“The world is awash in capital whether you know it or not.
The total value of capital in seen going from $600 trillion in 2010 to over $900 trillion by 2020, which will be here before we know it. A report released in November by management consulting firm Bain & Company suggests that the era of capital superabundance means a number of things to worry about for corporate and portfolio investors. But one of the biggest risks in a world awash in capital is bubbles. The world’s bubble economy is going to get even bubblier.
Bubbles are everywhere, and hard to avoid. Take for example, Brazilian government bonds. Currently, one of the big buyers of Brazilian government bonds outside of its own banking sector is Japan. Japanese investors seeking higher yield trade yens for Brazil reals and get an easy five percent return. Some day in the not-so-distant future, China will do the same thing. Their government will allow for regular investors to put money overseas and when China becomes part of that particular carry-trade it will drive up the price of Brazilian bonds as investors chase yield but end up creating bubbles….”
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