Nasdaq 5x Overvalued, Irrational?
The Nasdaq is worth about 10x of what it was in 1990, in real terms, if you take away all the money printing. The support structure from the 1990s that decayed in 2008 has now been resistance for a *decade*, and now that we're at a historical zone of sky high valuations and overboughtness, it wouldn't surprise me if it dropped 75% from here. What if there is more money printing, you say? Wouldn't that just make everyone rich? Well, the dollar loses about 5% of its spending power per year historically, so if you had simply held since 2000, you'd have lost roughly about 80-90% of that spending power. It's important to not repeat the same fallacy as people did in the 80s and 90s. It blew up in people's faces even back when the economy was supported by stronger fundamentals and there was a greater widespread success of passive wealth accumulation.
Traders are delusional, and perhaps maybe not temporarily on a short-term or medium-term timeframe where prices are highly random, but especially on a long-term one. The Federal Reserve has been trying to float this long-term sentiment for a while now, in the face of terrible fundamentals, and now they don't really have any ammo left. Just look how the price tries to trace the white trendline but continues to lag and has remained below. This tells you all you need to know without even getting into monetary policy.
But even if you look at monetary policy, look at the ammo they are using: they are jawboning claims that the job market is strong because job openings are high, which is a trailing indicator. So chances are in 3 or 6 months, job openings will contract and they will no longer have any poor excuses to linger in their knob turning, hand waving, and making 180 degree pivots in their decision making process. Not to mention, job openings are contracting at a pace only seen since, you guessed it, 2020! Even if they stop jawboning, what padding do they have? 1.5T of reverse repo? That pales in comparison to the 9T that was printed to prop up prices in 2020.
Also, just look at some of the companies on the list:
JD.com (Chinese company)
Baidu (Chinese company)
Starbucks
Blizzard
Do you really think that this hodgepodge of companies are fundamentally strong? Why would anyone put their future in the hands of an index with distorted, contrasting interests and motivations, and foreign ownership? Is that not literally the definition of irrational?
irrational; adjective
(1) Not endowed with reason.
(2) Affected by loss of usual or normal mental clarity; incoherent, as from shock.
(3) Marked by a lack of accord with reason or sound judgment.
If that doesn't describe the situation perfectly, I don't know what does.
Eventually, this thing goes down. With or without money printing.
I hope you enjoyed this idea. Let me know what you think, thanks for taking a look, and don't forget to hedge your bets!
Traders are delusional, and perhaps maybe not temporarily on a short-term or medium-term timeframe where prices are highly random, but especially on a long-term one. The Federal Reserve has been trying to float this long-term sentiment for a while now, in the face of terrible fundamentals, and now they don't really have any ammo left. Just look how the price tries to trace the white trendline but continues to lag and has remained below. This tells you all you need to know without even getting into monetary policy.
But even if you look at monetary policy, look at the ammo they are using: they are jawboning claims that the job market is strong because job openings are high, which is a trailing indicator. So chances are in 3 or 6 months, job openings will contract and they will no longer have any poor excuses to linger in their knob turning, hand waving, and making 180 degree pivots in their decision making process. Not to mention, job openings are contracting at a pace only seen since, you guessed it, 2020! Even if they stop jawboning, what padding do they have? 1.5T of reverse repo? That pales in comparison to the 9T that was printed to prop up prices in 2020.
Also, just look at some of the companies on the list:
JD.com (Chinese company)
Baidu (Chinese company)
Starbucks
Blizzard
Do you really think that this hodgepodge of companies are fundamentally strong? Why would anyone put their future in the hands of an index with distorted, contrasting interests and motivations, and foreign ownership? Is that not literally the definition of irrational?
irrational; adjective
(1) Not endowed with reason.
(2) Affected by loss of usual or normal mental clarity; incoherent, as from shock.
(3) Marked by a lack of accord with reason or sound judgment.
If that doesn't describe the situation perfectly, I don't know what does.
Eventually, this thing goes down. With or without money printing.
I hope you enjoyed this idea. Let me know what you think, thanks for taking a look, and don't forget to hedge your bets!
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