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Discussion Starter · #161 ·
Mother of all bubbles in creating, similar comments about immense value and exponential growth were circulating around in 1998 and 2006
growth attracts more money and that gives more growth, everyone makes a fortune in the bull market
This actually also happened all the way to 2007 and even 2008. I remember it well because I was actively trading markets back then. Everyone was in a panic about high inflation with huge growth estimates for the world.

Note the following charts show to the dates immediately before the massive 2008 crash.

Here was how commodities looked in early 2008. Rallying like nuts, high inflation expectations:

21228



Here were emerging markets. Absolutely on fire with high global growth estimates. Notice here that the average (trend line) is up 60% over just two years... tremendous rate of growth in emerging market stocks.

21229
 

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Discussion Starter · #163 ·
two previous bubbles look baby daughters compared with this mother of all bubbles
But remember, the market does trend upwards over time. Just because it's high and just because it's a big rally doesn't mean it's a bubble. It also doesn't mean it will revert back down to previous levels.

This is a misleading aspect of these kinds of charts because markets do trend upward over time
 

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Discussion Starter · #165 ·
They sure do.
Well now you're making my argument for me... what CMF usually shoots me down for.

So I'll tell you what people tell me.

But US markets are the best! America is unique in the world, other stock markets are known to be terrible but US stocks only ever go up. Japan, Europe, South America, China are all irrelevant.

The US stock market can never go down for more than a year or two at most. It has performed the best looking backward which is proof that it will perform the best going forward. And it can never have a long sideways/bear period like Italy, Finland, Argentina, France, Japan, or China.
 

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What possibly could go wrong 😑 right?
View attachment 21230
two previous bubbles look baby daughters compared with this mother of all bubbles
I have to disagree on how your are looking at the graph over the long term. Since growth is exponential, it makes look like the recent years were moving up like crazy, but in fact they are just following the exponential curve. You have to look at the graph on a logarithmic scale.

We tend to forget that the "amazing decade" of 2010s was partly due to a big recovery from the huge 2008 crash lows.

This graph on a linear scale...
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...becomes this graph on a logarithmic scale, so you can draw a straight line to assess the trend of the exponential growth.
21235


And now you see that there was a bubble in 2000 as we all know, but currently we are just keeping up the usual trend after recovering from the 2008 crash.

And if 50 years is not enough to assess the trend, here's more. That line represents a 7.37% growth over 83 years.
21236


Basically, S&P 500 is mostly near its trend. It doesn't mean it can't crash, but it's not in a bubble and it won't crash -50%.

If you look at NASDAQ though, it's in dangerous territory... See how in 2020 it has been moving up, up, up and it could enter bubble territory.
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But US markets are the best! America is unique in the world, other stock markets are known to be terrible but US stocks only ever go up. Japan, Europe, South America, China are all irrelevant.
Well, I'm being cautious about the US stocks because they are becoming more and more expensive, but that just signals an underperformance, not a crash.

And since US is currently the economic power, it has a huge advantage over all other countries.

Until China becomes the economic power. Until there's a war.

China's GDP is growing much faster than US, but it's still years from outpacing US. Though I must say that China's GDP PPP is already much higher than the US.
 

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Basically, S&P 500 is mostly near its trend. It doesn't mean it can't crash, but it's not in a bubble and it won't crash -50%
okay let’s look at the biggest Apple of S&P 500
it was $40 in 2018 it has more than tripled since, but it’s earnings barely moved,
net income in 2018 was 59 billions and 57 in 2020
Or
  • Apple annual revenue for 2020 was $274.515B, a 5.51% increase from 2019.
  • Apple annual revenue for 2019 was $260.174B, a 2.04% decline from 2018.
  • Apple annual revenue for 2018 was $265.595B, a 15.86% increase from 2017
 

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Chinese economy to overtake US 'by 2028' due to Covid
I didn't want to forecast a number of years, but my ballpark estimation was 10 years, so it could also totally be feasible for China by 2028.

okay let’s look at the biggest Apple of S&P 500
it was $40 in 2018 it has more than tripled since, but it’s earnings barely moved,
net income in 2018 was 59 billions and 57 in 2020
Or
  • Apple annual revenue for 2020 was $274.515B, a 5.51% increase from 2019.
  • Apple annual revenue for 2019 was $260.174B, a 2.04% decline from 2018.
  • Apple annual revenue for 2018 was $265.595B, a 15.86% increase from 2017
I agree with this. I've myself did the same analysis in the past. AAPL's revenues and earnings are underperforming, so its SP has to calm down.

