원문 보기
Hello everyone, and welcome back to another day of investing to achieve success. We are living through a stock market bubble, and significant drops are coming. Many of you have asked me about the current market situation, whether it's a good idea to continue investing in index funds, stocks, etc. The markets have been quite turbulent lately, so much so that some of the most famous and renowned fund managers in the world, like Kathy Good and Michael Barry, have already warned that we may be experiencing a new bubble.
But to what extent should we worry about this? In this video, we'll try to shed some light on this topic. We'll review the current state of the stock market and see what some super investors, like Ray Dalio, think about it. And at the end of the video, as always, I'll share my personal opinion on what I'm doing with my investments and some tips for emerging victorious from the current situation.
We are facing a new bubble; a stock market crash will occur in 2021. Get ready because we're starting. First of all, to put things into perspective, I'd like to share a tweet I posted a few days ago. Charlie read this, which I think is quite illustrative. This tweet basically said the following about the US market: stocks at all-time highs, housing prices at all-time highs, corporate bond yields at all-time lows, mortgage rates at all-time lows, and inflation expectations at their highest level in the last eight years.
All of this is a bit scary, isn't it? And then it also added that the Federal Reserve needed interest rates at 0% and to continue buying bonds to boost asset prices and thus increase inflation, and that the Bit Cohen had also recently reached all-time highs. But we'll leave that for another day. So, this is the current outlook in the US, the benchmark market worldwide.
But the reality is that this isn't only happening in the US; in other countries around the world, such as Germany, the situation is very similar. Undoubtedly, we are facing a very critical moment when it comes to making investment decisions. We are seeing an unprecedented situation with a devastating pandemic for health and the economy, which has forced central banks to come to the rescue and increase their reserves like never before.
The size of their balance sheets is very good, Carlos, but let's get to what's really important: are we in a bubble, yes or no? Is it a good idea to keep investing in the stock market? Well, first, I'd like to tell you to give this video a thumbs up and subscribe to the channel, activating notifications so you do n't suffer the consequences of the next bubble.
Now, let's look at some indicators. If we look at the P/E ratio of the S&P 500, which compares the price we're paying for the profits generated by companies, we can see that it's currently around 35 times, which is much higher than the average of the last few years of around 20 times. So, according to the P/E ratio, as you can see in the graph, the market is quite expensive since we're approaching bubble multiples.
And if we look at the P/E ratio of the S&P 500, which is the price we pay relative to the estimated profits for next year, this multiple is high, as it's above 20 times, values not seen since the dot-com bubble. On the other hand, we can also observe an overvaluation of the If we look at the Warren Buffett indicator, which compares the value of the total American market to the country's gross domestic product, the difference between the stock market and the real economy, so to speak, has never been as unequal as it is now.
Although, if we stop to think about it, given the current situation with interest rates practically at historic lows and the amount of money injected by central banks, it might even be considered somewhat normal. But anyway, while the indicators mentioned can give us an idea of what's going on, let's go a step further.
Before sharing my personal opinion and seeing what we can do with our investments, let's see what Ray Dalio, one of the most renowned investors and manager of the world's largest hedge fund, Bridgewater Associates, thinks about this topic. Well, he's already experienced his fair share of battles in the markets, and that's why he's designed his own model to analyze bubbles.
This model is based on analyzing the six factors we can see on the screen: first, how are stock prices relative to their historical average? Second, are those prices discounting unsustainable conditions? Third, the number of new investors entering the market? Fourth, sentiment? The optimism in the stock market, fifth, analyzes the degree of leverage, and finally, it analyzes the use of forward contracts, whether companies have made futures purchases to protect themselves from possible price increases or to speculate.
Okay, well, as I said, the good Ray Dalio develops a model quantifying all these variables, and according to the current result, it's, let's say, at the 77th percentile. That is to say, the bubble level, according to Ray Dalio, would be 77% out of a maximum of 100%, which was the level reached in the 2000 dot-com bubble and in the bubble prior to the 1929 crash.
And well, in addition to this, according to Ray Dalio, there is a great divergence between the different stocks. On the one hand, we have the case of emerging technology companies and many of these companies that have become fashionable and that trade at really high multiples, and on the other hand, we have the rest where the valuations would be more reasonable.
So, well, after having seen all this information, let's move on to the final conclusion: is there a bubble, yes or no? What do we do with our investments? Well, according to what we have seen and my personal opinion If we're not in a bubble, we're close. We have to be careful because we're entering treacherous territory.
The truth is, I largely share Raed's view. I do believe there's a group of companies, especially tech companies, that have become very fashionable, and we have to be careful with them. Many of these haven't even become profitable yet and are already trading at completely exorbitant prices. In fact, according to a recent Deutsche Bank survey of 627 professionals, 89 percent thought the financial markets were in bubble territory, placing US tech companies and Bitcoin in the spotlight.
But on the other hand, there are companies like Fans and Microsoft, which generally have demanding valuations, but are nowhere near extreme. And finally, we have stocks in sectors like energy, with oil companies, rights, etc., where there might be more opportunities since these sectors were hit hard during the pandemic and seem to be starting to recover now.
And I should also add that not everything on the stock market is in the US; in emerging countries, companies are trading at Lower multiples are the norm, so I think it's interesting to keep an eye on the opposite, especially in Asia. As you can see on the screen, the MSC and World, which would be the developed countries index, currently have a higher P/E ratio than the emerging countries index.
As for me, you know I continue to invest in index funds every month. I don't like market timing because we never know when to stop the party, we don't know when the market is going to correct, and it usually spends more time going up than down. So if we're out of the market, we can miss out on big gains.
That said, in times like these, I think it's important to diversify to reduce risk. First, have different assets in your portfolio: stocks, fixed income, real estate, Bitcoin, etc., always considering your risk profile, your situation, and your knowledge. And then, don't invest only in one type of company.
If you want a balanced portfolio, invest in stocks yourself. Be careful about investing only in the most fashionable companies or in a specific sector. If they're fashionable, it might no longer be the best time to invest in them. Always do your own analysis and see if the numbers add up before investing in any company.
And that's about it. It's time to be prudent, stick to the plan, and be prepared for potential drops so you can buy more aggressively. Don't do anything reckless, don't over-leverage, and don't invest just for the sake of investing. As we 've seen, there are quite a few indicators showing we're in dangerous territory.
So, be responsible, choose your investments wisely, hit the like button hard if you enjoyed this video, and of course, subscribe to the channel by clicking the bell icon. Finally, I want you to leave your opinion in the comments. Do you think we're in a bubble? Is the branch coming? And in 2021, as always, thank you so much for being there another day, and I'll see you in the next video. Cheers! e m now
Comments 0