pragmatic and I enjoy pretending to be a perma-bear as much as the next guy, but if the macro environment leads to more currency being created or distributed than prior times, then nothing is overvalued yet relative to how much money has to be placed into them when it is seeking yield, so that means here I will have to disagree:
"But this bubble will burst in due time, no matter how hard the Fed tries to support it"
this either needs to be weighted much lower, can't be the crux of the article, or has to be called out for its ambiguity and uselessness in predictive ability
Yes, the bubble readers seem to ignore the money creation.
However that said, the default bubble is potentially a lurking time bomb, so it's a race between inflation and loan defaults, essentially. (Inflation tends to make loan defaults less likely as it reduces the relative cost of existing loans.)
>the default bubble is potentially a lurking time bomb
Many things are potential lurking time bombs. I can't think of a single period during any bullish market where you could not point to something and claim that that could be a potential end to the bull run.
The problem is when you are in the business of making predictions, if you just scream "Bear" long enough, eventually you'll be right and then you can write a book subtitled, "By the man who called the 2021 (or 2022 or 2023 or 2024 ...) stock crash" and people think you're some sort of genius.
> The problem is when you are in the business of making predictions, if you just scream "Bear" long enough, eventually you'll be right and then you can write a book subtitled, "By the man who called the 2021 (or 2022 or 2023 or 2024 ...) stock crash" and people think you're some sort of genius.
I think the point the article is making is that successful Bears, even though they can't call the peak accurately, are able to say "I am reasonably certain that if I exit the market now and wait for the bubble to go higher and then burst, the correction will drive prices below the current high, and I will have made money overall, even though I'll miss out on the tail end of the bubble rising."
If you call the bubble too early (and if you are always screaming "Bear", you are by definition always too early) , the prices after the crash will still be higher than when you exited, you're completely screwed, and so is anyone who listened to you.
It isn't particularly difficult to say that the next crash, even if it happens a year or two from now, will probably drive the market below the current level. You would experience major FOMO by exiting now and watching the market continue to climb, but you won't actually lose money. If it happens sooner than a year from now, it will certainly dip significantly below current valuations, and you'll be ahead by quite a bit.
In this particular game of Chicken, opinions will differ as to whether it is time to lock in your gains yet, but it shouldn't be too controversial that it is definitely time to start thinking about it.
If I were currently in the market, I would keep an eye out for large and quirky M&A activity along the lines of AOL+Time-Warner. Eg. Tesla decides to buy a consumer appliance, rideshare, or financial services company. Or all of the above).
I don't see that as fundamentally different than any other large Forex transaction. A bit unusual for a manufacturing company, but hardly unprecedented, and for all we know this is just a signal that Musk is betting he can call the Bitcoin bubble, rather than an actual hedge against USD.
I think that's Musk realizing that the announcement that Tesla bought Bitcoin will boost Bitcoin's value. And therefore cashing out that reality by making the trade.
It's not technically illegal afaik, but it certainly is making a trade because of realities inherent in the trading, rather than the underlying.
A potentially more productive view is that the fed cannot support the bubble indefinitely.
It's becoming clear that money can be printed without causing inflation if its unevenly distributed in the economy. This amounts to large scale wealth redistribution to support asset price increases. If you earn dollars for a living, your purchasing power in terms of future dollar income is being eroded. You will purchase a home later or never, you may not be able to afford an education, and your medical expenses will rise ( as will anything that affects future earning power ).
When this ends is anyones guess, it's entirely plausible that we revert to the social systems of prior less equal times, foreign trade moves off the dollar, assets converge to an effective price of infinite dollars, or populists demand their own redistributive policies such as UBI or wealth taxes.
Or the fed meets tomorrow and cuts QE entirely. What is assured is that the current trend is unsustainable and must end eventually.
>> A potentially more productive view is that the fed cannot support the bubble indefinitely.
The interesting thing is whether "cannot" means the point when they literally can not because the market and inflation wont bear it...or when they wise up to the tinder box they have created. The problem with the latter is -- which administration would allow this to be under their watch. Once a problem is bad enough, you might as well just kick the can a bit more until you literally can not.
(yes, i realize the Fed is independent but there is still quite a bit of control)
There are many situations where the fed is forced to end its current policies prior to the expected triggers of market stability or increased CPI. Political and social risk is likely underestimated.
That being said, examining the exit paths and forcing functions which would force Fed policy to change is something I'd like to see more of. There is a certain mentality floating around that there are no alternatives to being in the market, and that it's become too politically difficult to end Fed market support. If the latter is true, then there are a lot of consequences - such as returns becoming decoupled from cash flow see TSLA, Unicorns, or Hertz.
This is a great article. Note it's from January 5th, and it's extremely speculative. But certainly at least worth adding to the overall amount of signals that stock investors are thinking.
I think I remember someone saying that in 1929 when the shoeshine boys were giving stock advice that that's how someone knew the bubble was about to burst.
Lately I've been discussing investment strategies with the people that work at the gyms I'm going to. Is this the equivalent signal? The 2021 equivalent might be "When your personal trainer is giving you investment advice, that's how you know to get out?"
Or, it could just be that far more people are investors today than there were in 1929. According to this site, only about 10% of Americans owned stock or speculated in the markets in 1929.
>In fact, only approximately 10 percent of American households held stock investments and speculated in the market; yet nearly a third would lose their lifelong savings and jobs in the ensuing depression.
Yet, this poll seems to indicate that around 55% of Americans now hold stocks.
>Thus far in 2020, Gallup finds 55% of Americans reporting that they own stock, based on polls conducted in March and April. This is identical to the average 55% recorded in 2019 and similar to the average of 54% Gallup has measured since 2010.
So if slightly more than one out of every two people you meet owns stocks, I would assume you're bound to run into a lot of people talking about stocks.
I presume most of today’s stock owners are actually owners of 401k account which invests in something like Vanguard Target retirement fund. As a result, they know pretty much nothing about stocks, yet they do own them.
I would presume that as well. However, that doesn't negate the fact that 10% vs 55% is a considerable gap.
In 1929 if the shoeshine guy was giving you stock tips, it signaled a very different level of market euphoria than today when your gym trainer is talking about stocks.
Also, today we live in a world where there's just so much more accessibility to information. Only about 1.3% of the planet has ever owned Bitcoin. About 13% of Americans have ever owned Bitcoin but 90% of Americans surveyed have heard of Bitcoin.
I don't mean this to be about Bitcoin, only trying to point out the massive gap between something that is relatively niche, and the number of news articles/stories, discussion, etc about it.
