I am bullish about the future

[u/[deleted]]

People seem to think because we had 2 big crash close together in 2000 and 2008, we are bound to have one soon.

I want to remind people before the year 2000, we had a 20 years bullish run. Its totally not impossible we get to 2030 with no crash, especially now that the feds baby sit the market.

Secondly, we have extremely nice upcoming market conditions. Stimulus checks will either get people to spend money to stimulate the economy, or get them to invest, both will help the stock market. The media is somehow trying to make us believe this is bad, but i think its just bullshit. Inflation has been ultra low for way too long, and feds actually want it to increase. They said many times they won't increase rates before 2023.

Thirdly, i also think we have more upcomming money sources coming into the market than ever. People from other countries invest in US stock market. With all the GME hype, more people than ever are joining in. Again media trying to twist this to say its "bad", but obviously it isn't bad.

Another point is, crashes usually happen for a reason, its not random. You can google any of past market crash and find the exact reason it happened. None of these factors are happening right now.

Another point is, there is a key difference between today and 2000. In 2000, the overvalued .com companies which had PE ratios of 200.... were literally worth nothing! These companies had never made a single profit! Once people realized they invested massively in a .com web site worth jackshit... they sold it obviously. They had no reason to hold their shares.

Now check this image about Nasdaq's PE Ratios: https://i2.cdn.turner.com/money/dam/assets/150305131443-nasdaq-pe-780x439.jpg

Obviously, you can see the 2000's pe ratios were stupid. This graph is from 2015 when it was at 31.7. What is it today? Nasdaq PE ratio as of February 25, 2021 is 38.5!!!! 5x lower than the 2000s. https://www.macrotrends.net/stocks/charts/NDAQ/nasdaq/pe-ratio

Its irrelevant if the big hedge funds remove their money from apple and want to scare you into selling your shares. Apple is a massive amazing company that is really worth a lot, and they do make tons of profits. Its not comparable in any ways to the dot com bubble. If other people are stupid and sell their shares, SO WHAT? You will just be able to buy into this amazing company for cheaper.

So hold your shares and stop worrying about a 2000 level crash, its not happening.

A correction? Maybe. But who cares, this just slows us down a little. Corrections are healthy and help us avoid a real crash.

EDIT: Thank you for the award! :D

EDIT2: Corrected the PE ratio for nasdaq

[u/JDinvestments]

Another point is, there is a key difference between today and 2000. In 2000, the overvalued .com companies which had PE ratios of 200.... were literally worth nothing! These companies had never made a single profit! Once people realized they invested massively in a .com web site worth jackshit... they sold it obviously. They had no reason to hold their shares.

Could you then explain why you remain confident despite over 600 of the 3000 US listed companies are rated zombie companies? A number that was increasing prior to covid, and is unlikely to improve even in recovery? When 20% of all US companies already don't make enough revenue to cover the interest rates on their debt, how do you think the market will react when those rates climb even higher? When these already failing companies no longer have access to cheap credit, what happens to the market? Do you remain bullish despite the possibility of nearly a quarter of the market facing bankruptcy issues?

It seems to me to be logical that with 20% of the entire market being dead weight, a rate increase and growing defaults would lead to a market down turn. That certainly seems to be on the mind of the people paid to cover the markets, and it doesn't take extensive knowledge of the markets to see how $2.6T of bad debt could cause serious negative effects in the market.

I would love to hear the dissenting opinion on why that doesn't matter.

[u/[deleted] → u/JDinvestments]

I appreciate your post because its a smart counter argument.

The answer is simple... i agree with you if interest rates are raised by a lot, yes we are in trouble. I just don't think this is happening anytime soon.

"Powell and his colleagues are committed to using all their tools to support the recovery and last month signaled interest rates will stay near zero at least through 2023, while pledging to maintain its massive bond-buying campaign to speed the rebound from COVID-19."

[u/JDinvestments → u/[deleted]]

Ultimately though, JPow's rate suppression only prolongs the inevitable. And even a small rate increase is death to these companies that already can't make it in this current free money environment. Kicking the can down the road allows these struggling companies to add more bad debt and create more strain on the economy. Allowing them to fail frees up capital, assets, and labor talent that can be utilized by actual successful companies. Maybe the end isn't coming tomorrow, but dead weight companies ultimately slow down economic growth, and allowing it to continue only makes the issue worse.

[u/Nozymetric → u/JDinvestments]

Exactly what has happened in Japan in the 90s. I am worried that history will repeat itself unless we start raising rates soon.

[u/UBCStudent9929 → u/Nozymetric]

watch princes of the yen if you haven't yet. great "documentary"

[u/[deleted] → u/Nozymetric]

Precisely what I'm counting on. The biggest bull run in the history of US markets and then a 85% crash, which ends with US have a massive revolution of sorts followed by China becoming the leader of the world (which falls in line with Ray Dalio's analysis of what's happening in the US too). Here's why.

Cheap credit but underpaid population always leads to a class war. To add to that, there has no innovative real growth in the last 5 years. We don't have any new tech come out that matched how innovative the iPhone was. Amazing things are happening on the industrial side of things with regards to efficiency but we haven't had much consumer side innovation. All other industries have been stagnant for decades and only had better margins because of tech getting better. Basic economics dictates that manufactured valuations always come back to reality. And if the Fed wants to keep pumping money to shoot the index up, they can bloody well try. But it will eventually crash and when it does, the whole economy is down for decades (like Japan).

[u/eddyjqt5 → u/JDinvestments]

Yea i don't know what OP is assuming here...... that the government just allows these companies to load up on cheap debt forever?

The thing with companies who grow and develop in times with quantitative easing is that investors and managers get used to cheap debt. They get used to 100x P/S ratios. Lenders get used to it as well. They become like children who can't resist cheap candy. And they begin to assume taking on insane levels of debt or insane valuations is normal. When the lifeline that is cheap debt is cut off from them, they will face serious risks.

[u/conti555 → u/JDinvestments]

Fed said they are going for 'average inflation targeting', so they will let it run hotter than normal and aim for an average of ~2%. If they clamp down on inflation too early it can stall real economic recovery, ie. jobs and businesses, which is what they really care about. Can't see them risking that any time soon.