In the past one asset class appreciated at a time and investments moved from class to class chasing the highest performing investment, but now the Everything Bubble exists. In the Everything Bubble, there are no bargains left. All major asset classes are simultaneously at all-time high prices: stocks, bonds, and real estate. On this episode of The Real Estate Launchpad, Charles Hugh Smith joins host Jonathan Twombly to explain the Everything Bubble. Charles shares why central banks have pumped money into the system, how the system got where it is now, and how to protect your investments in the case of the Everything Bubble bursting. This is an episode you won’t want to miss!

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Why the Everything Bubble Exists

In the Everything Bubble, all asset classes are performing exceptionally well. All asset classes are currently connected because central banks and the private banking sector have created a lot of money. This money is looking for a home. There is a tsunami of fresh credit in the economy to be used in investing. In the past, capital used to be scarce or limited, so people sought the best return. This caused investors to jump from the class to class, choosing whichever would make the most money. However, with abundant capital, there is enough to invest in and balloon all asset classes.

Where did all the money come from?

The central bank’s solution to a downturn in the economy is to make borrowing easier to encourage the movement of money in the economy. Over the last 30 years, central banks and central treasuries have flooded the economy with cheap credit, putting lots of liquidity in the system. However, with fewer requirements on borrowing, too much credit gets lent to marginal borrowers. Marginal borrowers are also more likely to default, causing banks to incur losses. Despite these losses by the banks, this cycle has continued with more and more accessible credit becoming available.

Why infrastructure is suffering

Charles says that in recent years, there has been underinvestment in productive infrastructure as investors are choosing speculative ventures instead. He points to the fact that private capital is no longer interested in a 2-3% return that would come with investment in infrastructure. Instead, private capital is looking for a quicker return with enormous gains. The idea that one can catch the market correctly and get rich quick has captured private capital.

How to protect yourself from the Everything Bubble bursting

The Everything Bubble will burst. Charles says the economy is currently sitting on a lot of debt, and the level of risk in the system is growing. To protect yourself from a burst of the Everything Bubble, you must expose yourself to less risk. Try to get out of debt, so you are not in an illiquid market. Don’t worry about waiting to sell assets until you are at the tip-top. Charles says it is far better to sell assets too early than to sell them too late and lose money.

In This Episode Charles Hugh Smith says…

  • [2:38] Who he is
  • [5:33] What is the everything buble
  • [9:30] Where did all the money in the economy and why now?
  • [13:52] Why central banks keep lending
  • [24:59] Why people don’t want to invest in infrastructure
  • [32:33] Where are we headed now?
  • [38:26] It is better to sell too early than too late
  • [41:14] What will cause the everything buble to burst

Resources Mentioned In The Episode


Connect with Charles Hugh Smith

Connect With Jonathan and Real Estate Launchpad

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