Be careful: “The current stock bubble is unlike any precedented one in his view. The formation of a bubble comes from market participants unrealistically assuming that a perfect economic situation will persist indefinitely. The COVID bubble is unique in the sense that the world expects one of the worst economic conditions and yet the market is valued at historically high levels. This is his view is the direct implication from central banks across the globe injecting liquidity into the system and cutting interest rates to close to zero percent or sub-zero in some countries. He said “every dollar injected in the economy doesn’t flow through the real world but ends up fuelling asset prices or the current bubble”. There hasn’t been this much disconnect between the real world (GDP, economies) and the paper world of stocks and P/E ratios.”
“Good indicators of bubbles: the flood of interest in special-purpose acquisition companies (SPACs). “give me your money and trust me I will do something useful with it”. Warren Buffet has been sitting on> $130 billion in cash throughout the COVID crisis.”
