George Soros, the hedge fund genius, and economic soothsayer sent a warning shot over the bow of the global financial market five or more years ago. Soros thinks the global financial system is showing signs of a massive breakdown, and Neil Woodford, the Bank of England’s star fund manager thinks Soros is right. The bankers who work for the Central Bank also think investors are ignoring inflated asset prices. Those bankers say the perception that the global market is strong is blinding their investment vision. And the Bank for International Settlements believes there’s long-run financial turbulence coming, and it may be too late to stop it.
The Central Bank thinks global financial markets are overheating, and consumer debt in many countries around the world is reaching unhealthy levels. Plus, risk-taking is the norm, and that will spell trouble sooner than later, according to the chief of the Bank of International Settlements, Claudio Borio. Borio thinks investors are ignoring the high debt levels. Borio also thinks investors are blind when it comes to overvalued financial assets. The perception that assets will continue to increase in value regardless of economic and political situations is the new way of thinking, and a dangerous one, according to a recent Buisnessinsider.com article.
In an uncanny and unprecedented announcement, Neil Woodford put investors on notice at the end of November 2017. Woodford thinks stock markets around the world are in an expanded bubble that can burst at any time. The result will be the worst market crash in history. Those flashing red warning lights are everywhere, according to Woodford. The bitcoin surge, junk bonds yielding less than U.S. Treasury bonds, triple-leverage exchange-traded funds that are attracting a massive inflow of investment money, and low levels of volatility are just some of the red lights that will bring the markets down, according to Woodford.
The current equity valuations are part of the bubble, and these bubble-like patterns are everywhere in the financial market, according to the Business Insider article. The Bank of England is also concerned about consumer debt levels in the United Kingdom. Debt levels in countries around the world keep getting higher, and the United States is no exception. In fact, the new tax proposal could be the financial pin that pops the bubble. But that possibility is not being considered by the current administration. The push to take more risks may be a Trump slogan, but it could be the financial force that puts a market crash in full gear, according to some economists.