Are We in a Bubble?

> yet we are in the middle of pandemic, millions get sick every day, inflation 30yr high

> is the economy is broken? should we be expecting a crash/crisis soon?

The question assumes that the real conditions on the ground are going to change the values we assign to stuff, but what if those are no longer meaningfully coupled?

Ford sold about 20% fewer vehicles at the end of 2021 than at the end of 2019, but its stock price is 2.5x what it was then. Ford is producing less actually useful stuff, but we pretend it's more valuable.

What if the economy is "broken" but not in a way which produces a "crash"? Prices are higher now, but many companies have improved margins; they're raising prices faster than their costs are increasing. Money is moving faster from the population at large to companies/investors. If the rich can keep getting richer by siphoning more out of everyone else, and the rich are the ones that own stock, real estate, invest in startups etc, then a lot of metrics can show those assets as increasing in value even if the median person's income or wealth are declining in real terms.

If the economies experienced by the rich and everyone else are decoupling, then I think the question is less "are we in a bubble" and more "will we enact reforms to decrease wealth and income inequality?" and at least in the US given structural political issues, I think the answer is "No."

I’ve seen this question posted here or the others forums I visit - multiple times per year, and every year since at least 2012.

I don’t know if the market is in a bubble. I do know, if I pulled out of the market at any point since 2012, my net worth wouldn’t be anywhere close to what it is today.

2022 could very well have the mother of all crashes. On the other hand, every year since at least 2012 has brought new highs. I do believe that time in the market beats timing the market. Even Dr. Michael Burry had to hold credit default swaps for 2-3 years before the mortgage bonds and the underlying loans proved to be garbage.

I believe that cryptocurrencies/web3 are in a bubble that's going to pop. So far the utility of these things is dominated by trading on speculative assets (read: ponzi shit) and that's gonna crash at some point with a lot of normal people holding the cards. Doesn't seem good.

Housing I don't know. At least in my area there's just no new constructions happening. Prices are absurd here because a lot of people have a lot of money and there isn't much supply going around.

I know nothing about the stock market and how it works, it's just a machine to bet on things, and lots of companies have had outsized benefits from the pandemic so I guess it makes sense? Who knows

Inflation? Who knows

> Are we in a bubble?

Yes, clearly, but no one knows when or if it will burst, or how much higher the market can go.

One of the key indicators is the Schiller PE ratio, which compares company stock prices to their profits. It is very high right now: https://www.multpl.com/shiller-pe

Other good indicators are that inexperienced investors are making a lot of money in meme stocks (AMC, GameStop), and cryptocurrencies or NFTs, classic indicators of a bubble.

Many people agree that the reason this is happening is the US federal reserve has kept interest rates too low for too long. This helps stock and home prices, but can also lead to a bubble. The Fed has indicated that they will raise interest rates soon.

To protect yourself first educate yourself on 2008 and the Dot com bubble, read Irrational Exuberance, All the Devils are Here, or watch Money Power and Wall Street, The Big Short, or Inside the Federal Reserve.

Hedging this bubble is extremely difficult but physical assets are nice to have. Cash is losing value more quickly than normal because of high inflation. As always diversifying is the best way to manage risk. This is not financial advice, just my personal opinion.

I think we are going back into a real estate bubble not very different than what preceded the 2008 financial crisis. I even see "high return" real estate funds that proudly advertise they're heavily into CDOs. For fuck's sake. Really, guys?

Do we now have a whole new generation of young finance bros creating debt instruments that were literally children in 2006-2009 and haven't learned the lessons from the very recent past?

Look at the absurd rise in single family home prices for a modest, detached home on a small lot in major cities. Look at the price of what would be the same location/street address of a $450,000 house in Seattle in 2014 vs now. It's absolutely a bubble.

> yet we are in the middle of pandemic, millions get sick every day

Pandemic is very big and very serious, but it is disproportionately overblown in our perceptions. Many people are completely untouched by the pandemic except for travel plans. The economy has taken a hit in many places like hospitality, travel, medium and small enterprises, but in other places it has grown.

E-commerce, gaming, pharmacy, electronics gadgets- all have seen a boom. And as these industries scale well, wealth transfer has happened and the gulf has been widened. But that does not mean that all of economy is hurt.

> Fed printing dollars recklessly in 2020

The USA is the only country on earth that can print money with little to no consequences.

I don't know whether we are in a bubble or whether there is going to be a big crash. I just added these points in relation to your post.

People have been asking this exact question since at least 2014. Some day, there will be a crash, but no one can really predict it. There will be a lot of people how have been "predicting" an imminent crash every year for the last 7+ years who will claim prescience when it finally happens.

