We are in an asset bubble. All assets. Bonds are an asset.
What happens when the bubble bursts? What doesn't lose value? Who doesn't wind up underwater?
I remember that for a short but intense period of time money-market funds were in negative territory in late October 2008, which was really interesting because they were seen as basically cash (rightly or wrongly, that’s another discussion) and a run on them would have made many people very, very unhappy.
The fact is that gold is one of the few asset classes that are safe.
As opposed to say steel and copper which are tied to industrial supply and demand.
Everything.
"What happens when the bubble bursts?"
Good question. High inflation? Strong recession? Or decades of stagflation? Everything is possible. The future is hard to predict.
"What doesn't lose value? Who doesn't wind up underwater?"
"No place left to hide".
I assume OP is alluding to low interest rates, lots of money being injected in to the system and a select few companies being priced silly high.
There's no such thing as 'underlying worth' :)
A bubble is when prices are high relative to historical or comparative measures of worth, and any degree of volatility can snap such valuations back to historical norms.
The thing is - prices can be way out of historical norm ... but it may not be a 'bubble', in the sense that it may take a lot to 'prick' the bubble or change things so that there's a crash.
Housing in 2008 crashed due to a bunch of things gone wrong. If any one of those things held up ... there may not have been a crash even with high valuations, even with a fair bit of shenanigans going on.
As far as I am concerned, interest rates are being held 'historically low' by the Fed. In any other recovery, the'd have gone up by now.
The FT reported however that the Fed is engaging in a new tactic: they are looking not just at unemployment, but those who have stopped seeking work as well. Though unemployment is low, there's still people being sucked into the labour market and they're trying to see how far that can go. So they are less worried about inflation than they are 'true unemployment' apparently.
The primary function of an asset is to generate income - through dividends, rent, bond interest etc. This income determines asset's underlying worth.
Even if they did, what is a single share that produces $1 a month 'worth'? It depends on your cost of capital.
In both cases, they are 'worth' what someone will pay for them :)