Stock market is a "fully-fledged epic bubble" and will burst

[chris7676]

There is a big difference between the hot US (NASDAQ esp) and the "lame" underperforming UK market.
However any major US burst / correction will affect the rest of the world, including the UK, just the correction would likely be more shallow here.
If you stay invested, I would suggest sound, non-overvalued businesses in sectors such as healthcare, defence, and more boring stuff perhaps.
Also some gold rather than bitcoin especially for buy and hold as insurance.

[Sheepshanks]

red_slr said:

I do think the S&P500 does some crazy stuff.

If you look at the last 5 years its doubled in price.
The FTSE in the same period is up 20%.

I appreciate they are very different indexes but it just keeps going up and up.

You'd have thought the US markets would be affected by all the goings-on in Washington this week but they've just carried on regardless.

[troika]

You do have to ask what will it take to stop the US markets from marching on?

[Mr Whippy]

troika said:

You do have to ask what will it take to stop the US markets from marching on?

Tens of millions unemployed?
Tax rises.
Interest rates rising.
Foreign holdings of treasuries falling as they lose confidence in the dollars value (looking to be on a decline in value and foreign holdings in last few years)

And all time high valuations and P/E ratios, corporate debts all time highs.


There is plenty to stop them moving on once bitter reality bites the arses if the herd currently buying in (late) and driving this rally built on thin air.

[Phooey]

troika said:

You do have to ask what will it take to stop the US markets from marching on?

I agree. I know they say the markets are not the economy or vice versa but I just think recently people are going bat-st crazy for investing in stocks and shares, BC etc (throwing fuel on the fire). You'd think it'd all end in tears but I'm not sure.. maybe once a few people get burned on a few high-profile stocks (Tesla?) it might shake the markets but until then I see no sign of any news putting people off playing this one-way gamble. Me included

[troika]

Mr Whippy said:

troika said:

You do have to ask what will it take to stop the US markets from marching on?

Tens of millions unemployed?
Tax rises.
Interest rates rising.
Foreign holdings of treasuries falling as they lose confidence in the dollars value (looking to be on a decline in value and foreign holdings in last few years)

And all time high valuations and P/E ratios, corporate debts all time highs.


There is plenty to stop them moving on once bitter reality bites the arses if the herd currently buying in (late) and driving this rally built on thin air.

Maybe a civil war? Inflation has to kick in big style with all the printing. Will they raise IR’s with so much debt? It seems they’ll just print as much as they need. C19 hit when markets were creaking already. I still think there’s a twist in the tail.

[Benbay001]

I dont think the US market growth will pop per se.

IMHO its returns will just be flat(er) over a period than its contemporaries.
Tesla at the extreme end is at a valuation that would be considered high even on a fair forecasted earnings in 10 years time.

All it will take is one mistep or earnings miss and i think it will see a massive correction.

[cheeky_chops]

millen said:

Well worth reading John Authers' column this morning https://www.bloomberg.com/opinion/articles/2021-01...
Note: you can subscribe to his 7.00 am emails free (for now) without a pricy Bloomberg sub. Always helpful on the big picture, imo!

This. Been subscribed a few weeks and its a decent read with lots of pictures. He's just tweeted this FT article too :

https://www.ft.com/content/20a4f647-5db3-40e6-a38c...

Been tinkering with a few £k of shares and kept away from the bat st stuff. There is one guy on twitter that seems to be making all the right calls. On investigation its on something called SPACs - Shell companies setup to buy other companies. They all have crazy valuations and zero revenue/assets on the promise of merging other companies. Authers mentioned them too and his dislike

Id love the market to be less turbulent - ive sat on a cash sum (60%) in my pension as i swapped it to a SIPP just before COVID. I know time in the market trumps timing the market but the covid/swings/brexit just put me off.

[Scootersp]

CzechItOut said:

Scootersp said:

not sure what happens in the medium/long term.

Remember, all this started in 2008. Therefore, are we not in the medium term now? Maybe this is the new normal, ultra low interest rates, government deficits, semi-continual QE.

It's funny, I go on a business forum where people routinely ask "What's my business worth?". The answer is always "whatever someone is prepared to pay for it."

Therefore, why doesn't the same logic apply to shares, rather than the old fashioned view of "fair value"?

Normally "what someone is prepared to pay for it" is an analysis of the fundamentals to arrive at a fair value? Not a 'gut feel' or whim and belief that it's just gonna be worth more tomorrow almost regardless?

