Friday, January 28

An old acquaintance from Argentina warns about the global bubble

Of course, Singer also blames investors and funds that are guided by the performance of the S & P500. According to Singer, institutional investors have been tempted to overweight their portfolios to equities, even at record prices, for fear of missing out on windfall gains. “The buying pressure created by these strategies is only driving higher prices and accumulating capital in risk assets.” Therefore, “The risks are at or near the highest levels in the history of the market.”

As an example, the capitalization of the North American stock market is 280% of GDP, well above 190% “just before the collapse of the dot-com bubble” 20 years ago. In this scenario, Singer wonders what will happen when there is “a substantial decline in the stock and bond market.” His first response is that the authorities would not allow a sustained correction. Something that, in his opinion, is one of the main current problems in the market. “The current set of monetary and fiscal policies in the developed world mask and minimize risks, while preventing equity and bond prices from performing their indispensable signaling function,” he explained.

Thus, due to the support of governments and central banks, “almost all investment strategies have been successful and are expected to continue to be successful,” especially those based on buying risky assets such as stocks or bitcoin, with maximum leverage. possible. For this reason, Singer launched a red flag: “The ability of governments to protect asset prices from another recession has never been more limited” due to rising inflation, which pushed the capacity of the authorities “to the limit” “To support the price of assets.”