>With one study suggesting ~25 million cryptocurrency traders outside the USA & Europe, it seems quite likely there are over 100 million owners of bitcoins.
>If true, it means about 1.3% of the world's population owns bitcoin.
I've seen a few other sources make a similar estimate using different methodologies.
> I think I remember someone saying that in 1929 when the shoeshine boys were giving stock advice that that's how someone knew the bubble was about to burst.
President JFK's father:
> While sitting in the shoeshine chair, Kennedy Sr. was alarmed to have the shoeshine boy gift him with several tips on which stocks he should own — yes, a shoeshine boy playing the stock market.
> This unsolicited advice resulted in a life-changing moment for Kennedy Sr. who promptly went back to his office and started unloading his stock portfolio.
> In fact, he didn’t just get out of the market, he aggressively shorted it — and got filthy rich because of it during the epic crash that soon followed.
Sort that by Highest APYs. It fluctuates all the time but the numbers are getting as high as 1,000,000% APY. There is no world in which that can be anything but a Ponzi scheme.
Ponzi schemes benefit greatly from a public perception that "all markets are rigged". Ponzi schemes can feel like a rigged game where they have a chance to get in on the ground floor of a rigged game. They also benefit from false equivalencies such as "after all, nothing good lasts forever" to make ponzi schemes feel like just another bull market opportunity that won't last forever.
It's akin to gambling. Many entrants tell themselves they'll only allocate as much money as they have to lose, or that they'll withdraw their initial investment after the first 100% gain. Sadly, they usually get overconfident when the scheme doesn't immediately collapse and end up investing far more than they would normally be willing to risk.
Yeah, the unfortunate consequence of the widespread misunderstanding and demonization of finance is that everyone thinks its all "made up" or "rigged," and then when they see something that REALLY IS rigged they think it's normal.
If I'd taken the advice of one of the guys I hired to move my home back in 2017 and bought Bitcoin like he had, I'd be up 25x today. I thought he was nuts, and still do, but if he's still holding on to his Bitcoin then the joke's on me. Shrug.
The quote at the beginning of the article is right:
> The one reality that you can never change is that a higher-priced asset will produce a lower return than a lower-priced asset. You can't have your cake and eat it. You can enjoy it now, or you can enjoy it steadily in the distant future, but not both – and the price we pay for having this market go higher and higher is a lower 10-year return from the peak.
With a bit more mathematical rigor: For each of us there will be only one future. In that future, each asset -- company, property, etc. -- will earn a finite cash flow yield. If we pay more for that future cash flow now, our rate of return will be lower in the future.
Looking at historical S&P 500 to Gold ratio, stocks are definitely more expensive but nowhere near dotcom frenzy. Either we see market correction or gold is undervalued and will catch up. In that case there might be no stock market crash.
Gold is not a suitable comparison to stocks - it gets brought up on here all the time. Gold is not uncorrelated to the market. Gold is not a store of value. Gold is a speculative investment with a great marketing team.
Gold has two things going for it: there's a baseline of "real" value underpinning it (not just industrial use, but lots of fast-growing Asian countries relying on it for dowries etc), and historically gold holds up quite well when everything else is doing badly. However, it's also fundamentally unproductive (no dividends, no real capital growth), so it's going to be a losing bet most of the time.
I agree with the basic take that stock prices are ludicrous, but what's different this time(tm) is that there don't seem to be any alternatives. Bonds are overpriced, real estate is not cheap, and Biden's $1.6T printer go brr money faucet ensures that there's going to be even more money sloshing around for the foreseeable future. Also, whereas the dotcom bubble darlings were all massively unprofitable, this time around the FAANGs are all minting money and even Tesla is eking out steady profits (if not exactly the $1M per car implied by their P/E!).
If the US stock market collapses, they'll go down too. They might go down less, but if the bubble is going to burst, you'd still be better off keeping your money out until then and only buying once they're cheap.
Of course, this requires being able to time the markets twice, which is... non-trivial.
>> They might go down less, but if the bubble is going to burst, you'd still be better off keeping your money out until then and only buying once they're cheap.
Not if the sure-to-follow inflation from a collapse devalues your cash faster than emerging markets and value equities.
> Many investors focus on the right time to buy stocks because they don’t want to buy near a peak in case of a future market crash. I understand the feeling. With the market near all time highs in early 2017, it can be tempting to hold off until there is a larger negative adjustment in prices.
> The only problem with this approach is the market could go up for a significant period of time before a correction happens.
> For example, if you search “stock market overvalued 2012” on Google you can find plenty of stories discussing how overvalued stocks were in 2012. If you had started waiting for an S&P 500 correction then, you would have missed out on the ~70+% increase in prices from 2012 through early 2017.
And what has the S&P 500 done since 2017? Continuing:
> If I still haven’t convinced you, let me tell you a story. The story is about a man with possibly the worst luck in investing history.[0][1] He made a total of 4 large stock purchases between 1973 and 2007. He bought in 1973 before a 48% decline in stocks, bought in 1987 before a 34% decline, bought in 2000 before the dot com crash, and bought in 2007 before the Great Recession.
> Despite these 4 individual purchases that totaled a little less than $200,000, how did he do? He ended up with a $980,000 profit for a 9% annualized return. What was his secret? He never sold.
> That’s right. Selling out is literally selling out your future wealth. You need to hold on to your assets as you acquire more.
> This is the purpose of capitalism (i.e. acquiring capital). The only time you should sell your investments is for rebalancing (annually/quarterly, etc.) or in retirement. Otherwise, you already know the mantra.
And as Maggiulli shows, trying to buy the dip, even when you know when the dip will occur (which is impossible), gives worse results than simply putting away a little bit every month:
Put away a little every pay cheque, in a diversified low-fee fund (S&P 500, Total Market/Russell 3000), at a comfortable risk profile that allows you to sleep at night (0/20/40% bonds), and try not to pay attention too much about what The Market™ is doing. Most of us are investing for retirement, and if you do the above, you'll probably end up with a decent nest egg.
Save a little for the future, and enjoy the present.
This line of reasoning assumes the future looks like the past. Which is generally a solid mode of thinking.
But, if the future looks like the past, shouldn't it give you pause that on many metrics markets are substantially more richly valued than at any peak in the last 100 years?
You can't have it both ways. Either the past is useful or it's not. If it's useful, then you have two conflicting data points -- market timing doesn't work, and we're at the top of a big bubble. If the past isn't useful, then neither data point is valid.
