By Simon Bond

Looking for value in a complicated world causes what comes to be known as "a crowded trade". In the world of investments, the phrase “crowded trade” is used to describe a security or an investment theme that has attracted an unusually large number of participants.

As an investment idea becomes more and more popular, it attracts greater inflows of capital, but the fun never lasts forever. Markets have been pumped by easy money flowing across asset classes looking for a home with some sort of income opportunities. Some of the structured income and yield products look to me very similar to the financial engineering we saw prior to the collapse of Babcock and Brown, Allco and Co and Co.

How do annuity providers provide annuity products with any level of reasonable return to yield hungry investors in a low or negative interest rate environment? Some of this is going to end up in tears (and losses). People are going to end up on the wrong side of the trade. All it takes is some left field event to hit.

In an environment of rising unemployment and low interest rates, Sydney house prices are off the chart. The fear of missing out and foreign buyers has pushed prices to levels that a year or two ago would have seemed beyond ridiculous. It doesn't actually matter how low interest rates are if a borrower is unable to repay debt, 2% or 10% is not relevant if you can't pay. That's without including the unproductive debt, that is debt that has been incurred to outlay on discretionary items rather than investment.

Stockmarkets look to me to be a "trading sell". Long term investors should just hang in, but looking at some of the prices out there for assets that are priced for perfection looks to me like a very crowded trade indeed.