Is the current market highly overvalued? Crash coming?

Alright boys lets get down to business. When is this party going to stop? You know goddamn well I love what big daddy Trump has done with the market but the stats from this current period compare strongly to the .com bubble. What do you guys think? I think banks will be good bc of low interest rates and Trump's tax policy but what other areas of the market would you expect to see decline?

Comments (19)

Jan 17, 2020

I hope so.

Most Helpful
Jan 18, 2020

Definitely. There needs to be a correction soon.

There's so much crazy shit going on right now it's making me feel stupid. Some of my favorites from this week alone:

-Got on the phone with a lender that had threatened to pull a LoC we have with them. Literally just told them why we feel good about the business and they gave us improved terms instead. Asked 0 questions about the numbers.

-Talked to another lender today that we have a few revolvers with across the portfolio and he admitted they have no real strategy when it comes to defaults. This co is a unicorn. They are also giving us tons of data we shouldn't have among other things to keep us there.

-Routinely meeting room temp IQ founders that are funded well and at ridiculous valuations...

-On that note...It's also incredibly fucking annoying to win deals ATM when I feel like every other autistic kid is running around with a "Bid that fucker up" hammer.

Anyways, all of this reminds me of when I was younger and would think to myself how amazing it would have been to be one of the people profiting massively off stupidity at the time. 100% guilty of doing it now, cheap non-recourse debt = yes

Jan 18, 2020

Half the market is on price/lil expensive (growth stocks), the other half is actually pretty cheap (value stocks). So now you know what to do

Jan 18, 2020

Honestly value stocks are not that cheap either. In these scenarios people tend to get into a value trap looking at EPS consensus for the next few years and see very low forwards PE multiples, but if shit starts to go down there's no way most companies are getting even close to the current EPS targets which have quite aggressive growth spectations factored in.

Jan 18, 2020

Ofc is there is a massive drawdown all equities are affected. However, no 2008 is expected. World is expected to grow 3.4% in 2020, unemployment rates are low and most importantly company earnings are solid and capex levels are not massive (these two should be your main concerns). Additionally, where else you wanma invest? fixed income w a massive bubble w interest rates at minimums? pe/vc which is also seeing massive inflows and do not know what to do with their money? Honestly, I think 2 more good years of stock markets is probable and in this scenario I bet value stocks will outperform growth stocks (trend change since august '19). Thaank me later

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Jan 18, 2020

Margin Call 2

Funniest
Jan 18, 2020

I'm ready.

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Jan 18, 2020

haha

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Jan 18, 2020

Waiting for a market correction and lever the fuck up into index ETFs.

Jan 18, 2020

Jan 18, 2020

Income now gets split up; 80% cash, 10% profit share rsp fund with my bank, 10% into a short s&p 500 etf as a bear play. Might be an L or might pay off.

Jan 19, 2020

No. The market is not overvalued. The fed will continue to print money (names used so far are ZIRP, QE and repo . . new names to come . .) and will inflate the currency. The American people will accept it once they realize that all inflation really is, is a wealth transfer from savers to borrowers and very few Americans are savers.

By "savers" I only mean dollar-denominated savers. If your money is in stocks you're not a saver for purpose of this post.

So yeah, average American is a net borrower so who's going to vote the crooks out of office when they decide to inflate away obligations? Fed ain't even elected and if they were, why would 80% of Americans balk at the chance to steal from 20%.

Market is pricing this in. People aren't stupid. For everyone being like "oh multiples are just too high, they have to correct" . . my advice is don't make bets because any view that obvious is obviously wrong.

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Jan 20, 2020

"A cynic is a man who knows the price of everything, and the value of nothing"

The real bubble is the dollar. Everyone has been so hardwired to think of everything in the form of its price in dollar $: home prices going up, stock prices going up, prices for precious metals going up, even bitcoin. Everyone has been so focused on the prices of everything going up in dollar. This is extremely dangerous because given the monetary policy (low interest rate, QE 1, 2, 3 and now 4...), the value of $ is being devalued quicker than ever. We need to stop thinking about prices in $ and start thinking about the value. For example, you may think 20% increase in "price" is outrageous, but if the dollar has declined 20% due to money printing, then I'd say the "value" hasn't changed.

PteroGonzales is 100% right. This is no different from stealing wealth from the American people. Those who have left cash in savings over the last 10 years have been smoked. Imagine a middle-class Joe saving up diligently each year to pay for a house. Given the price increase, now he probably could afford even less % of a house than he could 10 years ago despite working hard and diligently saving. And the reason this is allowed to happen is because people don't "feel" inflation as much as they feel taxes or higher interest payments.
But sooner or later people will wake up to the inflation and the whole house of cards will fall.

I don't think it's a good idea to short the market right now, or even holding cash to wait for a correction. A lot of people are pessimistic about the outlook right now just like you and me. You can hear in the media - everyone is talking about recession, market correction, bubble, etc. No one is optimistic so how can prices keep going up?? Again, it's because of money printing and it will only get worse over time. There is not much room to lower interest rate further, so what would they do if there is a slowdown? Print money. What if there is a war? Print money. Pensions run dry? Print money. DB goes bust? Print money.

The inflation figures they put out are extremely understated. I wouldn't be surprised if it's been 10%+ in reality. Also the thing is, the fed can no longer hike interest rate to fight inflation like they did in the 70s - there is now way too much debt and derivatives in the system. Any significant interest rate hike could be catastrophic to this country as well as pretty much all the financial institutions - leading to more bailouts and money printing.

You might be right that in the short-term, we may have a massive price correction due to a credit crunch. But I think it could go the other way as well based on what we saw recently with the repo market, the fed was willing to step in with QE4 as soon as something went wrong. In the long-run, the only direction the dollar (and all other fiat currencies) has to go is down. Because of it, all prices will go up. In other words, we could have a downturn where the "value" of everything tanks, but the "prices" still go up. That's why I'd be scared to short or hold cash.

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Jan 21, 2020

Thanks for your assessment!
What would you and @PteroGonzalez would do, in terms of playing this market?

Jan 20, 2020

My old manager might finally be able to get his "toss everything into $FAZ" strategy to make him filthy rich.

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Jan 20, 2020
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