Now, you'll probably argue that even if it is a big bubble, the past suggests it always comes back. Setting aside the obvious fact that it's mathematically better to buy after the bubble bursts than before, you're in the same conundrum. Does the past matter or not? If it does, then yes you should expect to recoup the money eventually from buying at the top (though, if you bought at the top in 1929, you had to wait until the 1950s to get back to even). If the past doesn't matter and this time is different, then you can't say anything productive about the future.
> If it's useful, then you have two conflicting data points -- market timing doesn't work, and we're at the top of a big bubble.
Market timing does not work over the long-term, and even if we are at the top of the bubble, you can't know we're at the top, but more importantly: it doesn't matter.
> If it does, then yes you should expect to recoup the money eventually from buying at the top (though, if you bought at the top in 1929, you had to wait until the 1950s to get back to even).
And what would your returns if you kept doing DCA every paycheque from the 1929 top, on the ride all the way done, and then little by little through the 1930s, 1940s, and 1950s?
Turns out, not horrifically:
> I wanted to show how market conditions can affect the end results of an investor who periodically invests in the stock market over time. Leaving aside taxes, costs, inflation, etc., I ran the numbers by decade going back to the 1930s to see how much money an investor would have ended up with by investing $10,000 each year on a monthly basis (or $833/month) in the S&P 500.
Especially if you have some bonds to rebalance with:
> For instance, investors earned a real 2% average annual return on their equity investments during the 1930s, according to Ibbotson Associates, a market research firm. But they pocketed a real 7.1% on their government bonds and 2.7% on short-term Treasury bills. Yet during the 1950s investors earned a real average annual return of 16.8% on stocks, while losing 2.2% on bonds and 0.3% on bills.
Asset allocation and portfolio management is about managing risk for the returns that are desired and/or needed. If I can achieve my (retirement) goals with only 4% returns, then why would I take on extra risk to get 6%?
If I have 60% equities and 40% bonds to achieve my 4% returns, and equities go crazy, such that I've earned a pile of money in that portion of the portfolio such that they now make up (e.g.) 70%, then selling some off to rebalance is not about market timing, but rather about managing risk and not having too many financial eggs in a particular basket.
It had doubled by February 1986: you should have been taking money off the table as it went up. Take your profits and put it in other places: bonds, international. Further, as the valuations/CAPE went up, you should be expecting future returns to go down.
By the time the Nikkei hit a CAPE of 50, that means expected returns would be 2%: is there any place where one could have put one's money that earned >2%? When the Nikkei hit a CAPE of 94, that means expected returns were ~1%. Japan 10-year bond were making 5% at the same time:
A bunch of money invested in Japan, in 1990, with a 30% JP equity allocation, a 40% JP bond allocation, and a 30% international equity allocation, would have funded a thirty year retirement using the 4% rule just fine:
Why would anyone be investing 100% anywhere? Regardless of it being the Japan, US (S&P 500, NASDAQ, Russell 3000, etc), or any other other area/country?
Harry Markowitz, who won the Economics Nobel for portfolio theory, said that diversification is the only free lunch in finance.
Yeah, people seem to ignore this part of the argument and just focus on US equities. There was a time not long ago - but long enough that most 20/30-somethings on this site don't study - that Japan was the obvious future steward of the technology age which even led to spikes in Asian-American hate crimes and lax policies of those events (Vincent Chin comes to mind), culminating in the clearly-better Japanese auto industry and their breakthrough JIT manufacturing methods.
A few years later, their economy crashed (along with ours), but ours recovered through various means, mainly immense untapped natural resources, net inflow of immigrants (skilled and otherwise), the Internet, and well, Andy Grove, if we want to give credit to at least one individual here.
Japan is now a funny country across the ocean we marvel for their cultural weirdness and spotless streets. It wasn't like that just 40 years ago, and the idea that the United States can't go down that road for some reason is... well, naively optimistic.
First, talk to me when the CAPE of any market has a CAPE of 100 like the Nikkei had:
> What if an investor decided to detach from the herd once the CAPE ratio hit 50? At that point, the Nikkei had already delivered 263% over the previous ten years, or 13.8% a year. Not too bad. But once the CAPE ratio broke 50 in 1986, it wouldn’t peak for another 45 months, and it would add another 145%. Could the person who sold at CAPE 50 really sit on their hands for another 4 years as the mania sucked everyone else in?
So at 35.83, as I type this, the expected returns are 2.79%. If you can find an investment that earns at least that (or more), then you should be putting your money there. Can you list an investment that has that expected return? Indian, Bahrainian, or Mexican bonds perhaps?
The actual lessons to learn from Japan, one of which is diversification:
> Diversification, as always, is the key to avoiding a blow-up. The entire point of diversification is to avoid having your entire portfolio in a Japan situation. The global stock market has done just fine since 1990 even when you include Japan in the results.
The probability of the bubble bursting now though is higher than in 2017 (can't argue with that?) ... Rebalancing is a form of market timing, why not be 100% in equities and never rebalance? There is some evidence to suggest that's a good idea.
The way I approach this is that I take these sorts of macro bets with some portion of my portfolio. In a sense I adjust or rebalance my portfolio to partly reflect what I believe are better investments at that time, but not radically so. That way I get to have the fun of maybe timing the market and making an extra buck while also mostly being continuously invested. Being diversified also helps.
it is not equity that is overpriced.
it is that printed dollar that is overpriced (cash is trash).
any bond guarantees long-term loss.
In 1990, 2k, 2008 investors could escape from equities to bonds with 6% yield, but now they have nowhere to go.
That concludes that this bubble will continue as long as interest rate remains near zero.
Federal Reserve basically cornered the entire market into equities, investors have literally nowhere to go. even if 1% of equities capital escape into any other asset class - emerging markets, real estate, alternatives, crypto, whatever - it will create even more gigantic bubble in that asset class that will surely pop without the FED's support
The overnight lending rate in 2007 was 5.5%. If that was the cheapest possible you could ever borrow money for even the shortest term, 6% for a long-term bond is downright cheap.
The federal reserve sets this rate directly. They chose it to be at 5.25% (correcting my error in the above) because the economy was going well, we had less than 5% unemployment, and a high rate was generally considered necessary to fight inflation. https://www.federalreserve.gov/newsevents/pressreleases/mone... is their statement.
That's really cool you looked up the press release! Yeah, that's right, the central bank sets the rate. But the government could have managed inflation by other means, by regulation, raising taxes (perhaps on those who could most easily pay them), cutting spending, or adjusting trade policy, rather than giving investors 5%/year for doing no work.
