Everything is up! The world enters the bubble era

QQ Music Securities, March 8th, in order to fight the epidemic and prevent the health crisis from causing economic crises, governments and central banks of all countries are continuing to use unprecedented fiscal stimulus and monetary easing policies, and one of the important by-products of these policies is that many investors And the analysts have now smelled the smell of foam everywhere.

A replica of a Ferrari car was sold in Europe for 120,000 euros, a bottle of Romani Conti red wine was fired to hundreds of thousands of dollars, and even a baseball card was worth millions of dollars.

Everything is up! The world enters the bubble era

In February, a computer-drawn ape painting sold for US$900,000. The pixels of the work are very low, and it looks like it was made with the oldest computer. However, this is actually part of a series of so-called cyberpunk digital art works. The latter uses contemporary blockchain technology to ensure that such works are This is the only one in the world. In the past year, the digital art market has expanded 400 times.

At the same time, the price of Bitcoin has risen more than six times last year.

Former Fed President Alan Greenspan once said in 2002: “It is very difficult to clearly define the existence of a bubble. People can only rely on hindsight-the existence of a bubble can only be proved by its bursting. “In other words, only after suffering a solid loss can investors finally know that they have been in a bubble.

Judging from some indicators, today’s asset market enthusiasm has surpassed almost all asset bubble periods in the past.

Hedge fund giant Ray Dalio compiled a bubble index with six sub-indices, the latter currently reading 77%. Although the risk is increasing, Dalio said that referring to the 1929 crash and the Internet bubble in the late 1990s, it is expected that the current bubble has room for further expansion-both times, his index readings have reached 100%.

Nikkei conducted a research on five indicators and found that three of them showed that the current asset market is already very risky. For example, the Buffett ratio, which compares the total market capitalization of the stock market with the gross domestic product, has reached 186% in the United States, far surpassing the period of the Internet bubble and the years before the 2008 global financial crisis.

At the same time, the US housing price index has also exceeded the level on the eve of the global financial crisis. According to data from the Bank for International Settlements, current global housing prices have risen by 19% compared to 2010, with India, Germany and the United States seeing particularly impressive increases.

As the risk of asset bubbles continues to be high, the situation facing governments and central banks is becoming more and more difficult.

In India, more and more people are beginning to conduct bitcoin transactions, and the lower house of parliament is about to start a debate on a virtual currency regulation proposal-the final result is entirely possible to ban all virtual currencies in India.

In China, real estate prices in big cities are rising. Since January, banks have adopted stricter restrictions on loans to real estate companies and personal mortgages.

However, the United States continues to vigorously stimulate the economy. In the past weekend, President Biden’s $1.9 trillion stimulus plan was finally approved by the Senate, and it is expected that it will be passed with a high probability.

Now, what many investors worry about is a change like 2013. At that time, the U.S. Federal Reserve signaled that it expected to reduce the scale of asset purchases under its quantitative easing policy. As a result, it immediately triggered the so-called “reduction frenzy”-investors panic and the stock market plummeted. What happened at the end of February has shown similar signs. With the rapid rise in the yield of the 10-year US Treasury bond, global stock markets have staged a round of declines.

However, Mark Haefele, chief investment officer of UBS Wealth Management, is still optimistic. He wrote in an investor letter in January: “The choice of policymakers is to make those safe assets more expensive. Expensive makes the prices of risky assets more attractive. In this case, it is completely understandable that valuations exceed historical normal levels. The key is that we have every reason to believe that such a policy environment will continue for several years. ”

Due to fiscal stimulus, the ratio of US debt to GDP has increased from 1.08 to 1 a year ago to 1.29 to 1 in 2020, and this indicator in developed economies such as Japan and Europe is also at a record level. Level. If the current fiscal and monetary policies implemented by governments and central banks finally fail to come up with a suitable exit plan, then all generations in the future can only pay for the bill, and the burden on their shoulders is becoming heavier and heavier.