[Mr Whippy]

troika said:

Mr Whippy said:

troika said:

You do have to ask what will it take to stop the US markets from marching on?

Tens of millions unemployed?
Tax rises.
Interest rates rising.
Foreign holdings of treasuries falling as they lose confidence in the dollars value (looking to be on a decline in value and foreign holdings in last few years)

And all time high valuations and P/E ratios, corporate debts all time highs.


There is plenty to stop them moving on once bitter reality bites the arses if the herd currently buying in (late) and driving this rally built on thin air.

Maybe a civil war? Inflation has to kick in big style with all the printing. Will they raise IR’s with so much debt? It seems they’ll just print as much as they need. C19 hit when markets were creaking already. I still think there’s a twist in the tail.

To create debt they need buyers.

But debasing their currency puts off foreign buyers, who underpin their ability to create debt.

Once foreign interests wane (as they are continually doing) then they’ll need to offer increasingly high returns to make it attractive.


At the same time all this money is going to create inflation. Inflation is calmed down with raised interest rates.

But rising interest rates breaks the treasuries as they lose value, so everyone wants to sell.

The federal reserve can’t buy them all as everyone would just sell as the values would crash.


There is no obvious solution to getting inflation to deflate these vast debts, without breaking the economy.
It worked for the last decade as we had a stronger economy and deflationary environment.
Now it seems inflation is catching up to us and yet the economy is on its arse...


I’m no expert. It’s MMT through and through though, just a game of obfuscation and slight of hand and hope with tens of trillions shuffled around to balance digital books.

Fundamentals and logic went a decade ago.

What’s left is anyone’s guess.


My 2p, get into what you know and educate yourself as much as you can.

Anything ‘in the system’ is basically potentially worthless right now.

Even “cash” in the bank has me worried.

[marky1]

Mr Whippy said:

Rojibo said:

This is kind of a concern I have at the moment, I see no point in money sitting in a savings account earning 0.01% APR, so I'm looking to diversify things a bit, I'll happily put money into Crypto (as I feel I understand it better), but I don't have much confidence in the stock market itself, everything looks rather overvalued.

I guess I should just pick a fund and go with it, to start really, rather than sit here and watch my money get eroded by inflation thanks to the colossal amounts of money we've been printing...

Herd mentality.

The sheep have woken up to how they’ve been robbed blind for a decade with low interest rates and surging asset inflation.

Now they’re feeding the late stage parabolic rises in asset values.

This is the time not to buy. This is the time to sell had you bought years ago.

God knows what you buy though... almost everything is over valued with potentially zero real yield potential at today’s prices and a drop in consumer demand.

The only thing I can think has real intrinsic value, low supply, and a real yield in always in demand goods, is agri land and its produce... and it’s price hasn’t ‘surged’ yet, so it’s arguably priced ‘right’ vs most stuff right now... ie, time to get in before everyone else does.

Is Asset inflation surging because what it’s priced in is losing value every year, for all the reasons already mentioned on here? I can see it continuing, as we print more money it’s worth less so the price of assets must increase.

[Mr Whippy]

marky1 said:

Mr Whippy said:

Rojibo said:

This is kind of a concern I have at the moment, I see no point in money sitting in a savings account earning 0.01% APR, so I'm looking to diversify things a bit, I'll happily put money into Crypto (as I feel I understand it better), but I don't have much confidence in the stock market itself, everything looks rather overvalued.

I guess I should just pick a fund and go with it, to start really, rather than sit here and watch my money get eroded by inflation thanks to the colossal amounts of money we've been printing...

Herd mentality.

The sheep have woken up to how they’ve been robbed blind for a decade with low interest rates and surging asset inflation.

Now they’re feeding the late stage parabolic rises in asset values.

This is the time not to buy. This is the time to sell had you bought years ago.

God knows what you buy though... almost everything is over valued with potentially zero real yield potential at today’s prices and a drop in consumer demand.

The only thing I can think has real intrinsic value, low supply, and a real yield in always in demand goods, is agri land and its produce... and it’s price hasn’t ‘surged’ yet, so it’s arguably priced ‘right’ vs most stuff right now... ie, time to get in before everyone else does.

Is Asset inflation surging because what it’s priced in is losing value every year, for all the reasons already mentioned on here? I can see it continuing, as we print more money it’s worth less so the price of assets must increase.

I think that is a factor but I’m not sure it’s actually the predominant one.

