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I have a theory that another reason the stock market and property values are growing so fast is that they're basically the only things that the upper middle class can invest in, so most of the money that well off people save just goes to pumping up the valuation of a couple different asset types that haven't actually changed in their fundamentals that much.

Upper middle class people can't really do venture capital or private equity (well, they can if they get accredited, but these also require a lot more knowledge and time), bond yields and interest rates are so low, and our retirement system essentially requires chasing inflation-beating yields to work, so they have no choice but to participate in bubbles.

Do you have any data to support this? I ask, not to challenge the idea, but because I share the same suspicion - that the supply of investment dollars that go into the market independent of its underlying fundamentals continues to keep prices strong (particularly now that 401K plans have replaced pensions so a lot of dollars go into the stock market each pay period automatically). If everyone views the stock market as the place to save for retirement, rather than evaluating it as an investment per se (relative to other asset classes), then the overall stock market will continue to perform well, even if the active trading of mutual fund managers causes certain stocks to rise or fall relative to one another. I haven't, however, seen any hard data to support that suspicion.

Retail investors don’t drive stock market trends. It’s the Fed, institutions, and companies themselves.

Well known the Fed is pumping liquidity into the market for last few months through the Repo market. Plus cutting the Fed rate twice last year since the recession.

Companies are engaging in stock buybacks. When there’s fewer shares in the market the share price goes up.

Does the money I put in Vanguards 20XX retirement funds in my 401k count as retail? Because I assume across all the different flavors/providers of that, it adds up to quite a lot

Counter-evidence: the P/E ratio of AAPL has remained pretty steady as the stock has gone up by leaps and bounds:


The problem is the federal reserve and fiat money system.

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