Wednesday, May 13, 2015

The Everything Bubble Theory vs. The Too Much Money Theory

May 13, 2015
Welcome to the everything bubble

Everything is overvalued.

Which seems more likely?

1. Bonds are overpriced. Stocks are overpriced. Real estate is overpriced. Luxury art is overpriced. Gold is overpriced. Silver is overpriced. Oil is overpriced. Every single investment idea you can think up is overpriced simultaneously.

2. There's too much money in investor hands chasing too few investment ideas in a subpar economic growth world. It's causing the price of investment assets to inflate.

Think hard before you decide. Your answer will have a huge impact on where you put your money. If you are a long-term investor who truly believes that everything is overpriced simultaneously then you'll want to bury US dollars in your backyard for the long-term. Good luck on that.

This in spite of the fact that we've been exporting ungodly sums of US dollars to the rest of the world  for decades (through a massive trade deficit). Perhaps we can convince the rest of the world to bury their US dollars too? Wouldn't that be a hoot! And let's not forget the $10.6 trillion in deposits at commercial banks. Perhaps that should be buried as well.

This is not investment advice. I will say this though. I have no desire to put the bulk of my retirement nest egg in cash. Over the long run, that's not been the greatest of plans. Even those who buried cash in 2000 or 2007 are no doubt wishing they had dug it back up.


Anonymous said...

2 is cause,1 is effect.

Stagflationary Mark said...



If a person had been living in a cave for the past 50 years, one wonders what they would have to say about current grocery store prices.

1. OMG! Food bubble!
2. OMG! Overpriced!
3. OMG! Money is worth less!

#3 seems the best description to me.

Michael said...


If we are tuly entering deflation then holding cash is a good strategy. My guess is the greeks and Cypriats wish they had buried theirs. All money that is not held in your hand is electronic. And to quote south Park " and then its gone....." that is why there are inflation in tangible assets as electronic money is seeking a hiding place.

Stagflationary Mark said...


If we are truly entering a deflationary period (again) then treasury bonds are not in a bubble (again).