You seem to have the purpose of rate increases reversed. Low interest rates actually help investors more. You're able to trade on margin for cheaper, which is the real driver of large investment firms. The rate is raised when you want money to leave the system.
Financial institutions (such as hedge funds) borrow money for leverage but the rentier class as a whole are creditors. Raising rates pulls money out of the system but it also gives money to rentiers.
and look at gigantic bubble that was created in crypto, because of that asset rotation - do you think crypto (which is funny money) is fairly valued as compared to real companies with real cash flows?
the only right strategy is what China have been doing - they have been selling US treasuries and buying real assets left and right across Asia and Africa - securing their grip on rare earth minerals, gold/silver, commodities, emerging markets, infrastructure projects and land.
No question. I think you can make the argument Ethereum (and to a lesser extent, Polkadot) could be fairly valued due to what it represents (platform for distributed applications, I refuse to use the shorthand phrase for it or decentralized finance), but BTC is simply just gold / reserve currency in nature and always will be per the Blockstream team's desires. So there's no way BTC's valuation relative to other stores of value is correct.
There are potential paradigm shifters in the cryptocurrency space as much as HN wants to shit on it, but I also agree with your larger point more than I disagree with it.
if there is new better crypto with some guarantees of value - all BTC folks will sell at the top and jump ship. For example imagine European central bank creates its own "green" reserve crypto mined only with green energy and guarantees free circulation and acceptance in eurozone.
Embrace-Extend-Extinguish framework can be applied to BTC to kill it with a better alternative, and the higher price for BTC is the stronger incentives to sell at the peak and move elsewhere to more stable place
>> the only right strategy is what China have been doing - they have been selling US treasuries and buying real assets left and right across Asia and Africa - securing their grip on rare earth minerals, gold/silver, commodities, emerging markets, infrastructure projects and land.
I'd agree with this but selling US Treasuries is more of an economic weapon rather than an investment strategy on their part, IMO. They do need to raise cash to do the other stuff so it has to come from somewhere, but they aren't dumping them on the market, either; they want stable-type assets around and 30-year US Treasuries are tough to beat.
Their Belt and Road Initiative is the right strategy. Politically difficult to explain since it's basically imperialism / mercantilism under a different banner, but when you don't answer to your voters and have central control of the economy and media, who cares?
>Robert Shiller – who correctly and bravely called the 2000 and 2007 bubbles and who is one of the very few economists I respect – is hedging his bets this time, recently making the point that his legendary CAPE asset-pricing indicator (which suggests stocks are nearly as overpriced as at the 2000 bubble peak) shows less impressive overvaluation when compared to bonds. Bonds, however, are even more spectacularly expensive by historical comparison than stocks. Oh my!
Banks are OK, household debt levels are OK. Corporate bonds are the issue in the current economy. Nonfinancial corporate debt to GDP ratio: hhttps://fred.stlouisfed.org/graph/?g=B5NG
* There are too many zombie companies walking around (indebted company that is able to repay the interest on its debts but not repay the principal)
* Institutional bond investors have chased profits to the lowest possible bond rating they are allowed to invest.
When something changes and ratings are downgraded, institutional investors are forced to sell these companies at the same time. Corporate bond market liquidity freezes overnight. Berkshire Hathaway will by bonds for cents per dollar...
Fed already opened corporate bond-buying program and used it. It's called Secondary Market Corporate Credit Facility (SMCCF). It only applies to investment-grade debt. Going below that and buying junk would be a big step.
Yeah, this has been my impression for quite some time now. Future projection for company equity seems fine enough, though quite obviously overvalued (but good luck betting against uncapped QE).
Corporate debt on the other hand has been scary for a few years and is getting ridiculous. Your point lowest possible bond ratings is a solid one, I think, and one I hadn't considered.
The chaining effect of some failures will be significant given how much leverage is inherent in the system. I think bond market spreads will become quite large as liquidity dries up.
Do you want to under-perform during all bull markets so it hurts less during the corrections?
If you stayed invested in the broad market through any bubble-pop you would be better off than aggressive diversification and hedging. Unless you can reliably time the tops and bottoms.
Where else will you invest? China? India? Rest of Asia? Europe? South America? Africa? Specific commodities?
Do you believe the next generations in the US will continue to create value or do you think this is the beginning of a perpetual decline?
I'm not sure if they're still around, but I remember back in the 1990s there was a family of mutual funds that aimed to do exactly what you're describing. They actually advertised the fact that they won't have the best returns in bull markets because they were protecting people in down markets.
The idea was that people benefitted more from staying in the market over a long period of time rather than maximizing their returns in any particular year.
So the fund was aimed to smooth out the peaks and valleys along the ride so investors would be more inclined to leave their money parked in the fund rather than getting a statement that said that they're down 30% and going to cash and missing the next run up.
Where else are rich people going to park their money? The demand for investable assets has gone way up because rich people have gotten much richer, and rich people around the world (such as newly minted emerging market billionaires) often prefer American assets for liquidity and good legal protections. I'm sure these investors would prefer that stocks earn more than 2.5% but that's just the going rate now. What alternatives do they have? Bonds yield basically nothing.
Not only do bonds yield nothing, they yield less than zero once you consider inflation. And long bonds yield near zero but...you have huge bond price risk if rates rise again.
There is no real choice now, you have to park the cash somewhere...and so it ends up everywhere from stocks to commercial real estate to VC (and eventually into our tech salaries, into rent, to the landlord, to the bank, and back into MBS in institutions :-)
Exactly. Asset prices are not determined by central bank actions, there is a third component that pushes both asset prices and central bank policy - the global supply/demand of savings vs investment opportunities. Which is driven mostly by demographics. China's massive working class, and the unprecedented rate at which they are getting wealthier, and their savings rate which is like >10x the average US citizen means there is a huge increase in the global supply of savings. Which bids up asset prices and pushes down yields, as savers compete with each other to buy up the extant profitable and safe opportunities. Central banks are the on the receiving end of this too: over-saving pushes down the natural rate of interest, which means policy rates must be lower to respond (unless you want to condemn some working Americans to unemployment).
Greenspan said in '97 that the market reflected a state of "irrational exuberance." If, on that day, you said "oh, cool , I'm exuberant too!" and dumped all your money into random stocks, then you'd still have made money at the bottom of the .com bubble crash.
I totally agree with this guy, but my only reaction is "of course... so what?"
