Why do people believe what goes up will just keep going up despite all the historic examples to the contrary?
Last year, Hirschman Capital noted that since 1821, 98% of sovereigns that hit 130% debt/GDP have defaulted on their sovereign debt. The US hit 130% late last year.
There are only two ways for sovereigns to default: Inflation or collapse.
The latter is not an option.
House prices Extreme overvalued, stocks too. But see a blow-off top ahead prior to a meltdown
Vegas home prices fell 85% from 2005-2008. Ghost towns popped up all over California as people dropped off their house keys at the bank. The idea that housing cannot crash 85% or more as the Everything Bubble collapses is simply denial
so the banks can buy all of the property for next to nothing and rent it back to everyone.
Sounds like how people felt about housing in 2005, or stocks in 1929, 2000, 2007. Crashes occur after bubbles.
So our alternative long bonds might actually be bid in that scenario?
Not touching bonds under any circumstances. Out-of-the-money stock puts with a horizon of 1-2 years when the S&P hits 5500 and everybody and their dog is uber bullish might be the trade of the century. Such puts will be sold for pennies.
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