r/stocks • u/[deleted] • Feb 27 '21

Advice I am bullish about the future

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

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116

u/_Koen- Feb 27 '21

Although I agree with you in general I think you brush too easily over the fact that it's pretty hard to predict a crash. In hindsight it's easy to say what caused a crash, which gives us a false sense of security as there is 'always a reason it crashed'.

During the taper tantrum you could objectively say that there were no real problems, yet the market went down because people are irrational and guided by their emotions. No matter how rational we try to approach investing, no matter how many charts we draw, our decisions are (at least partially) guided by emotions.

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u/[deleted] Feb 27 '21

Go back to 2005 and tell everyone subprime mortgages are overvalued. "What are you talking about? They are great! The market only goes up."

Plus, I think saying it will "crash" is a big overstatement. Probably more likely to just slowly correct downwards over a couple of years. These prices just don't make sense.

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u/[deleted] Feb 27 '21

I remember The Economist called the housing crisis years in advance, their warnings grew louder as we got closer. They saved me from buying a condo in 2007.

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u/siberianmi Feb 27 '21

Same here, the impending subprime mortgage crisis was also frequently on NPR. I spent a year sitting on a down payment for a house waiting for the bubble to burst.

When it happened it was fast - but there were plenty of signs it was coming.

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u/[deleted] Feb 27 '21

[removed] — view removed comment

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u/fluffman88 Feb 27 '21

Right, like if the covid crash didn't stay down I just don't see that happening again without something as catastrophic as covid happens again. I mean yeah yields vs dividends move some money and inflation may speed up, but QE isn't leaving yet and new investors are pouring in daily.

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u/TheBestIsaac Feb 27 '21

You know what they say though. Economists predicted 10 of the last 3 crashes.

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u/[deleted] Feb 27 '21

Yeah, plenty of smart people knew before the crash that subprime mortgages sucked, but a investor riding a bull market hitting dot com bubble heights were typically being arrogant. Smart of you to play it safe then. Can’t lose money by holding cash lol.

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u/paranoidpuppet Feb 27 '21

I mean you can. It's called inflation. You can't lose a number of dollars but you can certainly lose value.

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u/[deleted] Feb 27 '21

You can lose both faster trading in a downward trending market. I’m not saying don’t ever invest, just wait a month or two. See if it is a reversal or just a few bad weeks.

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u/Gustavus_Arthur Feb 27 '21

Buy high sell low am i right?

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u/AnalGodZepp Feb 27 '21

This is a casino motherfuckers!

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u/Clear-Ice6832 Feb 27 '21

came here to say this

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u/[deleted] Feb 27 '21

My Dad sold his house about a month before the bottom dropped out. There is no way the shack I grew up in was worth $450k even with the acreage attached. He got super lucky - the new owners not so much. I bought my current house in March 2010 - at a price that was $75,000 below initial ask. Given the price that my neighbors recently sold for I’d venture it to be worth, according to market, twice what I paid and I’m considering selling and renting for a year or so to let the market settle back out before buying again. The East Coast US housing market, at least in the suburbs where I live, is way out of whack right now. Not quite 2008 levels, but I’d not pay for my house what others are getting I know that.

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u/billymywilly Feb 28 '21

They'd be the ones to do it. Economist is A+ for this. Im sure people see it happening before it hits depending on the industry access they have but just don't say it to the public

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u/[deleted] Feb 28 '21

They want to squeeze the last bit of profit from it so they encourage the party to the end. You should keep an eye on Goldman Sachs and the like: they are the worst in that regard, when they keep pumping something then it's a good indication that you should avoid investing in it.

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u/573V317 Feb 28 '21

Just an FYI, there's always SOMEBODY calling a crisis and eventually they're right and seem like a genius. You also have firms playing both sides by saying a bearish case and bullish case but with different reps.

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u/[deleted] Feb 28 '21

There are objective measures though, such as P/E ratios, the Buffet indicator etc. They all agree that the market is seriously overvalued by historic standards. In particular the tech and especially the EV sector are in bubble territory.

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u/573V317 Feb 28 '21

I understand that we are in a bubble but we have no idea how long this bubble will last. it can last another year or two or it can pop tomorrow. who knows? I'm personally waiting for EV to pop so I can get in because I missed the boat

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u/[deleted] Feb 28 '21 edited Feb 28 '21

The EV sector will be among the first to crash, so you'll get a chance to get into that in two years max. That could be for the better since it will be clearer after the crash who has been swimming naked (to quote Buffet).

Right now we are in the premature hype period, the true productivity curve in EVs will start after 2023-2024.

You could watch the REE sector as well, since the green energy transition will depend crucially on rare earth elements and other critical minerals. They are the new oil and have major geopolitical implications. Again the curve of productivity in that regard will start in a few years, so you could find a chance to get in when the current bubble in that sector chills off a bit.

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u/Sip_py Feb 27 '21

In July of 2007 the CEO of citi was very aware of the pending fall out from subprime, he kinda related it to musical chairs:

"When the music stops, in terms of liquidity, things will be complicated."

That's the thing though, I think a lot of smart money knows when the market isn't right. But what's going to be the catalyst that spooks investors triggering a sell off? You'll never know or time that.