The best advice you can get--keep investing at normal intervals in well diversified assets. You can't time the market and you can't predict the future. If there's a crash tomorrow, twenty years from now, it won't matter at all to you. The market will even itself out.

I am also really confused. I'm a complete noob and have been trying to learn a bit more about markets and evaluating companies but it seems like so many companies have price to earning ratios of > 30. I mean even $NET (Cloudflare) literally do not make money right now so don't even have a P/E ratio?

If anyone has any light books to understand markets more please do share.

It is a bubble only if there is an inevitable bursting to be had at a large scale. You see segments of the economy having micro crashes and correcting so I am not sure. Mass psychology has also changed since '08 smartphones and the internet have evolved a lot.

Look at evergrande in China, almost if not bigger than the lehman brothers' crash but China self regulated it. Same with COVID and stimulus. Retail investors are now more powerful too.

Sort of bubble... if we look at other countries like Zimbabwe that had hyperinflation, their stock market inflated along with the currency, more or less keeping the same values. At least until the government in Zimbabwe shut down the market. Here in the US, the Fed controls the money supply, and it's widely believed that the Fed won't choke the money growth any further if the market falls by 20% to 30%, depending on your pessimism. Of course, if the actual economy collapses due to Covid and supply chain problems, there is no bottom.

> s&p returning ~30% last year,

One big thing to remember is that the S&P isn’t the whole economy. The pandemic pushed a ton of money into bigger businesses which are listed on the S&P, cutting into small businesses which aren’t. Your neighborhood restaurants and stores started giving a much higher fraction of their income to companies like UberEats or GrubHub, lots of places stopped taking cash & got Square terminals, Amazon got a ton of orders which people might have picked up locally in years past, etc.

Real estate agent checking in here: one of the frequent oddities I see on HN is the number of people who see housing / real estate as one thing. It isn’t - it’s super localized. So just because houses are overpriced for your area or there are a lot of foreclosures in your area, or whatever else might be going on in your area doesn’t mean much about anywhere else. In my market, houses just two blocks from each other can vary significantly in value! So, sure - there probably are markets around the country and world that are in a bubble. There certainly are trends that affect large geographic areas too. But, at the moment there are few asset classes in which to put money and money is cheap. Even if those things change, real estate is historically a good investment depending on your market.

The economy can be broken for a long time. Between 2013-2016 I worked in a Mobile ad-tech startup, we spoke of valuations as 2x revenue and SaaS based analytics at 5x revenue.

We thought that there was a bubble at that time when firms started getting high valuation multiples without any cash flow/profit. Now 7 years later Uber trades at a 5.8x multiple to revenue, google at ~10x, and salesforce at ~10x. Companies like Hubspot trade at ~24x revenue, and Snowflake trades at ~100x revenue! Revenue multiples are a pretty awful metric, but the crazy thing in the above calculation is effectively inversely correlated with earnings while also being only loosely correlated with revenue growth.

While this doesn't look sustainable, it's quite possible that it lasts for long enough that a contrarian bet won't pan out.

stocks: No, prices are just going up. I'd call it inflation caused by rich people who can't spend their money due to Covid. But I expect the higher prices to stick.

crypto: Yes, for sure there are lots of ponzi schemes and BTC/ETH will eventually drop back to sane levels while NFTs/web3 go bust.

dotcom: No, software really is eating the world. Did you notice how much shit Facebook / Google / Apple / Amazon / Microsoft can get away with? They are behaving like the robber oil barons of the past and that's highly profitable, so their high stock prices are "justified". That is, until there's legal action to break them up. But in the current political climate, I predict that won't happen.

housing: No, there just weren't enough new houses built in the past 10 years. That's why prices skyrocketed. The same amount of people are competing for less available houses. This might be a bubble, but it can only burst when lots of new houses are built. So maybe it just won't burst due to NIMBYism.

is the economy is broken? Yes, we're shoving large amounts of money towards the ultra rich while some of our fellow citizens are starving or get financially wrecked by natural disasters like the texas ice / electricity thing.

counter reaction to the Fed printing dollars recklessly in 2020? Yes, that's why crypto and some stocks went up sky high. But as long as it's only rich people blowing their money into shady investments, us regular folks might get off pretty unscathed.

"Fed will go on a printing spree again" I consider that very unlikely. They wanted to kickstart the economic recovery and it worked. So their purpose for printing money has vanished.

Your 4th premise is all you need. We are in a pandemic with supply and labor shortages. Even if demand dropped, prices would still be increasing. But demand didn’t drop, increased.

Why do you frame the fed printing money as reckless. If the fed had not intervened, we would likely have had a collapse of demand with scattered inflation, so stagflation or possibly a depression, both of which are harder to deal with than inflation.

