Some thoughts about what’s going on with stock market and financial markets.
Recent headlines and topics are nothing more but bubbles, many ways to cover up ongoing money printing. Inadequate market behavior and everything around this hot topic. The main thing is that many traders think, including myself, that the market has moved away from reality. I only can imagine how difficult it has to be for fundamental traders.
As I mentioned previously, market is always right, even your experience, analytics and even common sense tells you otherwise and you end up with loss. So, perhaps it is worth to look at this situation from a different perspective as oppose to common point of view when the market is overvalued, and Buffett indicator has reached new heights. To sum this all up – the future earnings look grim. However, another controversial trading figure, George Soros has a different point of view. And I quote: "When I see a bubble forming I rush in to buy, adding fuel to the fire"
And this phrase is really worth pondering - because why wouldn’t participate in all of this?
The rise in Tesla shares alone is worth it. The potential of technology companies still seems huge even with already ridiculously high share prices. And what is even more exiting is that it is very difficult to predict when this bubble will burst. It may just as well last for a relatively long time.
Looking at it all and considering the potential risks - why not participate in this, indeed? Of course, considering all the risks described in my previous blog posts.
Well, if you think about it, these kinds of bubbles don't burst that easily and instantly. Don't think that you will miss the "sell opportunity". The market will provide plenty of them. I consider myself as a permabear, always waiting for market to fall, but when you look at even the worst financial crises – the market never falls without adjustments, or at least some indications or chances to join in.
For example, here’s the Dow Jones graph from the 1930s. Why the 30s? Simply because many compare this crisis with the crisis of the 30s when the economic performance was poor and the long-term forecast is not that bright either, since nobody can predict how long the impact of COVID-19 will prevail. Thousands have lost their job, and many will no longer have access to those jobs. Many companies will go bankrupt within short period of time etc.
You can look at this example in two ways - both the rise and the fall of the bubble is impressive. The market’s downturn did not happen "as a one-way, uncorrected movement". Therefore, my recommendation for those who are able to look at the markets with clear mind – use these market adjustments as opportunities. You can also sit in the buy position until the first signs of bubble burst. And these signs can be quite different. For example – a sharp second wave of COVID-19 spreads, clearly visible poor economic performance (e.g. large negative deviations from classic macro indicators), a sharp fall in stocks, “technical drawings” of stock charts that would indicate the formation of a peak.
In the absence of such indications, this rise will continue, and we will see more than one headline mentioning “the bubble” and ridiculously inadequate stock prices.
Stay tuned!
Agris