I think the entire investor class in the US is currently experiencing a bubble. By "investor class" I mean anybody who has a significant amount of money in stocks or bonds.

The bubble was inflated by the quantitative easing that the Fed has done across the past 9 years in order to prevent the 2008 recession from turning into another great depression.

The bubble has led to asset price inflation both in the US and elsewhere. Basically, investors have money, but consumers don't. So the money is chasing assets (stocks, bonds, houses, Bitcoin) rather than starting new businesses or growing existing businesses. (Why build a business if your potential customers are broke?)

The average US consumer with no savings, on the other hand, has seen wages stagnate. As a result, the prices of consumer goods have stayed roughly the same. That's why the Fed has been able to pump trillions of dollars into the economy without causing massive inflation. The inflation is happening, just not in consumer goods where we typically measure it.

That's why the Fed's recent decision to reduce their balance sheet is so interesting and so important. They are going to gradually make a few trillion dollars of easy money disappear, and it's going to let the air out of the bubble. To do this, they are going to stop buying new bonds with the cash from old bonds that have matured.

The hope is that by deflating the bubble in a transparent and gradual way, they can avoid any type of severe market movements, and can take their foot off the gas pedal (or brake, more accurately) if/when necessary.

Interesting points.

I was asking on HN to get a Bay Area perspective. Your answer sounds more Wallstreet'ish - no offense.

The dot-com crash happened because there unreasonable businesses like pets.com got millions.

The 2008 crash happened because poor people got loans on houses who shouldn't have gotten those loans.

What about 2018?

No offense taken. I was on Wall Street in another life.

I don't know if there will be a crash. The market went up slowly, it could also go down slowly. That's the Fed's goal, it seems.

I do think that any time a bunch of people are making a bunch of money without knowing how or why, but by simply following the herd, it is leading to a dangerous place.

This is happening right now in the S&P 500 and other index funds. Everybody is getting the same advice ("buy index funds") and following it blindly.

I expect there will either be some kind of sea change where the herd starts moving (possibly stampeding) in the other direction, or someone on Wall Street is going to figure out how to take advantage of the movements of the herd.

But this is all speculation. If I knew for sure, I'd be a billionaire in the next few years.

> someone on Wall Street is going to figure out how to take advantage of the movements of the herd.

Maybe by buying "reverse etf s&p 500"?

That's too risky. It relies on the herd running in a specific direction.

I'm talking about profiting off of the predictability that exists as a result of there being a herd. You can find a way to make money no matter what direction the herd moves.

To put it a different way, see that tree over there? Right now it is much more likely that 1,000 buffalo run past that tree vs. one and only one buffalo runs past that tree. That's how a herd works. This is the opposite of how the market usually behaves, and I imagine there is some mis-pricing to be found as a result.

But, what do investors do when markets don't go up? because there's a giant drain on asset prices? especially very liquid assets.

Lose money?

your guess is a good as mine. Sorry if it sounded like I had an answer.