I think any educated observer is wowed by the stock market right now. Anything other than "wow!" is voodoo
> I expect once again for my bubble call to meet my modest definition of success: at some future date, whenever that may be, it will have paid for you to have ducked from midsummer of 2020.
Two can play at this game. I predict that at some future date the stock market will be higher than it is today.
Given the Nikkei, I've never understood the fundamental law that everyone believes about the US stock market going up long term. I'm genuinely looking for a convincing answer so I could feel comfortable investing.
I'm sorta skeptical. With 12% of the usa vaccinated and things on the verge of opening, I really don't see things going into a recession unless the powers at be do something stupid.
I think this is fundamentally different than other bubbles because there's a guaranteed light at the end of the tunnel.
This bubble started well before Covid. I do agree that if the vaccination campaign is successful the mood will be such that it might sustain it a little longer. That should factor into the calculation. Though on the other hand, governments may hold back a little on stimulus once that happens as they've been throwing money all over the place during Covid.
It always does? It's partly a psychological phenomena and partly just a question of running out of greater fools. The first one is that once there's a change in mood for some reason (some event happens, e.g. a recession which in some ways is its own psychological phenomena) everyone convinces themselves that equities are too expensive, the prices start declining and that feeds a further decline. Just look at the GME stock as a microcosm of that situation.
In terms of the greater fool thing, you can only keep buying and selling the same thing for a 10% profit every year without eventually running out of people who will buy it. I guess see also the GME stock as a microcosm of that?
Bubbles suggest "irrational exuberance" but in this instance, equity values are actually operating off of a legitimate logic. Bond yields are low so investors are putting more of their money into equities. Equity centered index funds and ETFs have also grown in popularity. Sure individual stocks might be bubbling, but the market as a whole is operating within an environment that's narrowed growth within certain asset classes.
Saying "we're in a bubble" is always technically right since stock prices rarely reflect actual company value, unfortunately this article doesn't offer much insight beyond the obvious.
So, if the goal of investing is to get rich and the goal of being rich is to be happy, I have a good strategy.
Your overall net worth is not what makes you happy, it’s the CHANGE in net worth (up).
If you’re always heavily invested in the market, you are most of the time happy, because most of the time, the market goes up. This is punctuated by (relatively) quick periods of great loss/sadness.
But overall, you end up with a lot more happy times than sad. So a net positive to happiness. Not being invested in the market (at all or trying to beat a crash) means you have a period of net zero happiness. Which is worse on average than being in the market.
So, let it ride people... on average you’ll be happier!
(And actually, on average you’ll do better financially too.)
> Your overall net worth is not what makes you happy, it’s the CHANGE in net worth (up).
Two unfunded assumptions that seem to be based on your own experience.
Here's another, based on my own experience: a component of what makes you happy is to not have to worry about money at all, either because you live a lifestyle that require little of it, or because you have enough that a 50% change in wealth has zero impact on your life.
Very interesting article, and has some very poignant observations.
That said, it's not that hard to say we are in a bubble. Frankly, almost any time the market isn't at the bottom, it's in a bubble.
The real questions are, when will it pop, and how do you invest accordingly. These are super-hard, and a (cursory) read of the article doesn't really address that.
The general, boring observation, is that unless you can do much, much better, you should just be long the market, throughout all the bubbles and busts. You won't get the 50%-in-a-month payout, but you can get your consistent 10% a year or whatnot.
So I'm not just nay-saying, I thought S&P is about to crash ever since it crossed 2,000 after the crisis. If I followed my (weak) gut feeling, I would have lost 50% on that trade. Thank goodness I didn't. Even when it crashes, eventually, probably (???) not as low as 2,000.
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[ 4.2 ms ] story [ 162 ms ] thread"But this bubble will burst in due time, no matter how hard the Fed tries to support it"
this either needs to be weighted much lower, can't be the crux of the article, or has to be called out for its ambiguity and uselessness in predictive ability
However that said, the default bubble is potentially a lurking time bomb, so it's a race between inflation and loan defaults, essentially. (Inflation tends to make loan defaults less likely as it reduces the relative cost of existing loans.)
Many things are potential lurking time bombs. I can't think of a single period during any bullish market where you could not point to something and claim that that could be a potential end to the bull run.
The problem is when you are in the business of making predictions, if you just scream "Bear" long enough, eventually you'll be right and then you can write a book subtitled, "By the man who called the 2021 (or 2022 or 2023 or 2024 ...) stock crash" and people think you're some sort of genius.
I think the point the article is making is that successful Bears, even though they can't call the peak accurately, are able to say "I am reasonably certain that if I exit the market now and wait for the bubble to go higher and then burst, the correction will drive prices below the current high, and I will have made money overall, even though I'll miss out on the tail end of the bubble rising."
If you call the bubble too early (and if you are always screaming "Bear", you are by definition always too early) , the prices after the crash will still be higher than when you exited, you're completely screwed, and so is anyone who listened to you.
It isn't particularly difficult to say that the next crash, even if it happens a year or two from now, will probably drive the market below the current level. You would experience major FOMO by exiting now and watching the market continue to climb, but you won't actually lose money. If it happens sooner than a year from now, it will certainly dip significantly below current valuations, and you'll be ahead by quite a bit.
In this particular game of Chicken, opinions will differ as to whether it is time to lock in your gains yet, but it shouldn't be too controversial that it is definitely time to start thinking about it.
If I were currently in the market, I would keep an eye out for large and quirky M&A activity along the lines of AOL+Time-Warner. Eg. Tesla decides to buy a consumer appliance, rideshare, or financial services company. Or all of the above).
It's not technically illegal afaik, but it certainly is making a trade because of realities inherent in the trading, rather than the underlying.
It's becoming clear that money can be printed without causing inflation if its unevenly distributed in the economy. This amounts to large scale wealth redistribution to support asset price increases. If you earn dollars for a living, your purchasing power in terms of future dollar income is being eroded. You will purchase a home later or never, you may not be able to afford an education, and your medical expenses will rise ( as will anything that affects future earning power ).
When this ends is anyones guess, it's entirely plausible that we revert to the social systems of prior less equal times, foreign trade moves off the dollar, assets converge to an effective price of infinite dollars, or populists demand their own redistributive policies such as UBI or wealth taxes.
Or the fed meets tomorrow and cuts QE entirely. What is assured is that the current trend is unsustainable and must end eventually.
The interesting thing is whether "cannot" means the point when they literally can not because the market and inflation wont bear it...or when they wise up to the tinder box they have created. The problem with the latter is -- which administration would allow this to be under their watch. Once a problem is bad enough, you might as well just kick the can a bit more until you literally can not.
