The Everything Bubble [infographic]

The problem with giving people more money to stimulate demand for those things is that it only solves half of the problem. Healthcare is limited by the supply of doctors so no matter how much government subsidizes it, the amount of people who can be seen by the constant number of doctors will be the same. In practice, this means the price will increase every time you try to give people more money for healthcare.

Housing is similar in that even if you give people money for new houses, everyone wants their house to be in a nice location and there are only so many houses that can fit in a constant amount of desirable real estate.

Without reforms to medical school and medical residency programs, healthcare might never be affordable. Without reforms to zoning laws, housing might never be affordable.

Without at least allowing for an increase to the supply of nice things, increasing the demand of nice things won't be very helpful.

when you put funny money in the market, tech booms, paper assets boom and investment in hard industry becomes less appealing. the investment in tech has failed to rise all boats. its only raising boats for some very select geographies, and perhaps that could have been changed if tech developed differently (less monopolies), but it didnt.

Well, look we are nearly a decade later from that moment so that money has gone through the system, aggregated usually with the 1% and then dispersed.

Additionally the world continues to become more global. If you look at some of the main residential markets in America like NYC and Miami, you will see that a significant percentage of purchases aren't from US citizens, but instead, international buyers that are moving their money into a more secure asset offshore and away from their government.

In Miami there is a lot of money from Russia and South America. In NYC it is a lot of money from China.

Then consider that after the housing bubble popped it would only be natural that money would look for another asset class to invest in so it shifted to the stock market.

Certainly there is speculation there, that's the nature of the stock market but the largest companies that have the majority of the growth are simply larger due to higher revenues. What made them successful five years ago are macro trends that are still playing out.

As massive as Amazon is it's only a small percentage of overall sales, which still occur at retailers, however the macro trend of more sales happening online hasn't stopped so you are seeing that continuation.

Apple could be argued is under valued, not over valued.

Google is still continuing to grow.

Sure, Tesla could be considered a bubble, but eventually it grows into the valuation or the irrational exuberance stops and the stock will decrease to it's real valuation. Similar to what happened to LinkedIn. But again, that is too small to really matter on the global scale.

The question of reducing taxes to spur more demand, well that won't really work. Think of it this way, if you reduce taxes even 10% that isn't going to lead to more cars being bought. Sure things that you need like groceries and maybe making your rent, but you aren't going to be making massive purchases.

That tax cuts would benefit the rich the most, because 10% of a $10MM salary means an extra $1MM of cash after you already have enough for savings, so that really does become discretionary spending money. But those people would again purchase the most expensive assets and drive up real estate prices.

Also very unlikely that you could push through a tax cut for a single class or even two classes without a tax cut for the rich, otherwise it would be called socialism, which is misunderstood, but still hated and feared in America.

These are just normal shifts of money moving depending on the barriers that it encounters. We all are exposed to inflation so money needs to be shifted as inflation is it's own version of having limited timeline. Leave the cash under a mattress and 50 years later be surprised by how much spending power you lost.

If you look at the American economy manufacturing is only 10% of salaried positions and 80% is the service sector. So you are seeing how this plays out over time.

The reality is that the world was never equal, and unless you want to move to communism where everyone has the same stuff, it will never be equal. As such there will be some winners and some losers.

Now if you really want to reset this imbalance, it isn't about tax cuts for the poor, but instead massive taxes on the rich. That would then move those funds back to the government, they could focus on more infrastructure which is sorely needed, and it would be coming from the very class that can afford to lose that money.

This would decrease some of the real estate prices, but that could lead to problems in building as well, which means that sector will lose jobs.

The reality is that everything is interconnected, you can't change one thing without affecting everything else.

But certainly if you want to tax those that have the most you could move forward.

Plus, check out what the highest tax rate was on the largest income earners 80 years ago and be surprised by how high it was.

This is pretty directly contradicted by the post. The real estate markets that have higher taxes on the wealthy are showing more bubbly behavior.

Higher taxes on high earners may be a good idea but they’re not a solution to bubbles.

It seems simple on paper. But the wealthy didn't get wealthy by giving away money.

Asking the wealthy to hand back some of their "welfare" is going to be incredible difficult and unsuccessful.

Think about it. It's easier to ask 1 million people to give up $1 each than it is to ask one person to give up $1 million dollars.

Yes -- this is the whole point of owning a broad index.

You get exposure to the highest-performing stocks -- what those actual companies are changes over time.

And there's usually another company to step up and fill the gap when one of the leaders falls.

