So Much Downside Still to Go: The Stock Market Bubble vs. US Savings

Quartz  ( Original )
FEB 5, 2018

After a certain point, investing in bubbles becomes a self-fulfilling prophecy that does not have to stand to reason. Why did people triple-subprime-mortgage shaky investment properties to buy a fifth investment property? Because real estate was going to double every few years forever, that’s why.

Why invest in a wildly overvalued stock market today? Because the damned thing just keeps going up, that’s why. Nothing else yields anything, where else are you supposed to put your money?

Gold. That’s where. Because if today’s stock market action is any sort of indicator, when this very overinflated market bubble bursts in earnest, it’s going to be spectacular on the downside.

 

Allison Schrager explains, Americans are saving at their lowest rate since 2007. And when Americans reduce their rate of savings, it usually means there’s a recession in the offing. “The economy may be booming now,” she writes, “but there are plenty of reasons to be skeptical it will last. Productivity numbers don’t justify the headline growth figures. Many people think the stock market is overvalued and due for a correction.”

 ORIGINAL SOURCE: Is a global recession led by a US stock market crash in the offing? by Paul Smalera at Quartz on 2/2/18