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Short and Sweet

Blowing up the “Everything Bubble”

graphic image of a harried investor watching the blow-up of the financial bubble

“What the average person fails to understand,” writes Lance Roberts in an analysis posted at the Real Investment Advice website, “is that the next ‘financial crisis’ will not just be a stock market crash, a housing bust, or a collapse in bond prices.  It could be the simultaneous implosion of all three. Whatever causes that change in sentiment is unknown to me or anyone else.  I am not saying with certainty it will happen, as I hope sanity prevails and actions are taken to mitigate the consequences. Unfortunately, history suggests such is unlikely to be the case.”

And, we might add, it is not likely the damage will be restricted to the United States. All the largest and most advanced economies are engaged in rate suppression and quantitative easing schemes. In fact, an implosion in one location could cause corresponding meltdowns in multiple locations. Easy money and heavy leverage have greatly influenced price levels in all markets heightening rollover risks. And then there’s the derivative problem with notional exposure estimated at more than $1 quadrillion, according to Investopedia.

Are you ready for the ultimate derivatives moment?

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