samcros.blogg.se

1. #ARE WE IN A HOUSING BUBBLE 2021 REDDIT HOW TO#
2. #ARE WE IN A HOUSING BUBBLE 2021 REDDIT PROFESSIONAL#

More than $600 Billion have been raised by IPO’s this year. Rise of new issues and speculative assets While this can be attributed to the democratization of complicated investment instruments by platforms such as Robinhood, Fidelity, E-Trade, etc., it’s highly unlikely that all the retail traders who are using options completely understand the instrument and the inherent risks while using it. Retail brokers alone are now trading more options than the entire market used to do in 2019. The below research by Goldman Sachs shows an even more concerning trend. While leverage works great in a bull market, it can destroy your portfolio during downturns. More than 50% of the surveyed population borrowed more than $5k or more for investing. 80% of Gen Z and 60% of Millennial investors have borrowed money to invest in the market. This survey conducted by Magnifymoney for almost 1,000 investors shows staggering results. Both of these have seen a dramatic rise in the past 2 years. The first method is borrowing money to invest in the markets and the other is using options. There are two ways of using leverage while investing. One can argue that even the stimulus has been increasingly trapped within the financial markets and fueled speculation. While it might be argued that there are structural reasons why this was required, there is no denying that only a small portion went into the actual paychecks that people received and a vast majority was used for keeping companies afloat. Money Supply Growth (Aka ‘Money printer go brrr’)ġ/5th of all U.S Currency in circulation was printed in 2020. The red flag here is that those who invested when the CAPE was above 40 last time (1999-’00) had to wait another 7 years to break even for a brief period of time (just before the 2007 housing market crash) and then wait another 5 more years before the market consistently settled above their buy-in price. The last time the Shiller PE crossed 40 was during the 2000 dot com bubble (The value reached only a max of 27 before the 2007 financial crisis).

The current concern is that as of Nov’21, the Shiller PE for the S&P 500 crossed 40, which is the highest reading in the last two decades. Shiller PE is adjusted for the cyclical nature of earnings when compared to normal PE.

The price to earnings ratio has been historically used to understand if the market/company is overvalued when compared to historical trends. (Spoiler alert - there are a lot of them!)

Let’s first look at the dive into the various concerning trends that we are observing in the current market.

#ARE WE IN A HOUSING BUBBLE 2021 REDDIT HOW TO#

So what I wanted to analyze is: Should we really be worried about the current trends or is this the ‘new normal’ given the drastically different situation we find ourselves in? Finally, this would give us an insight into how to manage our current portfolio and future investments! There is an immense difference in the available capital, interest rates, and ability of the retail crowd to invest in stocks now compared to 20 years back. The 2020s are wildly different times compared to the 2000s and we should not be looking at both scenarios through the same lens. While it’s easy to say that it’s all a bubble and we should be liquidating all our investments based on the current trend, I feel that we might be missing the other side of the story.

#ARE WE IN A HOUSING BUBBLE 2021 REDDIT PROFESSIONAL#

Why the Stock Market is in a bubble? - Business InsiderInvestors are overestimating earnings growth far more than they did during the dot-com bubble - Bank of AmericaĮven professional investors whom I consider level-headed and not indulging in sensationalization are calling the current rally unsustainable.Īdding to all of this, we can see that the Shiller PE Ratio is now climbing close to the 2000 dot-com bubble level.

Lately, there has been growing chatter around whether the current rally that we are experiencing over the past one and half years is mainly driven by speculation and if we are in one of the largest investment bubbles ever.