You know what's the easiest thing to say about the markets right now? They are all in a bubble. I find it both hilarious and bothersome that the same old mutual fund and hedge fund managers come out and use this excuse to stay underinvested or doubtful about all assets, particularly equities.
To me there are only three bubbles out there and they are often blinding older money managers and making them abhor everything including equities that make so much sense to own that you have to believe intellectual laziness is behind their protests.
The first? Cryptocurrencies and non-fungible tokens. Between the two cryptocurrencies are the most realistic. I totally get the idea that fiat currency has become toxic for many. The printing presses are going full speed because of the pandemic and the Federal Reserve is buying a lot of debt. So, if there is an alternative to fiat then I would and have embraced it. I have always thought of gold, because of its scarcity, a worthy insurance to dollars. The vitality of gold is the scarcity of gold. We only find about 1% more gold a year than is currently in circulation and there is no doubt among anyone in the business that it is getting harder and harder to find.
That, to me, sounds like bitcoin. Now bitcoin just had a spike that took it to new heights and I don't know if it can be sustained. However, the idea that it can rival gold as a storehouse of value, I find totally legitimate and not just because gold has been a big disappointment as a hedge against inflation. But let's deal with two extremes for a moment, dogecoin and NFT's. Dogecoin was meant as a joke and it is still a joke except a lot more people are on it. I think a more serious market would be a betting market on the direction of dogecoin because the currency's action is more reminiscent of sports betting. Why not? To me its just a sport, so why not gamble on it.
Non-fungible tokens come close to tulips in my book. But because it has billionaire supporters it is therefore deemed legit. To me there are so many billionaires out there now their support means nothing to me. All I can see is a greater fool theory with no two way markets. Nike (NKE) shoe markets make more sense. Billionaires will keep this market alive as long as they can, though.
Next up is SPACs. Here the problems are two-fold. First, they don't have to have any rigor at all, just a name. They can buy companies with ridiculous projections by using a backdoor that the SEC should just close. Or the SEC must regulate the SPACs as if they are regular launches. If not, the bubble will continue and I will blame the SEC for its collapse. There's no way you can protect people from buying these things based on the projections because they are just too fetching.
Finally there are the stocks that sell at more than 10 times sales and there are a plethora of those. Here I am in agreement with the bubble callers. I don't like these either. But there is a simple solution to this: short them. If you really think they have no value then use some ETF - there are a gazillion of them - to bet against them. Put your money where your mouth is and profit from their overvaluation. I don't want to hear gripes, I want so see actual money put to work in an adverse way. Then I will believe the bubble's dangerous and about to explode.
It's a simple equation. There are bubbles but two can be eliminated, the current wild west of SPACs and the highest valuations out there, the first by the new SEC and the second by managers who want to show us what they really mean about overvaluations.
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