Daily Traders Edge

Opinion: This is why you can expect another global stock market meltdown – MarketWatch

February 25
16:54 2016

This story is part one of ‘Crash Course,’ a five-part series from commentator Satyajit Das on threats to investors in the current market climate. Coming on Monday: The destructive impact of excessive debt.

The mispricing of assets across world markets has reached epidemic proportions.

Stock prices have made strong advances over the past several years, yet market analysts see further gains, arguing that the selloffs of August 2015 and early 2016 represent a healthy correction.

But this rise in stock values has been underpinned by financial engineering and liquidity — setting the stage for a global financial crisis rivaling 2008 and early 2009.

The conditions for a crisis are now firmly established: overvaluation of financial assets; significant leverage; persistent low-growth and deflation; excessive risk taking reliant on central banks for liquidity, and the suppression of volatility.

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