Bitcoin appreciation has nothing to do with any of this. It’s trajectory predates the pandemic and is part of a standard cycle for new technologies.

Be careful that you are not assuming a conclusion and then shaping the premises to support and justify.

"The cause of bubbles is disputed by economists; some economists even disagree that bubbles occur at all (on the basis that asset prices frequently deviate from their intrinsic value). However, bubbles are usually only identified and studied in retrospect, after a massive drop in prices occurs."

https://www.investopedia.com/terms/b/bubble.asp

I'd say the bubble actually already popped in some places and is popping in other places. The major indices are largely holding up because of high-quality mega cap stocks with huge cash flows that are immune to inflation (or rather, they have pricing power to track inflation).

For example, XBI, the biotech sector ETF is down more than 50% since its Feb 2021 peak. MJ, the marijuana sector ETF is down 70% since Feb 2021.

> companies raising billions with zero revenue, s&p returning ~30% last year, bitcoin goes 10x, housing (in my area) up 2x

This does not automatically imply that there's a bubble. It could be the effect of the increasing inequality, where more and more money are moving towards wealthy companies.

> is the economy is broken?

Absolutely yes.

Yes, but it's not clear whether the bubble will get bigger. If you were really old you could also say the same about recessions: better days will come, but will worse days come first?

A thing to remember about financial things is they end up affecting the "real" world. It's not just a matter of things being overpriced, overpricing can actually inflate the fundamental value of things. Indeed this is probably why it happens in the first place: often things get better with investment, and those gains are visible to investors, who end up getting overexcited.

A monthly report I read[0] predicts a crash this year.

[0]: https://ethz.ch/content/dam/ethz/special-interest/mtec/chair...

[1]: https://er.ethz.ch/financial-crisis-observatory.html

Do you know how people sometimes say "If everybody stopped believing the dollar had value, it would stop having value, and you could paper your walls with it"?

I don't know if people have stopped thinking the dollar has value, but I suspect people are beginning to realize it's all made up, and we're starting to feel the deep cynicism that comes from believing your world is a farce. I think postmodern thought has probably contributed to this, due to its deconstructive and subjective bent.

Yes, we're in a bubble, we've been in a bubble for at least the last 10 years. But the reason why the bubble still hasn't popped is because reserve banks have been propping up the stock market by creating massive amounts of new currency. Stock prices are denominated in fiat currencies so when you talk about a 'crash' you mean relative to fiat currencies... If the value of fiat drops faster than the value of stocks, you won't notice that a crash is happening; it might look like it's all going up.

It's basically similar to what happens in countries which experience hyperinflation; the stocks all seem to be going up relative to the national fiat currency when in reality they are dropping relative to foreign fiat...

But the difference is that because the USD is the world's reserve currency, there is no other fiat against which to measure the loss of value of the USD... So the loss of value is hidden; it will only be revealed when people start selling their stocks and buying real assets with the money; this will drive up consumer prices. The crash will only be experienced as increases consumer prices and possibly also increases in the price of cryptocurrencies. It may also explain why inflation is strongest in the US.

First, what do we mean by a “bubble?” Let’s define it as a steep rise in price of an asset, fueled by FOMO, without enough underlying value to justify the asset price inflation. You mention a lot of asset classes, and there are big differences, so let’s start with the most risky.

In my view, there was in 2021, and still in 2022, a bubble in high risk assets like crypto, meme stocks, unprofitable tech, and junk bonds. These prices have already come down considerably, but I do not believe they are done. You can look at the ETF charts of MEME, ARKK, and JNK to get a sense of the last three assets.

Home prices have skyrocketed, but because of rising incomes and exceptionally low 30Y mortgage rates, monthly payments are actually very low historically. https://fred.stlouisfed.org/graph/fredgraph.png?g=KFhj

Stocks are very mixed. There is a set of stocks that have been pummeled all 2021, but pay high dividends, and are now back in favor. Look at the last couple of weeks charts for T, DOW, and TSE. This is a rotation to more safe stocks that have cash flows and pay high dividends.

But ultimately, my view is that there is too much cash earning negative real interest rates in high income households for a 2001-2003 style drawdown. During the pandemic (through September 2021), the average household in the top 1% of income earners went from $2m cash savings to $3m. The top quintile of earners has, in aggregate, an extra $2.75 trillion in extra pandemic cash. I don’t see the case for a huge broad drawdown with that much cash sitting around earning negative real rates in savings and money market accounts.

As far as your last statement, you should be far more afraid the Fed tightens too rapidly.

One of the arguments that I see against crypto being a Ponzi scheme is that the stock market is just people looking to sell stock to some other sucker for a higher price so its the same thing.

