in the bond market , there was a bubble in precious metals and commodities and it's been pricked or deflated (commodities). Equities are probably next, they typically take more time to adjust, as stock investors "don't get it" and early shorts are taken for a ride pushing stocks even higher.

However there is one thing missing the catalyst for the crash, the pin that will prick the bubble. In 2006 we had a subprime crisis looming. Today ? I can't see a threat as significant as subprime/housing which would be currently building up , possible catalyts :

1) China (and emerging markets) assuming there would be contagion (how exactly?). To me it could be catalyst # 1

2) bond market crash (long term rates go to 5-6%).
Problem I see with that : a huge crash in equities would make
treasuries a safe haven . Hard to see how we could have a crash of the same magnitude in bonds and stocks. Yet stocks should crash hard at some point (the charts!)

3) EU woes come back with a vengeance

4) Market loses confidence in Fed as Helicopter Ben leaves, the house of cards collapses (how exactly ? )


5) US fiscal situation deteriorates further and fast, triggering downgrades and a run on the dollar as Yellen's Fed monetizes
to oblivion. (not sure of that one) .


anything else ?

Any catalyst should be gaining momentum now, yet that's not really the case . So what gives ?
 
this time is different. China is at 5 year low. in 2007 was in line with other markets. Harder to crash from 5yr low than all time high.
 
Quote from trade2live:

It's 2006 all over again.

However there is one thing missing the catalyst for the crash, the pin that will prick the bubble.
More...

It all comes down to QE. When/if they ever decide to end it, the bubble will explode.
 
Quote from toolazy:

this time is different. China is at 5 year low. in 2007 was in line with other markets. Harder to crash from 5yr low than all time high.
More...

I hear you but it looks like the real economy has not yet crashed in China. Obviously shorting China was a 2007 bet, but the pain has been hidden bandaged over by the Chinese govt with huge stimulus and fake economic statistics. And maybe the skeletons are going to come back to haunt Western economies once the recognition of the japanisation of China takes hold.
 
Quote from Clubber Lang:

It all comes down to QE. When/if they ever decide to end it, the bubble will explode.
More...

This isn't a very realistic scenario. I believe they won't end QE, maybe they will taper a bit (what a joke this tapering is btw) markets will deteriorate before the real normalization of policy and they obviously will go on with QE . So QE can go on for ever ( a long time) but stocks can't go up at that pace forever.
 
Quote from trade2live:

the pain has been hidden bandaged over by the Chinese govt with huge stimulus and fake economic statistics. And maybe the skeletons are going to come back to haunt
More...

Replace "Chinese" with "United States".
 
I don't understand this infatuation and anxiety over bubble bursting.

Until it bursts, enjoy the ride, when it does, enjoy the show and adapt accordingly.

Predicting tops in monster uptrends making record highs is a fool's game because there is virtually, no technical resistance.
 
Quote from Trader.Fighter:

Predicting tops in monster uptrends making record highs is a fool's game because there is virtually, no technical resistance. [/B]
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Technically, the value of the indices with accounted for inflation could be an interesting point which is a little bit higher than we currently are. Tapering could shock the system, but might not be enough to derail this monstrous run. Who knows how this bubble will end? It could end when the problem(s) will threaten the lively hood of the system similar to 08 but not before. As always, capital (lots of it) has to go some where. If there are defaults than it will go to the mattress. With all of the QE money, they have only succeeded in creating stagflation. Somebody will have to put an end to this madness (Summer?) or will they become madder?
 
Quote from trade2live:

It's 2006 all over again. People can debate over whether there is a bubble in stocks but in 2007 valuations weren't stretched either. There is a bubble in the bond market , there was a bubble in precious metals and commodities and it's been pricked or deflated (commodities). Equities are probably next, they typically take more time to adjust, as stock investors "don't get it" and early shorts are taken for a ride pushing stocks even higher.

However there is one thing missing the catalyst for the crash, the pin that will prick the bubble. In 2006 we had a subprime crisis looming. Today ? I can't see a threat as significant as subprime/housing which would be currently building up , possible catalyts :

1) China (and emerging markets) assuming there would be contagion (how exactly?). To me it could be catalyst # 1

2) bond market crash (long term rates go to 5-6%).
Problem I see with that : a huge crash in equities would make
treasuries a safe haven . Hard to see how we could have a crash of the same magnitude in bonds and stocks. Yet stocks should crash hard at some point (the charts!)

3) EU woes come back with a vengeance

4) Market loses confidence in Fed as Helicopter Ben leaves, the house of cards collapses (how exactly ? )


5) US fiscal situation deteriorates further and fast, triggering downgrades and a run on the dollar as Yellen's Fed monetizes
to oblivion. (not sure of that one) .


anything else ?

Any catalyst should be gaining momentum now, yet that's not really the case . So what gives ?
More...

I have no idea what makes you think there is a bubble in stocks. In 1998 we were trading 1550 in the S&P 500 and only took that level out 15 years later!!! For 15 years we went no where!!!!! There are bubbles out there, but it's not in stocks. The next bubble will be in our entitlement programs. Then the underfunded pensions. We will see a crash but not in stocks, rather our standard of living as the only way to net out these short falls is through devaluation. In other words, you better get long stocks!
 
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