All that cash is searching for a home, and unlike water, cash tends to seek higher ground rather than the lowest. So all of the world's cash is pouring into higher quality assets with little concern for underlying values or economic fundamentals.
It's not that old letters, stocks and London hotels have suddenly become inherently more valuable. The amount of money chasing those assets has grown.
The swollen supply of money is pouring into everything from rental properties in Las Vegas and condos in Miami, to farmland in Brazil and office towers in Hong Kong to 1950s Ferraris, Gerhard Richter paintings and even old U.S. stamps. The bond king Bill Gross sold off around 370 lots from his prized stamp collection this week, fetching nearly $2 million for charity. Some of the lots went for twice the estimated price.
As a bond trader, Bill Gross knows the link between central banks and asset values better than just about anyone. As he once told the Washington Post, talking about stamp collecting: "The liquidity provided by central banks over the past two, three, four, five years has led to asset appreciation not just of homes, but of stamps and collectibles."
Of course, not everyone buys the money-supply theory of asset values. Plenty of stock markets around the world are underperforming. Carl Weinberg, founder and chief economist of High Frequency Economics, points out that outside of the United States, monetary easing has not substantially increased the supply of credit.
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Weinberg added that the rally in stocks and alternative assets "may be an argument for irrational expectations," rather than an oversupply of cash.
"Unfortunately there is no good data to prove this one way or the other," he said. "There are people who want to believe central banks have created asset bubbles. But it's hard to prove."
Unless of course, you follow the stamp market as well the stock market.