Are we in a bubble?

I will preface this by saying that I have a strong conviction that says "yes, this is a bubble". I will try my best not to compare to the 2000 tech bubble, considering it happened before I could walk. 

The macro conditions in 2020 and into the new year are fucked. Rock bottom rates and a massive amount of money added to the Fed's balance sheet, and the M2 supply going up by close to 25%. No inflation to be seen at the moment, but that is due to change. Large stimulus and nowhere to spend it means that one day, people will spend that money, and they will spend it fast. When that day comes, inflation will be on the rise, well above the 2% target, and there will be no more ammo in the interest rate rifle

On top of that, the force of retail investors has never been crazier. Just look at what those idiots on r/WSB are doing. Being able to drive a company with no fundamentals behind it is borderline dangerous, albeit really fucking funny. These retail investors have latched onto trends, and proved that negative real interest rates have the effect of enhancing the attractiveness of the stocks of companies with soaring growth rates. This is because future returns are discounted to their present value by rock-bottom interest rates, leading to dramatically higher present values. Blistering P/S metrics have been the key to so many SaaS companies firing in the past few months. The grandiose idea of growth drives many of these companies with little-to-no earnings. 

I am no prophet, and could be wrong for some length of time. But this economy and current market is a ticking time bomb. A massive run up on the tail end of a decade-long bull market, coupled by hyper growth in the tech space, and looming macro concerns are a recipe for disaster. 

3 Comments
 

Maybe some form of quant. tightening or raising rates. But at the end of the day, I'm not sure. Any interjection by the Fed at this stage would be held under scrutiny, so they would have to jump in when we get to a point where things are looking really bad. But letting a market propped up by retail speculators and Wall Street alike would be bad everyone. I am far from an expert so at the moment a solution that I could think of wouldn't mean much. 

 
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