Please read this thoughtful essay by the modest Marc Faber yesterday. He looks at the zooming valuations of the Zimbabwe stockmarket and explains that it's because local investors' money has nowhere else to go if it doesn't want to lose value. He says the rest of us have a similar problem.
Currently, Faber is cautiously bearish about most types of asset:
...it will become increasingly important for investors not only to decide which asset-class train they want to board, but also, and even more importantly, whether they want to board ANY of the asset trains.
...a peculiar feature of the bull market in asset prices since 2002 has been that all asset prices around the world have appreciated in concert, as a result of highly expansionary monetary policies, which has led to excessive credit growth and a credit bubble of historic proportions. Therefore, if my theory of slower credit growth in the future holds, it is conceivable that, for a while at least, all asset markets (with the exception of bonds and cash) could come under pressure, albeit with different intensities.
In fact, asset markets would come under pressure, even if credit growth continued at the present rate and didn't accelerate. In this instance, investors would be better off not boarding any investment train at all and, instead, staying at the station loaded up with cash. (However, they would still have to decide what kind of cash to hold.) U.S. dollars might not be the very best choice.
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