Here are the four things that convince me that we are in truly bubbly territory:
Sign #1: Junk Bond Prices at Record Highs
The Fed, et al., have been buying up all of the 'safe' bonds, with the twin intents of driving down interest rates and chasing investors into riskier assets. With lower yields comes (hopefully) more borrowing; and when investors move towards riskier assets, this drives up the equity markets – which, as the thinking goes, will paint a rosier picture of the economy plus boost consumer confidence and spending.
Sign #2: Junk Sovereign Debt Being Chased to New Highs
It was just over a year ago when Greece ten-year debt was yielding a whopping 30%...Today? Greek ten-year debt is under 10%.
Sign #3: It's Not Official Until It's Denied
The poster child for a bubble market has to be Japan, where the main stock index of the island nation, the Nikkei, is up an astonishing 70% in the past six months
Sign #4: Making Up Crazy Excuses
My final sign of that we are in bubble territory is when the folks who consider it their job to make sense of the high and spiking prices offer up thin, sometimes stretched-to-the-breaking-point, rationalizations for why the current price action make sense.
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