I just made the case for why this era looks a lot like a late 2015 analog: yields, banks, dollar, breadth etc. all declining. However, one other all-important aspect of this latent disaster is the level of rampant speculation. The magnitude of bubble - which now persists across global real estate, EM stocks, Crypto-currencies, revenueless Biotech, junk IPOs, Chinese internet companies and whatever else can be bought and sold, is unprecedented.
The subprime of this era however, is the ubiquitous fantasy that bidding up assets creates a permanently stable price equilibrium, consisting of record low volatility. One could make the serially proven argument that the exact opposite is true, albeit with a built in lag to allow capital to accumulate to the maximum extent possible. The origins of this stable speculative equilibrium fantasy derive from Wall Street of course, however, the Fed itself has succumbed to the same inefficient market hypothesis:
Below we see that the Fed's "financial stress model" merely follows the equity volatility index 1:1. We also see that leveraged volatility index volume is unprecedented. Which is another way of saying that a return to historically normal volatility levels (VIX 20) is a perilous scenario.
ZH: Leveraged Volatility Exposure All Time High
Also circa the 2014 volatility regime change, market breadth and volume are now declining in like manner:
Here we see that record low volatility makes large % spikes in volatility more likely, simply due to the fact that a 10 point move in the VIX is a larger % at VIX 10 than VIX 20. Which is a problem, because the VIX ETFs are rebalanced daily based upon the one day % move in volatility.
A one day 100% move is not an option for those betting on a permanent low volatility regime. It's annihilation.