Care to elaborate more on the housing.

Just few examples of putting things into context:

* Household Debt Service Payments as a Percent of Disposable Personal Income https://fred.stlouisfed.org/series/TDSP

* Household Financial Obligations as a percent of Disposable Personal Income (FODSP) https://fred.stlouisfed.org/series/FODSP

* Household Debt to GDP for United States© (HDTGPDUSQ163N) https://fred.stlouisfed.org/series/HDTGPDUSQ163N

https://en.wikipedia.org/wiki/Business_cycle

I'm not sure how I feel about this, but it's at least a perspective.

There's a "philosophical" problem to the effect of, at some point, what are you indexing? But what seems to me to be the more practical issue, and forgive me for this being half-formed, is that it seems like indexing is subtly the wrong thing to do (in a world consisting of only bad choices). The things being indexed are basically weights, for example, the relative capitalization of various stocks, based on some filtering criteria. In order to keep a fund on target with an index, they have to buy and sell according to those weights, and in principle, if the weights change, then the fund's holdings have to change accordingly.

This would seem to me to introduce problems like, if there's a sell-off of some stock so that its price drops, then its capitalization will also drop (capitalization being number of shares times price per share), which would seem to reduce its weight in the index. This should then lead to index funds having a follow-on sell-off. (And likewise for exuberant buying.) So this would suggest to me that, if index funds come to dominate stock holdings, then they should both increase volatility, and result in their holders systematically "buying high and selling low." That is, because an index fund is not the same as an index, but it's in active feedback with the index computation method.

There's also a potential issue, again depending on the level of buy-in, that one should see systematically increasing P/E ratios because of increased overall buying of stocks. That is, in the past, it was not typical for normal people to engage in regular stock purchases (which are held for decades). This would suggest lower dividend yields, which leaves one wondering whether 401ks will become what people think Social Security is, i.e., ever-rising P/Es serving as a transfer from the young to the old that requires continual workforce increases to maintain.

Though I'm not in finance, these are just the things that occur to me in thinking, how would I implement an index fund, and what might that do to the system's dynamics.

Let's take an S&P 500 index fund as an example. Vanguard or whoever does some marketing, and people decide that index funds are a good way to invest, and money flows into index funds. That's not a bubble.

The economy starts doing well, and stocks go up, and a bunch more people decide that they want to be in the stock market, and so they put their money into an S&P 500 index fund, not because they really want to be in the stock market, but because it's what's going up. That's still not a bubble.

Vanguard gets a bunch of money for its S&P 500 index fund, which it has to use to buy stock in the companies that compose the S&P 500. As a result of all the new money coming in, the stock in the S&P 500 companies go up - more than the fundamentals of their business indicate, more than stock in, say, the Russell 2000 goes up. Because the S&P 500 has gone up more, more money pours in to S&P 500 index funds. Now the S&P 500 is going up because of all the money being invested in it, and all the money is being invested in it because it's going up. That's a bubble - a positive feedback loop that has become detached from the fundamentals of the assets involved.

That's a bubble, but it doesn't really get bad until borrowed money enters the picture. If people are borrowing money to invest in S&P 500 index funds, because the funds are going up faster than the interest cost on the borrowed money, now it's a bubble that can cause serious damage when it pops, because it may damage the lender as well as the borrower.

So, for example, people were talking about bonds being in a bubble because bond prices were so high (extremely high by historical standards). That was a flight to safety, not a bubble. People were not buying bonds because they expected bond prices to keep rising, they were buying bonds because they expected other prices to keep falling.

It feels a lot like when people talk about the national debt without putting it into context of GDP.

Though I just checked the data: in order to get past 100% with YTD from [1] you need to go to around top 112 companies, so my complaint isn't that valid. Only 159 of the S&P 500 lost value this year and almost all of those were very modest, so there isn't as large a cancellation as you might otherwise see. Nonetheless, you can always select the top performers and point out how they're outperforming the rest. If this were an honest infographic it would compare this value (% of total gains obtained by top N performers) to previous years.

[1] https://www.investing.com/indices/us-spx-500-components

But honestly, I've grown tired with all the doom-and-gloom oracles every year, they irritate me much more than the "everything is fine, nothing to see here" ilk.

And when a recession finally happens, you'll see all those broken watches on a daily basis in the media proclaiming they "predicted" it in 201x and nobody listened and I'll have to really hold myself not to smash the monitor...

On a side note, who (apart from the few investing) cares if cryptocurrencies are a bubble? It's currently not even a footnote to the global economy