(yes, i realize the Fed is independent but there is still quite a bit of control)
That being said, examining the exit paths and forcing functions which would force Fed policy to change is something I'd like to see more of. There is a certain mentality floating around that there are no alternatives to being in the market, and that it's become too politically difficult to end Fed market support. If the latter is true, then there are a lot of consequences - such as returns becoming decoupled from cash flow see TSLA, Unicorns, or Hertz.
I think I remember someone saying that in 1929 when the shoeshine boys were giving stock advice that that's how someone knew the bubble was about to burst.
Lately I've been discussing investment strategies with the people that work at the gyms I'm going to. Is this the equivalent signal? The 2021 equivalent might be "When your personal trainer is giving you investment advice, that's how you know to get out?"
>In fact, only approximately 10 percent of American households held stock investments and speculated in the market; yet nearly a third would lose their lifelong savings and jobs in the ensuing depression.
https://courses.lumenlearning.com/atd-hostos-ushistory/chapt...
Yet, this poll seems to indicate that around 55% of Americans now hold stocks.
>Thus far in 2020, Gallup finds 55% of Americans reporting that they own stock, based on polls conducted in March and April. This is identical to the average 55% recorded in 2019 and similar to the average of 54% Gallup has measured since 2010.
https://news.gallup.com/poll/266807/percentage-americans-own...
So if slightly more than one out of every two people you meet owns stocks, I would assume you're bound to run into a lot of people talking about stocks.
In 1929 if the shoeshine guy was giving you stock tips, it signaled a very different level of market euphoria than today when your gym trainer is talking about stocks.
Also, today we live in a world where there's just so much more accessibility to information. Only about 1.3% of the planet has ever owned Bitcoin. About 13% of Americans have ever owned Bitcoin but 90% of Americans surveyed have heard of Bitcoin.
I don't mean this to be about Bitcoin, only trying to point out the massive gap between something that is relatively niche, and the number of news articles/stories, discussion, etc about it.
>With one study suggesting ~25 million cryptocurrency traders outside the USA & Europe, it seems quite likely there are over 100 million owners of bitcoins.
>If true, it means about 1.3% of the world's population owns bitcoin.
I've seen a few other sources make a similar estimate using different methodologies.
President JFK's father:
> While sitting in the shoeshine chair, Kennedy Sr. was alarmed to have the shoeshine boy gift him with several tips on which stocks he should own — yes, a shoeshine boy playing the stock market.
> This unsolicited advice resulted in a life-changing moment for Kennedy Sr. who promptly went back to his office and started unloading his stock portfolio.
> In fact, he didn’t just get out of the market, he aggressively shorted it — and got filthy rich because of it during the epic crash that soon followed.
* https://www.businessinsider.com/how-to-spot-stock-market-bub...
* https://en.wikipedia.org/wiki/Joseph_P._Kennedy_Sr.#1929_Wal...
And just wait till you see what is going on with Decentralised Finance.
https://coinmarketcap.com/yield-farming/
Sort that by Highest APYs. It fluctuates all the time but the numbers are getting as high as 1,000,000% APY. There is no world in which that can be anything but a Ponzi scheme.
People are actually buying into these things.
Perhaps this should be a measure of a bubble too: when you ran out of names and you start using food to name financial contracts.
The MMM Global ponzi scheme has been operating in the open for about a decade: https://en.wikipedia.org/wiki/MMM_Global
Ponzi schemes benefit greatly from a public perception that "all markets are rigged". Ponzi schemes can feel like a rigged game where they have a chance to get in on the ground floor of a rigged game. They also benefit from false equivalencies such as "after all, nothing good lasts forever" to make ponzi schemes feel like just another bull market opportunity that won't last forever.
It's akin to gambling. Many entrants tell themselves they'll only allocate as much money as they have to lose, or that they'll withdraw their initial investment after the first 100% gain. Sadly, they usually get overconfident when the scheme doesn't immediately collapse and end up investing far more than they would normally be willing to risk.
> The one reality that you can never change is that a higher-priced asset will produce a lower return than a lower-priced asset. You can't have your cake and eat it. You can enjoy it now, or you can enjoy it steadily in the distant future, but not both – and the price we pay for having this market go higher and higher is a lower 10-year return from the peak.
With a bit more mathematical rigor: For each of us there will be only one future. In that future, each asset -- company, property, etc. -- will earn a finite cash flow yield. If we pay more for that future cash flow now, our rate of return will be lower in the future.
If they're buying now when prices are historically high, what does that say about their ability to generate home equity returns in the future?
https://www.macrotrends.net/1437/sp500-to-gold-ratio-chart
I wouldn't want to be holding a lot of precious metals if/when asteroid mining gets going.
Of course, this requires being able to time the markets twice, which is... non-trivial.
Not if the sure-to-follow inflation from a collapse devalues your cash faster than emerging markets and value equities.
What's Buffet doing right now ?
He's been overly bearish for quite some time, here's the 7 year forecast from December 2009: https://ritholtz.com/2010/01/7-year-asset-class-forecasts/
Here's a recent talk he gave: https://www.youtube.com/watch?v=RYfmRTyl56w&ab_channel=Bloom...
A post by Nick Maggiulli in 2017:
> Many investors focus on the right time to buy stocks because they don’t want to buy near a peak in case of a future market crash. I understand the feeling. With the market near all time highs in early 2017, it can be tempting to hold off until there is a larger negative adjustment in prices.
> The only problem with this approach is the market could go up for a significant period of time before a correction happens.
> For example, if you search “stock market overvalued 2012” on Google you can find plenty of stories discussing how overvalued stocks were in 2012. If you had started waiting for an S&P 500 correction then, you would have missed out on the ~70+% increase in prices from 2012 through early 2017.
* https://ofdollarsanddata.com/just-keep-buying/
And what has the S&P 500 done since 2017? Continuing:
> If I still haven’t convinced you, let me tell you a story. The story is about a man with possibly the worst luck in investing history.[0][1] He made a total of 4 large stock purchases between 1973 and 2007. He bought in 1973 before a 48% decline in stocks, bought in 1987 before a 34% decline, bought in 2000 before the dot com crash, and bought in 2007 before the Great Recession.
> Despite these 4 individual purchases that totaled a little less than $200,000, how did he do? He ended up with a $980,000 profit for a 9% annualized return. What was his secret? He never sold.
> That’s right. Selling out is literally selling out your future wealth. You need to hold on to your assets as you acquire more.
