Things haven’t improved since the last financial crisis in 07/08. In contrary it has only gotten worse. The economy is at such a high growing pace that speculative bubbles and overheating of the market has come to be inevitable. We can see a pattern of overheating markets, a.k.a. bubbles, occuring all 7 to 8 years. Before 2000 this has never been the case so regularly.
S&P 500 Chart as Reference
THE WHOLE WORLD IS IN A BUBBLE - WHY?
There are multiple reasons but the most obvious is that so many markets are at all time highs. Just take:
- The above shown S&P500
- Cryptomarket: Bitcoin and multiple other Alts (Cryptomarket ressembles the .com bubble: People are throwing their money at the market and bragging how easy it is to multiply your money)
- Nasdaq: Mainly driven by FAAMG (Facebook, Apple, Amazon, Microsoft and Google) they are amongst the most speculative names. Also Tesla and Nvdia are subjects to great speculation.
- Student Debt & Loans
- Housing Market: Overprizing in Canada, California and Sweden. Especially in Sweden the housing prices rose by almost 50% since 2008. Thanks to the monetary policy of the Central Bank Sweden didn't feel a big recession and also thanks to high population growth and low mortgages rates the housing prices will keep on climbing. A reference index below:
One has to understand that Globalisation has in an economic sense become a huge problem: Since everything is interconnected and everything relies on everything else. If the general market trend is bullish, every single market will behave in this way. Of course there are sometimes some divergences.
Especially with banks this globalisation stuff is like playing Russian roulette. Since the banking business is usually in a 20:1 debt ratio it is even worse in this sector. For example what happened with Lehmann Brothers. One bank collapsed -> All other banks & the whole economy followed. When a Bank Run occurs many banks will run out of money and eventually collapse.
Growth is good and volatility is inevitable. Sooner or later there will always be a correction. But if it's later the correction will be more aggressive. I believe there will be a big correction in the following 10-15 months. We can't do anything against it but i suggest we wait for the so-called dip. In this sense the popping bubble has also good sides too.
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What are your thoughts on this topic? When will the "bubble" pop? Are you also looking forward for the THE BIG DIP??😄 I highly encourage you to participate in the discussion below!
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Kind regards,
Caspar