More of a reflective piece than a prediction of a future event but of course there is an expectation for something huge to happen in the near future. Right now as we speak, there are some notable examples of markets soaring with no foreseeable end. That itself should already raise huge red flags. Think about it, if markets rally for extended periods of time with no windows for withdrawals, it means that the same people are paying higher and higher for the same stock and putting in more of their own money to buy less and less assets at a higher price. While that makes zero sense, I admit that it is hard for people to think straight when they are investing in an atmosphere where irrational greed is rewarded consistently, until the music stops of course. Today I will spend some time talking about this and why I hope more people will realise this problem sooner.

Asset prices cannot go up indefinitely

For investors who are holding stocks for the long term in some markets. You need to be aware that while it all seems rosy and stable at the moment, this situation will quickly change because it is just unsustainable for any market to rally for so long. This is on top of the recent devastating impacts to the economy caused by the pandemic (which btw still haunts the economy), and the massive money printing exercises which will ultimately cause massive inflation very suddenly. At the moment, the warning signs are not non-existent but hidden from the general populous. Think about all the notable companies such as Netflix (PE 61), AMZN (PE 60), TSLA (PE 394) and so on. Furthermore, all that institutions are responding is, “We shouldn’t look at PE at the moment but focus on their future growth.” Thats the biggest tell tale sign that even they do not believe in those companies current valuations. I strongly advise people to reconsider their positions in those super expensive companies and think carefully about the market conditions.

Growth is not tagged to every little piece of good news every month (Hint…)

I have been following the biggest market (trying to be subtle) and realise that the market moves with every bit of positive news. Yet the Greed to Fear index is still kept at a “healthy level”. To me, its almost insanity to see the market rally continuously or recover almost instantly after every bad new is reported. In fact, if we were being honest to ourselves, then it seems as if the pandemic somehow pushed these notable companies’ valuations higher than ever, which itself is ridiculous. On the other hand, if you think huge companies share prices should rise when unemployment numbers are slightly better than expected, then perhaps you are trying to say that investing do not make sense anymore because those companies never had an issue employing workers in the first place. (Especially when they are already doing so well in the market right?)

The pain comes not when it drops but when you start buying the dip (falling knife)

People who have made 20-40% off the US market should be feeling really good and proud by now. But the pain will not come even after the first few dips. It will come when people foolishly buy the dips which they think will recover instantly when Powell says a few nice words. Honestly, how it will pan out for most people would be that they will over accumulate and the market will never recover back to current ridiculous levels. The rich will still be taken care of as institutions will just continuously short everything until there is nothing left for them to dig. Just to be clear, I am not trying to predict anything because the past 16 months have proven that the market can function in a completely illogical manner. However, it is also notable that I am not feeling very positively for the global markets because of such phenomena.

Closing Thoughts

Investors of such overheated markets, I suggest you take a step back and think about what is really happening around the world. If all else fails to scare you, just remember that if AAPL market cap can increase by 150% during a pandemic from 1 Trillion to 2.5 Trillion, then there is no reason for anyone to work anymore because money does not worth anyone’s time anymore. Wishing those snarky investors all the best.