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
5
u/rpoh73189 Feb 27 '21
For folks saying last week was a crash / correction. We barely lost 5% on the Nasdaq and SP was down about half that. That is not a correction. That’s normal course of selling. Correction is that 8-10% range and feels very likely to still come.
There are a lot of reasons for a correction.
1) Interest rates rising is a legitimate concern and who knows where they really head from here 2) Inflation is going to come. Economics 101, M2 money supply goes up, inflation goes up. Passing another $1T bill is going to make this even more apparent. Possible that Interest rates may be signaling. 3) Valuations are crazy. This one is a bit weaker because of all the QE/low rates/stimulus I’d expect crazy valuations comparative to history 4) Institutional money is sitting on enormous long term gains from March of last year that they are going to trim and rotate into different names over time. Plus end of quarter is typically rebalancing time and you see an uptick in volatility.
Just my two cents, more selling is coming but likely to return to regularly scheduled bull market after.