Bloomberg Businessweek - USA (2019-12-23)

8

ILLUSTRATION

BY

SANY

◼ REMARKS

● The risky pursuit of returns amid

negative rates isn’t a laughing matter.

Be afraid

● By Peter Coy

Apologies for being churlish in the holiday season, but the

let-nothing-ye-dismay attitude of the financial markets has

me worried. The exuberance feels irrational. Asset bubbles

form, remember, when greed overwhelms fear. It’s a truism

that bad loans are made in good times when lenders relax

their standards. As the American economist Hyman Minsky

once put it, stability breeds instability.

Investors get edgy when asset prices are down, but they

should be more concerned at times like now, when prices

have gone up, up, and up. Through Dec. 17 the S&P 500 index

has gained 27% this year. The market feels as frothy as the top

of a nutmeg cappuccino.

“We enter the next decade with interest rates at 5,000-

year lows, the largest asset bubble in history, a planet that

is heating up, and a deflationary profile of debt, disruption,

and demographics,” Michael Hartnett, chief equity strategist

for BofA Global Research, wrote in a recent note.

There’s a bigger issue here than whether stock and bond

prices are too high. The more serious question is whether