Loading ...is much better than a post jobs report plunge that is quickly bought…but the day is young and the fire brigade is always on standby…
The end is nigh, brother, the end is nigh!
World makrkets are like a pie crust stretched across the roof of a volcano!
Fu Manchu is about to pull the lever to the trap door!
Warbucks signals the trusty Punjab to cut the cords of the rope bridge!
Grease the skids! Happy tobogganing!
Does the FED think it can sustain this?
An economic bubble is essentially an economic activity that cannot sustain itself without a continuous influx of new money and credit to bid away real resources from self-funding endeavors. Financial bubbles are obviously closely related as financial assets are derivatives of underlying real production of goods and services. For example, an Apple stock is a derivative of the economic good emanating from peoples use of their cell phones. If the value placed on the services rendered from their product is high, the financial asset should reflect this through a high share price.
Aggregating this concept to include all assets and all production does not change the conclusion; valuations must reflect output somehow. In other words, there should be a causal connection between the value of assets and their ability to create output.
Quantitatively we can express this relationship by looking at the “Household Net Worth” time-series found in the Financial Accounts of the United States, compiled by the Federal Reserve (source) and nominal GDP as reported by the Bureau of Economic Research (source). We use the household net worth data because it is ultimately households that own all the productive assets in the economy so this is one of the closest thing we come to economy wide asset valuation which should correspond to NGDP, the widest measurement of output. To compare the two, we calculate growth rates of both and rebase them one for the first quarter of 1990.
Nominal GDP obviously reflect the economy’s ability to generate money income which can be used to, among other things, service cost of capital. Asset valuations reflect, or should reflect, a market view of the amount of money income the economy will be able to produce in the future. Elevated asset valuations are thus a reflection of exuberant expectations about economic output that will come. If for some reason that output fail to materialize, the expected money income will also be absent and overly optimistic valuations must be realigned with the new reality.
http://www.zerohedge.com/news/2016-10-07/do-our-central-planners-really-believe-will-end-well