I think it’s more a case of lots of new liquidity and cheaply funded debt looking for a place to live.

Obviously ‘assets’ make most sense with treasuries, bonds and interest rates near zero.

So the money went into assets. High demand, relatively low supply, little discretion on what is a good or bad price.
Prices shoot up, so more money goes in looking for yield.

I’d argue that the asset price boom is driven by malinvestment and search for yield, not by a fundamental loss of buying power of the underlying currency.
However, it might be that feeling that is justifying the buying at crazy high prices that we’re seeing?


All I know is buying at all time highs, way above long term moving averages, hoping more trillions of stimulus arrive don’t break something, while the country essentially sits burning and smouldering, is a bit daft.

But as always someone has to hold the bag, and someone has to stump up good money to pay others profits

[millen]

PeteinSQ said:

millen said:

Well worth reading John Authers' column this morning https://www.bloomberg.com/opinion/articles/2021-01...
Note: you can subscribe to his 7.00 am emails free (for now) without a pricy Bloomberg sub. Always helpful on the big picture, imo!

If you like Bloomberg I can recommend subscribing to the Readly App, it costs something like £7 a month and you get access to loads of magazines including Bloomberg Business Week and Bloomberg Markets. You also get a load of car magazines which as you're on here I assume you'd also like.

Thanks very much PeteinSQ!
I've had a Readly sub for 3 years but have used it only for hobby stuff so didn't think of looking there. All I need now is a bigger Kindle as mine is clogged up with downloads.

Another helpful souce of informed comment is the various Economist podcasts, eg MoneyTalks. I don't pretend to understand the business model of how they make so much info free on podcasts yet charge an arm and a leg for print copy or subscriptions. Not complaining, but can't see it lasting.

[Mr Whippy]

Sentimentology is where it’s at

Fundamental analysts went down the toilet with MMT economics invoked between 07 and now.

Now we have disaster capitalism, dollar hegemony decline, interest rates on arse, brexit, euro on its arse, stimulus being spent on paying down debt, negative gdp, banks on their arse.

Anyone who can unwind all that is a liar.


Inflation, slow at first, then fast. Then interest rates reappear.

Then the real value of things is determined with expensive money conscientiously spent.

[MikeKite]

chris7676 said:

There is a big difference between the hot US (NASDAQ esp) and the "lame" underperforming UK market.
However any major US burst / correction will affect the rest of the world, including the UK, just the correction would likely be more shallow here.
If you stay invested, I would suggest sound, non-overvalued businesses in sectors such as healthcare, defence, and more boring stuff perhaps.
Also some gold rather than bitcoin especially for buy and hold as insurance.

That's a fair assessment. A big difference between the US tech stocks (Amazon, Netflix etc) trading on near 3 digit PE multiples and various other sectors. It's been a great run for fund managers a with focus in this area as novice investors tend to chase performance and pile in.

[anonymous-user]

The Bufett Indicator has topped 120% of global GDP - look what happened last time it did this H/T @schuldensuehner on twitter

[DonkeyApple]

Mr Whippy said:

troika said:

You do have to ask what will it take to stop the US markets from marching on?

Tens of millions unemployed?
Tax rises.
Interest rates rising.
Foreign holdings of treasuries falling as they lose confidence in the dollars value (looking to be on a decline in value and foreign holdings in last few years)

And all time high valuations and P/E ratios, corporate debts all time highs.


There is plenty to stop them moving on once bitter reality bites the arses if the herd currently buying in (late) and driving this rally built on thin air.

A lot can be discounted by two factors:

Firstly, the USD has slumped in value so anything priced in it looks like it has risen more than it will have.

Secondly, most countries are more screwed and politically dodgy than the US so there are vast amounts of foreign currencies being converted into US stocks.

The problem for us sane investors is that there isn't any other place to put long term wealth other than a predominant focus on blue chip equities.

So long as new money is being printed in the trillions and massive payments are being made via furlough then the merry go round should keep plodding on?

[Lim]

Which begs the question, what could trigger a > 20% crash? In the near term. Anything?

[dingg]

Lim said:

Which begs the question, what could trigger a > 20% crash? In the near term. Anything?

A global pandemic......


Ooops too late and stocks just keep on rising, as DA says where else can we get a return, best get on the wagon before the wheels drop off, if they ever do...

[Lim]

Are you saying there is no limit? What happens when bonds etc flow to equity looking for returns?

Edited by Lim on Sunday 10th January 21:31