Jan. 27, 2020–It remains probable even with the coronavirus. If the epidemic is contained, that is. Question is how to analyze it and what happens after the post-30k: Is it a bubble or not, and if either, what happens next? My analogy is, YES It is a bubble BUT its effect in the entire U.S. economy/finance landscape is limited to within the financial and a few other marketplaces, such as urban properties, some arts (paintings but not necessarily antiques), and posh eateries. So, if/when it bursts, it may not look like the ugly great tokyo bursting of 1981. if/when the bursting looks imminent, the federal reserve would ease credit policy again, as close as to zero, but that accommodative, low monetary policy posture may not be sustainable and the Fed might again tighten credit as goods price inflation pressure would be likely to sprout up like asparagus shoots within a year or so, compounded by the U.S. tariffs on Chinese products and quietly rising U.S. minimum wages and other labor costs.
aside from esoteric, technical factors, I think ‘spiky’ conditions of the U.S. stock and bond markets are totally unwelcome to both sides of Congress and the American public, since Americans wealth and assets — social security, public, private pensions, annuities, funds like the OPC scholarship fund and numerous others, are so heavily invested in the markets directly and indirectly via direct stock and bond trading, ETFs, etc., etc. Stable and preferably high financial instrument prices are what the U.S. wants and their collapse cannot be tolerated. If that happens, it will drag all other global markets, including China’s, and in the next restoration phase, the U.S. may be dethroned as the No. 1 global power and replaced by China(?!) in a total different world order where non-caucasian nations hold power.
Just a thought.
–Toshio Aritake