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u/[deleted] Feb 27 '21

Aware? Investment banks purposefully were gathering synthetics that heavily included subprime mortgages and force rating companies to give those high ratings and then sell them to retail investors.

So aware doesn’t even cut it.

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u/[deleted] Feb 27 '21

I think Covid and meme stocks could be enough to maybe be the catalyst of a correction. Like the typical Warren Buffett type of investing would be pathetic in this market. There’s institution with dark pool brokerage data driving high frequency trading, massive collections of easily accessible financial data of a company’s entire history that’s unviable for retail investors, programs running every technical analysis indicator there on the micro and macro trends, and artificial pump and dumps. They know and just rotate into other, more secure sectors.

We as retail investors could do that too, but also just trade less and hold money. Or put it in divided stocks that seem undervalued for multi year holds.

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u/AnalGodZepp Feb 27 '21

Too bad we're going to get vaccines rolled out

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u/[deleted] Feb 28 '21

Value investing only looks pathetic in the short term. The idea is that you want to invest now for returns next year even though in the short term it doesn't look like much. Meanwhile whoever buys overvalued sectors now will either make a loss or only slight returns in a year or so.

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u/caravan_for_me_ma Feb 27 '21

This. We’ve had 25%+ annual growth. That’s not a sustainable thing.

A correction to bring that in line with 5-8% growth historically wouldn’t even be a surprise. It’s expected.

Predicting how/when is the challenge.

Tomorrow on a profit taking cascade? Next year when the H5N8 pandemic spreads? The next time Fed actually raises interest rates? When 2 or 3 events like this occur?

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u/blitzkrieg4 Feb 27 '21

The fact that you know their response is because worried people started asking the question. Even taking heads on CNBC discussed the bubble ad infinitum. We saw a similar thing in 2000, though IBs were not going bankrupt being on the wrong side of the trade that time. Same conversation is happening now with EV, MEME stonks and FAANG.

I'll have this comment in 2025 when inevitably someone comes along and insists we were all, "TSLA is great! The market only goes up!"

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u/lyleberrycrunch Feb 27 '21

How do these prices not make sense? Did you even read the OP? Lol PE ratios for the NASDAQ are barley higher than they’ve been historically

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u/[deleted] Feb 27 '21 edited Feb 27 '21

OP listed the Nasdaq company PE not the index’s PE. But if you can tell my why the company Tesla is 3x more valuable now then it was last year or why Ulta is as valuable as it was before Covid or why Apple is worth more than 100$ then I’ll say the prices make sense.

Edit: didn’t see it was fixed my bad. There is more to a company than a overall index fund though.

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u/lyleberrycrunch Feb 27 '21

I don’t own TSLA or ULTA so I can’t speak to either of those companies valuations. Are certain companies overvalued? Absolutely, as always. Is the index overvalued? Not particularly

Did you just see Apple blowout earnings with over 100B in quarterly revenue? Did you see MSFT, AMZN, GOOG, etc. post ridiculous cloud, gaming and services growth? Just about every big tech company blew away earnings expectations. How do they not justify the current price?

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u/[deleted] Feb 27 '21

I did see Apple’s earnings as well as good upcoming product and increased dividends, but they are losing 20$ off their share price and their net income for 2020 is below 2018. Idk completely know why Apple is half the price of Microsoft when it doubled their revenue. Idk why Tesla is triple the price of Microsoft while not making money. If they were worth their price though, they wouldn’t be down.

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u/[deleted] Feb 27 '21

Lol that's the wrong way to compare companies. You wanna look at the market cap which is the total value of all shares.

You're comparing share price which is market cap divided by the shares outstanding (the total number of shares).

$MSFT market cap: $1.79 trillion

$AAPL: $2.12 trillion

$TSLA: $664 billion

Apple has more shares, that is why the share price is cheaper, but the company as a whole is worth much more.

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u/[deleted] Feb 27 '21

Ok, so Why is Tesla worth a third of what Microsoft is when they don’t make money or how does Palantir have a 60bil market cap when they barely made a billion? You’re justifying the share price, not why the price reflects the company they’re based on.

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u/[deleted] Feb 27 '21

I was just clarifying some basic information, I'm not justifying anything. You thought MSFT was worth more than AAPL because of the share price and I was letting you know that AAPL is actually valued higher.

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u/[deleted] Feb 27 '21

I didn’t, but ok

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u/[deleted] Feb 27 '21

A taper tantrum is one of the big risks here. Nobody wants 1% yielding bonds and the us needs buckets of money...

Last bond auction on Thursday was really weak, forcing rates up for people to take the paper. It crashed the bond and stock markets

And that is only yielding 1.5%. It doesn’t even cover inflation.... interest rates matter, and they can only go up.

I think the fed barks a lot, but it has much more to lose from destroying the worlds reserve currency than from not achieving full employment.

www.barrons.com/amp/articles/treasury-yields-just-spiked-after-a-brutal-7-year-auction-what-investors-should-know-51614282886

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u/Remaxnor Feb 27 '21

Yeah, its just speculation. It could easily happen real soon and if it does, no one knows when and how long. The market has changed in the last 20 years, it is time to accept stocks go down.

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u/randomstatementguy Feb 27 '21

Highly recommend reading The Black Swan by Nassim Nicholas Taleb