The Globe and Mail ponders what a razor-thin equity risk premium (0ERP) is telling us in its Friday edition. The Globe's guest columnist David Rosenberg writes that investors willingly investing in the market today in this environment can only rationally be doing so if they are in it for the long run, never to sell under any circumstances. Mr. Rosenberg says go right ahead if that is your belief. However, if you believe the ERP should be about 300 to 400 basis points, then either interest rates must decrease, the equity market must fall, or both must occur. Mr. Rosenberg believes that a scramble to exit will occur when the top is turned, as the primal emotions of fear and greed in investing never fade. Greed may continue to prevail in 2025, but nothing lasts forever. Mr. Rosenberg says all exponentially rising markets go further than we think, and this one is no different than the others in the past. When everyone ends up heading for the exits when this cycle ends, and find out there are few buyers on the other side, things can turn very ugly. Retail investor flows into passive indexed equity funds are off the charts -- this blind investing is now fast approaching 60 per cent of the entire stock market capitalization.
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