Tags: Lombard | Dumas | Global | US | Stock

Lombard Street's Dumas: Global Cash Inflates US Stock Prices

By    |   Wednesday, 04 Dec 2013 06:41 PM

Global economic conditions are pushing investment funds around the world to U.S. financial markets, and that could end up creating a bubble, says Charles Dumas, chairman of Lombard Street Research.

"U.S. real assets are increasingly the only major game in town," he writes in the Financial Times

"Investors with global reach looking for security and return have few options as attractive, and none on the same scale. The world could soon see the kind of cash flow to the U.S. that underpinned the late-1990s stock market boom, culminating in the tech bubble." 

Editor’s Note: 5 Reasons Stocks Will Collapse . . .

Most emerging market currencies are way overvalued, Dumas says. "Meanwhile, the eurozone has its own, southern 'submerging markets," he writes. "Relapse of the much ballyhooed eurozone recovery to near-stagnation could persist."

As for Japan, its economy depends heavily on currency devaluation, Dumas says. "Japanese investors, facing minimal interest rates and deliberate stimulus to inflation, have every reason to seek assets abroad."

The same is true of other global investors, Dumas says. "Booming real estate, housing and stock market values could soon present the Federal Reserve with a painful choice between fostering growth and checking fresh bubbles," he writes.

As far as Marc Faber, publisher of the Gloom Boom & Doom Report, is concerned, the bubble already is here.

“You have to say that we are again in a massive financial bubble in bonds, in equities, in [other] asset prices that have gone up dramatically,” he told CNBC.

“Farmland is up 10 times over the last 10 years. Bitcoins are up now, and who knows what will go up next. We are in a gigantic speculative bubble.”

Editor’s Note: 5 Reasons Stocks Will Collapse . . .

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Global economic conditions are pushing investment funds around the world to U.S. financial markets, and that could end up creating a bubble, says Charles Dumas, chairman of Lombard Street Research.
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Wednesday, 04 Dec 2013 06:41 PM
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