In his latest weekly note, bearish investor John Hussman sounds the alarm about bubble mania all over again.
He writes that the exact behavior that caused the housing bubble is happening again. Investors are using cheap money to buy anything with yield, regardless of risk.
We increasingly see carry being confused with expected return. Carry is the difference between the annual yield of a security and money market interest rates. For example, in a world where short-term interest rates are zero, Wall Street acts as if a 2% dividend yield on equities, or a 5% junk bond yield is enough to make these securities appropriate even for investors with short horizons, not factoring in any compensation for risk or likely capital losses.
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