> This is the purpose of capitalism (i.e. acquiring capital). The only time you should sell your investments is for rebalancing (annually/quarterly, etc.) or in retirement. Otherwise, you already know the mantra.
* [0] https://www.cnbc.com/2015/08/27/the-inspiring-story-of-the-w...
* [1] https://awealthofcommonsense.com/2014/02/worlds-worst-market...
And as Maggiulli shows, trying to buy the dip, even when you know when the dip will occur (which is impossible), gives worse results than simply putting away a little bit every month:
* https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-co...
Put away a little every pay cheque, in a diversified low-fee fund (S&P 500, Total Market/Russell 3000), at a comfortable risk profile that allows you to sleep at night (0/20/40% bonds), and try not to pay attention too much about what The Market™ is doing. Most of us are investing for retirement, and if you do the above, you'll probably end up with a decent nest egg.
Save a little for the future, and enjoy the present.
But, if the future looks like the past, shouldn't it give you pause that on many metrics markets are substantially more richly valued than at any peak in the last 100 years?
You can't have it both ways. Either the past is useful or it's not. If it's useful, then you have two conflicting data points -- market timing doesn't work, and we're at the top of a big bubble. If the past isn't useful, then neither data point is valid.
Now, you'll probably argue that even if it is a big bubble, the past suggests it always comes back. Setting aside the obvious fact that it's mathematically better to buy after the bubble bursts than before, you're in the same conundrum. Does the past matter or not? If it does, then yes you should expect to recoup the money eventually from buying at the top (though, if you bought at the top in 1929, you had to wait until the 1950s to get back to even). If the past doesn't matter and this time is different, then you can't say anything productive about the future.
Market timing does not work over the long-term, and even if we are at the top of the bubble, you can't know we're at the top, but more importantly: it doesn't matter.
* https://awealthofcommonsense.com/2014/02/worlds-worst-market...
> If it does, then yes you should expect to recoup the money eventually from buying at the top (though, if you bought at the top in 1929, you had to wait until the 1950s to get back to even).
And what would your returns if you kept doing DCA every paycheque from the 1929 top, on the ride all the way done, and then little by little through the 1930s, 1940s, and 1950s?
Turns out, not horrifically:
> I wanted to show how market conditions can affect the end results of an investor who periodically invests in the stock market over time. Leaving aside taxes, costs, inflation, etc., I ran the numbers by decade going back to the 1930s to see how much money an investor would have ended up with by investing $10,000 each year on a monthly basis (or $833/month) in the S&P 500.
* https://awealthofcommonsense.com/2018/04/the-luck-of-the-dra...
Especially if you have some bonds to rebalance with:
> For instance, investors earned a real 2% average annual return on their equity investments during the 1930s, according to Ibbotson Associates, a market research firm. But they pocketed a real 7.1% on their government bonds and 2.7% on short-term Treasury bills. Yet during the 1950s investors earned a real average annual return of 16.8% on stocks, while losing 2.2% on bonds and 0.3% on bills.
* https://www.marketplace.org/2009/01/05/history-rewards-stalw...
Bonds and rebalancing also would have saved a portfolio with the S&P 500 in the 2000s:
* https://www.forbes.com/sites/investor/2010/12/17/the-lost-de...
* https://news.ycombinator.com/item?id=26138600
If I have 60% equities and 40% bonds to achieve my 4% returns, and equities go crazy, such that I've earned a pile of money in that portion of the portfolio such that they now make up (e.g.) 70%, then selling some off to rebalance is not about market timing, but rather about managing risk and not having too many financial eggs in a particular basket.
The Nikkei 225 was 6700 in January 1980:
* https://fred.stlouisfed.org/series/NIKKEI225
It had doubled by February 1986: you should have been taking money off the table as it went up. Take your profits and put it in other places: bonds, international. Further, as the valuations/CAPE went up, you should be expecting future returns to go down.
By the time the Nikkei hit a CAPE of 50, that means expected returns would be 2%: is there any place where one could have put one's money that earned >2%? When the Nikkei hit a CAPE of 94, that means expected returns were ~1%. Japan 10-year bond were making 5% at the same time:
* https://fred.stlouisfed.org/series/IRLTLT01JPM156N
A bunch of money invested in Japan, in 1990, with a 30% JP equity allocation, a 40% JP bond allocation, and a 30% international equity allocation, would have funded a thirty year retirement using the 4% rule just fine:
* https://www.gocurrycracker.com/lessons-from-japans-lost-deca...
Why would anyone be investing 100% anywhere? Regardless of it being the Japan, US (S&P 500, NASDAQ, Russell 3000, etc), or any other other area/country?
Harry Markowitz, who won the Economics Nobel for portfolio theory, said that diversification is the only free lunch in finance.
* https://en.wikipedia.org/wiki/Harry_Markowitz
And answer to the "but Japan" quip is: diversification.
A few years later, their economy crashed (along with ours), but ours recovered through various means, mainly immense untapped natural resources, net inflow of immigrants (skilled and otherwise), the Internet, and well, Andy Grove, if we want to give credit to at least one individual here.
Japan is now a funny country across the ocean we marvel for their cultural weirdness and spotless streets. It wasn't like that just 40 years ago, and the idea that the United States can't go down that road for some reason is... well, naively optimistic.
> What if an investor decided to detach from the herd once the CAPE ratio hit 50? At that point, the Nikkei had already delivered 263% over the previous ten years, or 13.8% a year. Not too bad. But once the CAPE ratio broke 50 in 1986, it wouldn’t peak for another 45 months, and it would add another 145%. Could the person who sold at CAPE 50 really sit on their hands for another 4 years as the mania sucked everyone else in?
* https://theirrelevantinvestor.com/2017/08/10/stock-bubble/
Second, the CAPE is fairly good at predicting future returns. Current S&P 500 CAPE:
* https://www.multpl.com/shiller-pe
So at 35.83, as I type this, the expected returns are 2.79%. If you can find an investment that earns at least that (or more), then you should be putting your money there. Can you list an investment that has that expected return? Indian, Bahrainian, or Mexican bonds perhaps?
* https://www.investing.com/rates-bonds/bahrain-government-bon...
* https://www.investing.com/rates-bonds/india-government-bonds
* https://www.investing.com/rates-bonds/mexico-government-bond...
The actual lessons to learn from Japan, one of which is diversification:
> Diversification, as always, is the key to avoiding a blow-up. The entire point of diversification is to avoid having your entire portfolio in a Japan situation. The global stock market has done just fine since 1990 even when you include Japan in the results.
