[jollybean]

I think this is missing a giant factor, which is let's say 'inflation leverage'.

Inflation will hit some parts of the economy differently than others.

Consumer goods, homes, stocks, bonds - different kinds of inflation.

Quantitative Easing and other such policies, may impact the stock market differently than others.

As interest rates drop, the amount of leverage goes up dramatically, causing bubble.

Recent increases in valuations were not commensurate with profits, ergo, an ugly kind of inflation.

[jacobr1]

> Recent increases in valuations were not commensurate with profits, ergo, an ugly kind of inflation.

But we also have downturns that reduce returns significantly. If you average out the returns the presumption is that the cost of that "inflation leverage" is accounted in the inevitable bubble pop.