There's a thing though... Even if AAPL's revenues are not growing as fast as they should with respect with their SP, its multiples are still lower than MSFT for instance, even though MSFT has been growing its revenues and earnings. They are also comparable to GOOG, even though GOOG has been growing its revenues and earnings.

AAPL
  • P/S 7.84
  • P/E 37.26 to 29.55
MSFT
  • P/S 11.91
  • P/E 36.08 to 29.91
GOOG
  • P/S 7.60
  • P/E 35.19 to 26.17
It's just telling us that AAPL should start underperforming its peers if they can't grow their revenues and earnings starting this year.

In fact, I also said that NASDAQ was in dangerous territory, but not S&P 500. I'm mostly saying that US tech better calm down. A correction on NASDAQ will obviously affect AAPL, MSFT, GOOG and it'd be healthy.

But S&P 500 is not in a bubble.

And NASDAQ is not in a bubble yet or it's starting a bubble if it doesn't correct soon.
 

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Discussion Starter · #171 ·
Elon Musk manipulated the dogecoin market again by tweeting on Sunday.

DOGE is up 24%. It's now doubled in price since Thursday.
 

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Crazy market.

How can the absolute beginner that I am make over +70% XIRR in 10 months (over +50% P&L)... I was NOT expecting this. My whole portfolio could crash -35% tomorrow and I would not lose any of the money I invested in 2020...

Market crashes and recoveries are the best because... the market gets bailout...
 

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Crazy market.

How can the absolute beginner that I am make over +70% XIRR in 10 months (over +50% P&L)... I was NOT expecting this. My whole portfolio could crash -35% tomorrow and I would not lose any of the money I invested in 2020...

Market crashes and recoveries are the best because... the market gets bailout...
This will end when the next tightening cycle begins. Monetary stimulus and low interest rates = high liquidity which will eventually drive inflation. Once inflation starts peeking above 3% or so, which is really not that much given how much monetary and fiscal stimulus is out there, that will be the beginning of "The Conversation".

"The Conversation" is likely to end in at a minimum of a correction but more likely touch to bear market status in many markets. Likely many asset classes too negatively correlated with interest rates.

"The Conversation" is when interest rates rise, either or both with the market and central banks. It could also be combined with fiscal restraint. Watch out then. I think this story could start sooner than people think - no more than 18 months, but maybe in the next 12 months. Maybe even in the next 6.
 

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This will end when the next tightening cycle begins. Monetary stimulus and low interest rates = high liquidity which will eventually drive inflation. Once inflation starts peeking above 3% or so, which is really not that much given how much monetary and fiscal stimulus is out there, that will be the beginning of "The Conversation".

"The Conversation" is likely to end in at a minimum of a correction but more likely touch to bear market status in many markets. Likely many asset classes too negatively correlated with interest rates.

"The Conversation" is when interest rates rise, either or both with the market and central banks. It could also be combined with fiscal restraint. Watch out then. I think this story could start sooner than people think - no more than 18 months, but maybe in the next 12 months. Maybe even in the next 6.


Hard to tell what comes next.
 

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Did not know that.
In the United States, the term Nifty Fifty was an informal designation for fifty popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks, or "Blue-chip" stocks. These fifty stocks are credited by historians with propelling the bull market of the early 1970s, while their subsequent crash and underperformance through the early 1980s are an example of what may occur following a period during which many investors, influenced by a positive market sentiment, ignore fundamental stock valuation metrics.
 

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Discussion Starter · #180 ·
Did not know that.
In the United States, the term Nifty Fifty was an informal designation for fifty popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks, or "Blue-chip" stocks. These fifty stocks are credited by historians with propelling the bull market of the early 1970s, while their subsequent crash and underperformance through the early 1980s are an example of what may occur following a period during which many investors, influenced by a positive market sentiment, ignore fundamental stock valuation metrics.
I think it's even more interesting.

Stock indexing was not a thing in the 1960s. So what we consider the normal way to invest today was not really used back then, perhaps until the late 1970s or into the 1980s.

Instead the Nifty Fifty was the popular way to invest. So one question I keep asking myself is, why do we think that modern indexing methods (like cap weighting) will perform well into the future? The Nifty Fifty was once the modern investment method, and it didn't do well through the bear market.

Could it be that we have all bought into a style of investing (due to hindsight bias) which will be rendered obsolete in the coming years? Maybe cap weighting like the S&P 500 index won't always perform so well.
 
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