Are bonds about to pop? |
Monetary expansion has driven government bond yields to historic lows |
This monetary expansion has created a sequence of bubbles: real estate bubbles, commodity bubbles, and the mother of all bubbles in government bonds which is still here. The debt of the private sector which caused the financial crisis has just been shifted to the governments of the US, Europe, Japan and even China.
If we measure valuation of other asset classes such as equities or real estate they appear cheap. Especially equities are in danger since companies are enjoying historically high profit margin, and profit margins are known to revert to their long term mean.
In my opinion, it is paramount to select reasonably priced stocks, not too much long term bonds, some cash and gold.
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