BofA: We Are Witnessing The Third Biggest Bubble Created By A Central Bank

In its scramble to reflate the biggest asset-bubble in hopes of inflating away the $233 billion in global debt, which at 318% of world GDP has never been higher, the Fed took a wrong turn somewhere, and instead of successfully sending "inflation" assets into the stratosphere, it successfully "reflated" deflationary assets.

Commenting on this divergence, BofA notes that while we are now in the second longest US equity bull market of all time...

... the bull market leadership has been in assets that provide scarce “growth” & scarce “yield”. Specifically, the "deflation" assets, such as bonds, credit, growth stocks (315%), have massively outperformed inflation assets, e.g., commodities, cash, banks, value stocks (249%) since QE1. At the same time, US equities (269%) have massively outperformed non-US equities (106%) since launch of QE1

And, as happens every time the Fed tries to manage asset prices, it has blown another  bubble.

As BofA's Michael Hartnett writes, the "lowest interest rates in 5,000 years have guaranteed a melt-up trade in risk assets", which Hartnett has called the Icarus Trade since late 2015, and points out that the latest, "e-Commerce" bubble, which consists of AMZN, NFLX, GOOG, TWTR, EBAY, FB, is up 617% since the financial crisis, making it the 3rd largest bubble of the past 40 years, and at this rate - assuming no major drop in the 6 constituent stocks - the e-Commerce bubble is set to become the largest bubble of all time over the next few months.

Comments

Jus7tme Nomad Trader Mon, 03/26/2018 - 12:11 Permalink

In the other thread today the author worries about the US consumer and their debt problems being impacted by the Fed increasing interest rate. But the real problem for debt slaves is not FFR at 1.75%, but rather average credit card rates at 15.07% (not volume weighted average, I think). It is the markup buy 13+ %points that is the trouble, not the 1.75% at the bottom.

In reply to by Nomad Trader

glenlloyd TheRideNeverEnds Tue, 03/27/2018 - 00:50 Permalink

Ebay, FFS, when is that bucket-o-shit going to go away!! It used to sell interesting things, but now it's just a clearance rack for thousands of listings for the same thing.

Ebay got away from where it started and that's when it went to shit, then it started to hose the sellers really bad and so now the only ones who sell there get premier discounts for their thousands of listings.

Personally I can't see how it's still around...

In reply to by TheRideNeverEnds

Eric Masters cpnscarlet Mon, 03/26/2018 - 12:56 Permalink

youre the typical fucktard moron trump voter: where? if i cant see the earth is round then it must be flat; shithead: yuan is less than 1% of global reserves and they just started futures trading in it yesterday and after it made the basket just 3 months ago, but your mensa cow-ass wants it now or its FAKE NOOOZ!

do us a fucking favor take your FAKE "sarcasm" (which you have no fucking clue how to use) shove it up your fat ass and kill yourself. asshole.

In reply to by cpnscarlet

everything1 Mon, 03/26/2018 - 12:21 Permalink

I think it's more of a re-run of the tech bubble, the crypto bubble was a safe play as the risk was spread worldwide.

Tech will need a trim when the time comes, but what is tech now, it's cars, phones, it's a high speed internet connection that I pay $68 dollars a month for - so as to pile other services that I pay for - all of which I could do without, for instance going to the library instead. 

E-commerce, a new animal, I'm guessing most purchases are using CC transactions, and CC debt is at all time highs.  Economies are becoming consumer based all around the world, making for bigger economic crashes when banks retract credit.  

I know banks are still pushing credit, looking for revisions to income in order to allow credit limits to increase.  They'll create revenue streams wherever they can, last time was housing, they'll find another high risk debt scheme if it pays them now they don't worry about tomorrow.

Like many corporations, it's revenue streams that determine stock price. 

Ban KKiller Mon, 03/26/2018 - 13:32 Permalink

BofA, a continuing criminal enterprise. 

 

"We've corrected our faulty accounting methods and deeply regret harming our shareholders".....LOOK for this statement soon from the big banks. 

Hikikomori Mon, 03/26/2018 - 13:47 Permalink

Agricultural commodities are very cheap, and no matter what, people need to eat.

Strange but true - even in 2018, people need food more than Facebook!

Thugocracy Mon, 03/26/2018 - 13:50 Permalink

Hahaha hahaha hahaha hahaha hahaha

Fed took a wrong turn somewhere!!!!!!!!

Wall Street set a record in 2008 for the most they ever paid for a president. When he took office, he printed them trillions of dollars. It's all right there in a huge pile. In Wall Street banks. Trump's gonna change that? Not hardly. What wrong turn? This was the plan. It wasn't different when Rome collapsed.

abgary1 Mon, 03/26/2018 - 15:03 Permalink

We need to get back to market price discovery for interest rates and assets.

The central banks' preoccupation with inflation and asset valuations is not benefiting the economy.

The pursuit of perpetual inflation and growth with little or no volatility is unachievable.

End the central banking system and neo-classical economic theory.

 

Prof. Steve Keen requires assistance in developing new economic theory that is reflective of the complex, dynamic and chaotic economy and markets that exist.

Why are the most prestigious Universities refusing to acknowledge the absolute failure of neo-classical economic theory and refusing to participate in the development of new theories?

Let it Go Mon, 03/26/2018 - 18:04 Permalink

It is logical that these so-called bright spots that have pulled the market higher also have the most room to fall as valuations retreat. Signs that central banks are becoming more concerned about asset bubbles growing as a direct result of their actions is in the air. A massive surge in debt across the globe as consumers, businesses, and governments have thrown caution to the wind setting up a scenario that ends in tears. The fundamentals behind the upward movement of these stocks is insabe, the article below argues the FANG stocks may suffer most in a market crash.

http://FANG Stocks Have Potential To Really Bite Investors.html

Aireannpure Mon, 03/26/2018 - 23:09 Permalink

How about risk measurement with perverted interest rates. Oh, and how about all that debt. WOW. Raising interest rates will do what? Fed is one and done for 18.