la gente had the best comment so far..."f"
A few things. First, I told you so. Like RE prices in places that offer certain advantages (most often lax government inquiry regarding source of funds, and favorable taxation), US equity prices rise because the money used to buy them is printed by central banks. As long as the money printing continues, and as long as everyone who matters is in, money from places like Switzerland, Japan, USA, etc. will drive up equity prices. Any of you who haven't experienced the RE bubbles firsthand won't understand how insanely high prices can be driven, seemingly out of all proportion to what is being purchased.
Again, try to understand the perspective of the buyers, and you will understand that prices can go insanely high. It's not real money they're using, and like with RE pockets, conditions are favorable due to government policies--low interest rates, FRB buying, under-reporting of inflation, and suppression of interest rates. It is these types of policies that make US equities look good RELATIVE TO THE ALTERNATIVES, which is what it is all about.
The government picks winners and losers, and it has thus far picked the bond market as a winner, because it is protecting its own government pension interests (too little and too late, no matter HOW high bonds go, but it will do what it can)...and it is the bond market that serves as the justification for equity prices. Propping up the bond market is a last-ditch attempt to improve the condition of unfunded liabilities and public accounts.
Given that, it is at this point questionable if equity prices will fall in response to a falling bond market (if China etc. actually stop buying and let things mature), or if there will be a ratchet mechanism in place for that, too, along with price supports. Yes the Fed is supposed to be tapering, but that can change awfully quickly, if required. We have seen it before, and because there is now precedent, it will be easy to do again.
So, from the perspective of buyers who matter, the deal looks good, and certainly better than the alternatives.
The everyman will be collateral damage, and will take it in the shorts. Under the theory that "something has to give", I predict that it will be the USD.
Lastly, it is INCREDIBLE how inflated something can get, and equally incredible that it can REMAIN INFLATED much longer than anyone expects, maybe even for your lifetime. And it has nothing at all to do with "intrinsic value", "balance sheets", or "fundamentals", as those terms are commonly understood. Add in things like estate tax, transfer tax, money laundering, legacy trusts, crime, invasion, geopolitics, etc. and only then will you understand what is truly "fundamental" to important buyers.
Having said all that, I'm still as nervous as, in gente's words, f.