As you know, the fundamental overvaluation of the US stock market has broken all records. It is higher than the top of 2000 and higher than 1929. So there is no longer any doubt that we are dealing with the largest speculative bubble of all time.
Speculative bubble in stocks, bonds and real estate
This observation is all the more true as the bond markets and real estate markets are also in a speculative bubble. In contrast to 2007, this time the German real estate market is also affected. Even the Bundesbank writes that. After all, real estate loans make up around 70 percent of total lending to domestic companies and individuals. I don’t need to explain the risks here.
This mega-bubble will burst too
Many of my critics are now saying, “What do you want? The markets are rising, overvaluation or not ”. That is absolutely correct, an overvalued market can remain overvalued for a long time and – as has happened in recent months – even break new historical records.
And the extent of the overvaluation also only gives us a clear idea of how high the risks are, but no indication of when the party is really going to end. This requires other indicators that financial market history teaches us:
7 bubble-burst warnings you need to know about
- The belief in the never-ending price increase: The affected markets have been rising more or less strongly over a longer period of time. Memories of loss-making times have been completely forgotten. The “buy high, sell higher” mentality is beginning to establish itself.
- Innovative pioneers: It is now important that something new comes onto the market that ignites the imagination of investors. These can be new products and technologies, but also new manufacturing techniques – or cryptocurrencies.
- New classes of investors are climbing the ring: These innovations and the steady rise in prices attract investors to the financial markets who have no knowledge of the stock market and only see quick money. These speculators have no experience of falling prices. They think that things will always go up.
- Speculating on Credit: These new classes of investors not only lack knowledge, but often also lack the money. You take out loans. What should happen? This high willingness to take risks is not limited to the new investor class, now almost everyone wants something off the cake. By the way, this speculative figure has recently risen to a new record of 3.4% of gross domestic product – and with it the wave of forced sales that will inevitably be triggered the next time the stock market goes downhill.
- “This time everything is different“: A self-reinforcing boom is characteristic of speculative bubbles. There are price rises that have no basis. According to the motto “This time everything is different“Doubts are wiped away.
- New financial products are brought to life and scammers take the stage: Now everyone wants something from the cake. Financial institutions are developing new financial products to siphon off even more money. The boom, which promises gushing profits, attracts swindlers and fraudsters. Only after the speculative bubble has burst does it come to light. There is no regulatory intervention on the part of the central bank bureaucrats or other institutions. On the contrary, they often heat up the bladder.
- Abundant supply of liquidity: Speculative bubbles cannot develop without increases in the amount of money and credit. Behind every historically documented speculative bubble there is a source of money and credit that made speculative price gouging possible. Money and credit growth is the prerequisite for all speculative bubbles. Without this prerequisite, the features mentioned in points one to six would be invalid.
Conclusion: In the past few months, all 7 warnings have reached extreme values and even set new records.
US money supply growth (M-2) in%, 2013 to 2021
The US Federal Reserve has increased the money supply dramatically.
Source: St. Louis Fed
“We are currently somewhere between July 1999 and February 2000”
Jeremy Grantham, America’s best-known value investor after Warren Buffett, has dealt extensively with speculative bubbles, as has Roland Leuschel and I. According to his analysis, we are somewhere between July 1999 and February 2000, compared to the technology bubble that peaked in March 2000. “This means“, Says Grantham,”the bubble may burst at any moment since it has met all the necessary conditions, but it could also rush to the top for a few more months. ”
Great opportunities in selected sectors
You don’t have to worry about any of this, on the contrary. Just like in 2000, there are a few sectors today that have not been hit by the speculative bubble and are attractively valued. These include, for example, the precious metals sector and the classic energy sector, which we are currently focusing on in our crisis-proof investing issue have dedicated.
In contrast to the general stock market, you will find stocks in these sectors that offer you a very good risk / reward ratio. The classic energy sector shows all the signs that are characteristic of the final phase of a long, severe bear market or the beginning of a new strong bull market. A buy signal was only given this week and I advised my readers to get started with an ad hoc announcement. Find out now.
Bitcoin – pure speculation
The peak of speculation was the New Market in 2000, when the shares of apparently worthless companies rose unstoppably. The blindness was so great that it was hardly possible to have a rational conversation with new market speculators about the actual business prospects of their absurdly valued stock market favorites. Their belief in the economically impossible, which was nourished by the fantastic price gains that this market segment had already seen, was too great.
Bitcoin and other crypto currencies are playing the same role as the Neuer Markt in the current speculative bubble. There is, however, one big difference to then: cryptocurrencies do not even pretend to be a business model that could be discussed. They are flawless speculative objects, the purest that man has invented so far. They serve the sole purpose of speculation.
You can read everything you should know about Bitcoin in my little book, which I wrote together with Roland Leuschel:
“Bitcoin & Co. – Feint or redesign of the monetary system? What you should know about money, gold and cryptocurrencies “(ISBN: 9-789925-750306)
Whether you are speculating in Bitcoin, thinking about doing it, or are determined to let it go, you should know this nearly 100-page analysis.
Mining stocks remain the first choice
Precious metal stocks are still extremely lucrative. From a fundamental point of view, numerous gold and silver mining stocks are valued very cheaply. Profits are bubbling up, and a further rise in the price of gold will reinforce this very positive development.
From a technical point of view, some of the mining stocks I prefer are giving very clear buy signals that point to high price gains. Don’t let these opportunities slip by. You can read about these stocks in my stock market letter Crisis-proof investing – now 30 days free of charge.
I wish you a nice weekend,
Claus Vogt, Editor-in-Chief of Crisis-Safe Investing
P.S .: My readers have waited a long time for this, now it’s time for uranium shares again! Investing in crisis-proof you can find all information about this.
P.P.S .: If you want to get through this crisis week after week, please ask for the free Claus Vogt market commentary today hereeasily with your email at.
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