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Welcome to the Everything Boom, or Maybe the Everything Bubble -

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But to call it that may not get things quite right either. What if the problem is not too much savings, but a shortage of good investment opportunities to deploy that savings? For example, businesses may feel that capital expenditures are unwise because they won’t pay off.

Well, duh.  The most interesting investments today are in people, not in physical infrastructure.  And we as a society are horrible at investing in people (see: Higher Education Bubble).  Still, that implies an awesome arbitrage opportunity...

I'm missing the connection between a football player selling shares of himself, and the fact that higher education is in a bubble.

The original New York Times article says there's a shortage of things to invest in -- but with education so expensive, perhaps that is still the best investment?

investment of people

You got it. People are the best investment.

Welcome to the Everything Boom — and, quite possibly, the Everything Bubble.

Around the world, nearly every asset class is expensive by historical standards. Stocks and bonds; emerging markets and advanced economies; urban office towers and Iowa farmland; you name it, and it is trading at prices that are high by historical standards relative to fundamentals. The inverse of that is relatively low returns for investors.

The phenomenon is rooted in two interrelated forces. Worldwide, more money is piling into savings than businesses believe they can use to make productive investments. At the same time, the world’s major central banks have been on a six-year campaign of holding down interest rates and creating more money from thin air to try to stimulate stronger growth in the wake of the financial crisis.

“We’re in a world where there are very few unambiguously cheap assets,” said Russ Koesterich, chief investment strategist at BlackRock, one of the world’s biggest asset managers, who spends his days scouring the earth for potential opportunities for investors to get a better return relative to the risks they are taking on. “If you ask me to give you the one big bargain out there, I’m not sure there is one.”

But frustrating as the situation can be for investors hoping for better returns, the bigger question for the global economy is what happens next. How long will this low-return environment last? And what risks are being created that might be realized only if and when the Everything Boom ends?

Safe assets, like United States Treasury bonds, have been offering investors paltry returns for years, ever since the global financial crisis. What has changed in the last two years is that risky assets, like stocks, junk bonds, real estate and emerging market bonds, have also joined the party.

Want to buy shares of American companies? At the current level of the Standard & Poor’s 500 index, every dollar invested in stocks buys you about 5.5 cents of corporate earnings, down from 7.4 cents two years ago — and lower than just before the global financial crisis in 2007-8.

Prefer a more solid asset? The price of office and apartment building has risen similarly; office space in central business districts nationwide costs $300 per square foot on average, up from $147 in early 2010, according to Real Capital Analytics. In Manhattan, an investor in an office building can expect rent payments after expenses to add up to only a 4.4 percent return, known as the capitalization rate, lower than even in 2007, the top of the last boom.


Mr. Bernanke himself has been wrestling with the possibility that the original framing of a global savings glut got the problem in reverse. “I may have made a mistake in trying to assign a name,” Mr. Bernanke, now at the Brookings Institution, said in an interview. “A glut means more than is wanted. But it doesn’t necessarily arise because people want to save more. It can be because they invest less.

“It’s entirely possible that if you look at the world, you have slow-growing advanced economies, China cutting back on capital investments, that the rate of return is just going to be low.”

If this analysis of the world is correct, investors have an unpleasant choice: consign themselves to returns lower than the historical norm, or chase ever more obscure investments that might offer an extra percentage point or two of return.

Just stop investing.  Be a decent human being. 

Median household income of wealthiest countries is about 40,000 US $ a year.  

If you have 4 million dollars you can live for 100 years better than 3 billion plus people never doing anything.   Of course you continue to do something and never even touch the savings. 

Stop investing and give it away NOW

Of course this is impossible because the slightest hint of liquidation takes your 4 million in illiquid assets to 2 million in a couple months. 

You cannot shift the balance of capital ownership to investing in humans because it will devalue your Monopoly money.  The irony is when a tiny group owns everything just like the kids game, the game is over. 

@Mark: I'm not understanding the distinction.  To me, giving money away *is* (or at least should be) investing in people, to help them become self-sufficient.  Otherwise you just make them dependent on you and rob them of dignity. :-(

Investing implies a return on your money.  

If you are "investing in people" do you get to retain equity?

Otherwise known as ownership. 

Seriously, using capitalist language to equate people with assets and turning around that charity creates dependency and robs them of their dignity is to be blunt fucked up. 

The language is so common people don't even for a minute look at the derivation of the meanings. 

I support my children I don't invest in them!

You're absolutely right: when I invest in people, I am giving them capital, expecting them to do something with it, and looking for a return (not necessarily monetary).  I get a *fractional* ownership in their success.  

That's exactly what I look for in the charities I support.  And yes, that is how I view my children; I have a stake in their growth and success, though I'm trying hard to make sure they have *more* of a stake than I do. I am continually agonizing over what exactly I am "buying" with the resources I give them: compliance? dependence? or productivity?

I see far too many charities where the charity really *does* end up "owning the problem" -- and thus the whole person -- by creating a mutually codependent relationship.  Haven't you? How much time have *you* spent with beggars in India and refugee camps in Africa? Are you claiming that failure mode doesn't event exist?!?

Sure, its better than letting them starve while we stuff ourselves with excessive consumption, but the consequences are still pretty negative.

Now, to be honest, I confess I do sometimes give money to people out of pure sympathy, without any ongoing relationship or concept of how they'll use it. But I gotta say, I do worry whether I am in fact "buying" their continued dependency rather than actually helping them...

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