[jfengel]

What's driving me nuts is that this has been a big fear about equities for nearly a decade. I ditched a lot of my S&P holdings at the start of the pandemic, saying "Surely this will cause a de-leveraging spiral." That aged like milk.

The market has remained irrational far longer than any of us can remain solvent. Eventually Coyote has to look down and fall... right?

I suppose I'd have to watch the Fed, which is holding interest rates at basically zero, and thus continuing to pump money into the asset markets. It's not causing CPI inflation because what goes into the asset markets isn't increasing demands for milk, and while it's weirding the real estate market, it's swamped by pandemic-based real estate weirdness.

[arcticbull]

Yup, the real estate stuff is interesting; most folks in the US buy on 30 year fixed rate mortgages, and the amount they can afford is based on their monthly payment. A reduction from 5% APR to 2.5% APR means they can afford a house 20% more expensive for the same monthly payment, and even their down payment isn't as big of a factor as they can just take out a non-conforming mortgage with a smaller down payment and once their LTV goes above 20% they stop paying PMI.