Thanks to Bernanke/Yellen, the valuation of any asset is poor, but that does not mean the bubble is bursting anytime soon with Fed’s foot on the gas all the time.
I also disagree that “shadow inventory” is going to be a predictor of the next bubble burst. Every bubble is unique and will burst in its unique way. Last time, it was an over-supply from the foreclosures. Next time, it could come from under-demand with lower wages.
For example, I don’t think the Chinese real estate bubble will burst the same way as the U.S. housing bubble. The hefty down payment requirements there would ensure that foreclosures won’t be a problem there. But that is not to say, there won’t be a crack on the demand side (which is fueled by everyone’s wishes to be multi-millionaire just by buying a home) or from the middle man (shadow banking collapses, taking down the loans that factories need to operate).
Frankly, I think globally we are all paid too high for what we are worth on average. With huge improvement in machine learning in recent years, the machines that will take our jobs are just around the corner, unless you are the very few who invented the machines to replace the service jobs. Wages now need to be depressed for the service sector as they did for the manufacturing sector years ago. It is almost inevitable.
Luckily, in U.S., I think it just means we are just less wealthy than we thought we are. As for emerging market, I am not so sure about their social stability when everyone starts to realize still how poor they are.
There is a mother of all bubble-bursts coming, if that ultimately happens, as we see political turmoil around the world hurts the never-seem-to-end productivity growth. Until then, you can probably see both stock market and housing market keep climbing for quite a few percentage.
