Assets? Physical, material goods? Or investment vehicles like bonds and funds?

What happens when the bubble bursts? What doesn't lose value? Who doesn't wind up underwater?

Anyone with cash and low-leverage cash producing assets.

And it will be a challenge deciding who really has cash and what cash really means when the bubble will burst.

I remember that for a short but intense period of time money-market funds were in negative territory in late October 2008, which was really interesting because they were seen as basically cash (rightly or wrongly, that’s another discussion) and a run on them would have made many people very, very unhappy.

This is a pretty good answer. With cash you are total contrarian in the current environment. But this strategy also comes with risk. "Haircut" etc.

"Assets? Physical, material goods? Or investment vehicles like bonds and funds?"

Everything.

"What happens when the bubble bursts?"

Good question. High inflation? Strong recession? Or decades of stagflation? Everything is possible. The future is hard to predict.

"What doesn't lose value? Who doesn't wind up underwater?"

"No place left to hide".

Gold

Wow, downvotes. The hate for gold is strong, never really understood why.

The fact is that gold is one of the few asset classes that are safe.

Gold has the volatility of the stock market, with lower returns than bonds: https://www.portfoliovisualizer.com/backtest-asset-class-all...

I wouldn't be so sure, it is only worth much because we believe so. (Likewise platinum.) They will bubble and crash.

As opposed to say steel and copper which are tied to industrial supply and demand.

Money is shared fiction too. The difference is we can print an infinite supply of it but only have a finite supply of gold in the world.

How can we protect our wealth? move everything into gold and Swiss francs?

Gold is already up. If I'm going to invest in commodities, I'm heading for less popular vehicles(i.e. platinum group metals... copper... anything but gold).

Copper is very tied to the manufacturing activity of the economy though so inflation in the face of a slowdown can end up washing copper gains.

Buy good Art.

What is an asset bubble? And why are we in one?

When the price of an asset doesn't match its underling worth, not strictly true since prices are high but earning are also high, PE ratio looks average in the US.

I assume OP is alluding to low interest rates, lots of money being injected in to the system and a select few companies being priced silly high.

"When the price of an asset doesn't match its underling worth"

There's no such thing as 'underlying worth' :)

A bubble is when prices are high relative to historical or comparative measures of worth, and any degree of volatility can snap such valuations back to historical norms.

The thing is - prices can be way out of historical norm ... but it may not be a 'bubble', in the sense that it may take a lot to 'prick' the bubble or change things so that there's a crash.

Housing in 2008 crashed due to a bunch of things gone wrong. If any one of those things held up ... there may not have been a crash even with high valuations, even with a fair bit of shenanigans going on.

As far as I am concerned, interest rates are being held 'historically low' by the Fed. In any other recovery, the'd have gone up by now.

The FT reported however that the Fed is engaging in a new tactic: they are looking not just at unemployment, but those who have stopped seeking work as well. Though unemployment is low, there's still people being sucked into the labour market and they're trying to see how far that can go. So they are less worried about inflation than they are 'true unemployment' apparently.

> There's no such thing as 'underlying worth' :)

The primary function of an asset is to generate income - through dividends, rent, bond interest etc. This income determines asset's underlying worth.

Funny because Apple hardly ever pays dividends. So what is APPL worth?

Even if they did, what is a single share that produces $1 a month 'worth'? It depends on your cost of capital.

In both cases, they are 'worth' what someone will pay for them :)

AAPL has been paying dividends four times a year since 2012.

It seems like you're getting at discounted future cash flow. But this has an easy explanation for why assets are more expensive. Interest rates are incredibly low which discounts future cash less.

Not sure why you think bonds are assets because they are not. Investment 101 stuff right there.

Bond -> Financial Security -> Financial Asset -> "non-physical asset whose value is derived from a contractual claim". More details at: https://en.wikipedia.org/wiki/Financial_asset

Theoretically... If I lend you 5 bucks, I don't really see it as an asset. I believe to call it what it is becomes even more important if we talk about asset bubbles...

It’s debt owed to you. It can be sold off. It’s definitely an asset.

Maybe, but certainly there is a distinction between that and me keeping the 5 bucks?

Risk and return and depreciation.

True, but then it makes no sense to group them. Because one kind of asset can form bubbles much more likely and frequently.

You still group them. All assets have risk, return, and (possible) depreciation.

A bond is an asset, just as shares are, as they are securities you can buy in exchange for future cash flows (contractual in the case of the bond, discretionary for the share). Both are only a liability for the issuer.

right... Informs us all then - what is it? a liability?

It is a liability for the issuer :-)