* https://ritholtz.com/2017/10/japan-greatest-bubble-time/
There are plenty of "markets" out there:
* https://www.bogleheads.org/wiki/Callan_periodic_table_of_inv...
The way I approach this is that I take these sorts of macro bets with some portion of my portfolio. In a sense I adjust or rebalance my portfolio to partly reflect what I believe are better investments at that time, but not radically so. That way I get to have the fun of maybe timing the market and making an extra buck while also mostly being continuously invested. Being diversified also helps.
Federal Reserve basically cornered the entire market into equities, investors have literally nowhere to go. even if 1% of equities capital escape into any other asset class - emerging markets, real estate, alternatives, crypto, whatever - it will create even more gigantic bubble in that asset class that will surely pop without the FED's support
Yeah, I think that is the generally accepted understanding of what's happening right now especially with additional stimulus / QE methods.
Think you are already seeing equity escape into other asset classes in commodities and cryptocurrency, too.
the only right strategy is what China have been doing - they have been selling US treasuries and buying real assets left and right across Asia and Africa - securing their grip on rare earth minerals, gold/silver, commodities, emerging markets, infrastructure projects and land.
There are potential paradigm shifters in the cryptocurrency space as much as HN wants to shit on it, but I also agree with your larger point more than I disagree with it.
Embrace-Extend-Extinguish framework can be applied to BTC to kill it with a better alternative, and the higher price for BTC is the stronger incentives to sell at the peak and move elsewhere to more stable place
I'd agree with this but selling US Treasuries is more of an economic weapon rather than an investment strategy on their part, IMO. They do need to raise cash to do the other stuff so it has to come from somewhere, but they aren't dumping them on the market, either; they want stable-type assets around and 30-year US Treasuries are tough to beat.
Their Belt and Road Initiative is the right strategy. Politically difficult to explain since it's basically imperialism / mercantilism under a different banner, but when you don't answer to your voters and have central control of the economy and media, who cares?
1. become worls biggest bitcoin miner - funny money alternative to USD
2. if USD is overvalued then you should buy up undervalued assets in EM and gain mercantile and political benefits
3. their expanded empire will continue to print USD and they will continue to expand everywhere except USA to hedge against USD
Only because most of the world hasn't caught up yet to what a dollar real's worth is.
Banks are OK, household debt levels are OK. Corporate bonds are the issue in the current economy. Nonfinancial corporate debt to GDP ratio: hhttps://fred.stlouisfed.org/graph/?g=B5NG
* There are too many zombie companies walking around (indebted company that is able to repay the interest on its debts but not repay the principal)
* Institutional bond investors have chased profits to the lowest possible bond rating they are allowed to invest.
When something changes and ratings are downgraded, institutional investors are forced to sell these companies at the same time. Corporate bond market liquidity freezes overnight. Berkshire Hathaway will by bonds for cents per dollar...
I can't imagine corporate bankruptcies resulting in corrective change if the fed is the principal lender.
Corporate debt on the other hand has been scary for a few years and is getting ridiculous. Your point lowest possible bond ratings is a solid one, I think, and one I hadn't considered.
The chaining effect of some failures will be significant given how much leverage is inherent in the system. I think bond market spreads will become quite large as liquidity dries up.
If you stayed invested in the broad market through any bubble-pop you would be better off than aggressive diversification and hedging. Unless you can reliably time the tops and bottoms.
Where else will you invest? China? India? Rest of Asia? Europe? South America? Africa? Specific commodities?
Do you believe the next generations in the US will continue to create value or do you think this is the beginning of a perpetual decline?
The idea was that people benefitted more from staying in the market over a long period of time rather than maximizing their returns in any particular year.
So the fund was aimed to smooth out the peaks and valleys along the ride so investors would be more inclined to leave their money parked in the fund rather than getting a statement that said that they're down 30% and going to cash and missing the next run up.
There is no real choice now, you have to park the cash somewhere...and so it ends up everywhere from stocks to commercial real estate to VC (and eventually into our tech salaries, into rent, to the landlord, to the bank, and back into MBS in institutions :-)
I totally agree with this guy, but my only reaction is "of course... so what?"
I think any educated observer is wowed by the stock market right now. Anything other than "wow!" is voodoo
Two can play at this game. I predict that at some future date the stock market will be higher than it is today.
If you said that about the Nikkei 225 in 1990, you’d still be waiting for it to come true. Though as of a few hours ago it’s within 30% of the peak: https://www.bloomberg.com/news/articles/2021-02-15/japan-s-n...
I think this is fundamentally different than other bubbles because there's a guaranteed light at the end of the tunnel.
In terms of the greater fool thing, you can only keep buying and selling the same thing for a 10% profit every year without eventually running out of people who will buy it. I guess see also the GME stock as a microcosm of that?
And so, all bubbles must burst.
Historically prices have always gone up, so as long as you aren't near a peak it's probably the lowest the total market will ever be.
Saying "we're in a bubble" is always technically right since stock prices rarely reflect actual company value, unfortunately this article doesn't offer much insight beyond the obvious.
Your overall net worth is not what makes you happy, it’s the CHANGE in net worth (up).
If you’re always heavily invested in the market, you are most of the time happy, because most of the time, the market goes up. This is punctuated by (relatively) quick periods of great loss/sadness.
But overall, you end up with a lot more happy times than sad. So a net positive to happiness. Not being invested in the market (at all or trying to beat a crash) means you have a period of net zero happiness. Which is worse on average than being in the market.
So, let it ride people... on average you’ll be happier!
(And actually, on average you’ll do better financially too.)
Two unfunded assumptions that seem to be based on your own experience.
Here's another, based on my own experience: a component of what makes you happy is to not have to worry about money at all, either because you live a lifestyle that require little of it, or because you have enough that a 50% change in wealth has zero impact on your life.
That said, it's not that hard to say we are in a bubble. Frankly, almost any time the market isn't at the bottom, it's in a bubble.
The real questions are, when will it pop, and how do you invest accordingly. These are super-hard, and a (cursory) read of the article doesn't really address that.
The general, boring observation, is that unless you can do much, much better, you should just be long the market, throughout all the bubbles and busts. You won't get the 50%-in-a-month payout, but you can get your consistent 10% a year or whatnot.
So I'm not just nay-saying, I thought S&P is about to crash ever since it crossed 2,000 after the crisis. If I followed my (weak) gut feeling, I would have lost 50% on that trade. Thank goodness I didn't. Even when it crashes, eventually, probably (???) not as low as 2,000.