We seem to have become almost completely detached from the idea that investment valuations should be tied to present and future cash flows from an operating business that is providing value.

So yes, more and more the whole top-half of the economy is a bubble, while the bottom half is being overrun with flat-out scams (and crypto is sort of the best of both worlds).

The actual best outcome I think we can hope for is that the labor shortage is real and workers have much more negotiating power now which will lead to a wage-price spiral with high inflation for the next decade and resetting the game through dollar devaluation. This is the high employment solution where wages rise faster than e.g. housing prices and without falling prices there's just a slow corrosive effect on the real value of housing without a sharp drop. The real value of debts would also be erased by inflation.

The alternative would be a hard deflationary stop to the economy. Since everyone is terrified about inflation, though, this is what I expect will happen. This will be the high unemployment option but the value of the dollar will be retained, while asset prices will crash. Right now that seems impossible in the current climate, but if this happens we will suffer a sharp reversal (people will correctly blame the bubble on inflationary policies and then predictably apply harsh austerity during the crash).

That fact that I probably sound delusional to a lot of readers here is why I'm pretty sure the latter outcome is where we're heading. Everyone is now a believer in the quantity theory of money and that the Fed is irresponsible. When the wind suddenly does a 180 we're going to make it all worse.

Depending on where you are in the world, you may be living during several bubbles.

I think the key is to not have any assets that you aren't willing to gamble in these bubbles.

Then there are macro economic forces (in the US at least) such as hyper inflation that are really hard to avoid. I wouldn't call inflation a bubble as it don't focus on an over-valued asset.

Anything that seems too good to be true, probably is. It can pay handsomely to put a small wager on these situations, but it is a terrible idea to leverage yourself in a bubble. In 2008 many people bought houses that they could not afford and then the bottom dropped out. It was a terrible situation, but no one was forced into this bubble. One can rent, move to a less expensive area and take on a longer commute, etc.

With exponential acceleration as a macro trend, we will probably live during one or more bubbles more often than not... as long as things do not boil over.

The price of stocks and other assets does not reflect the value of those. It reflects a ratio of the value of the asset relative to the dollar.

If more dollars are printed, the dollar is worth less. So the ratio of other assets to the dollar is higher.

That is not a bubble.

It would be a bubble if the asset prices multiplied and the amount of dollars stayed the same.

The way I understand it is:

Since 2008 central banks around the world lowered interest rates in order to stimulate investment. But for the first time ever, they set the interest rates to below the inflation rate. This below-inflation interest rates means that borrowing from central banks and putting the borrowed money into any asset is on average going to be a win, because the currency gets weaker faster than the interest accrues on the loan. This causes the institutions and individuals with good credit (usually backed by lots of held collateral) to borrow as much as they can and put it into stocks, real estate, crypto, or anything that is not cash and not subject to depreciation.

This borrow and buy feeding frenzy will continue as long as interest rates are lower than inflation, because it is free money for those who partake.

You'd better believe it. Always look at the fundamentals of a stock. What is the P/E? Do you know what the definition of the P/E is and why it is important? Buying a stock with a P/E greater than about 20 is poor judgement (unless you're gambling on it going up further). A P/E of 20 means that there is only a mere 5% Return on Investment. If current inflation is greater than 5% (which it is), you're actually losing money on that stock every year.

Are you getting into stocks because the underlying business model of the company is good? Or is it because you expect the stock price to go up, at which time you might sell that stock? If it's the first, that's investment. If it's the second, that's just glorified gambling.

FED printed huge amount of money, which resulted in huge asset price inflation and "little" regular inflation.

So in spite of fundamentals being worse due to pandemic, we price asset more generously.

Hard to predict exact future, but expect shocks along the way as massive influx of money makes bubbles and Ponzi schemes more likely.

Maybe dollar will go bust, maybe crypto will experience winter, maybe too many ETF on S&P makes it too high vs. wider index or maybe companies with no established business model, but high valuation will go bust.

Maybe high energy prices will lead to higher food prices which will cause unrest in poor countries. ...

Hard to be certain, but some things are more likely (e.g. crypto recession) vs. the others (e.g. companies with solid fundamentals and great products, but no profit going bust).

Expect cashiers to be making 200k per year and software developers making 1.5M per year in 2030.

My ponderings: central bank economists are truly confused why the real world is not following text book examples, and they are still reluctant to admit mistakes.

(factoids I don't remember sources for:) Chinese export volume is higher now than in 2019, meanwhile there are fewer US jobs. If true, the actual cause of inflation is money printing; supply chain overload is an effect. Everyone knows the effect on asset prices.

The central banks can reverse these trends ("bursting the bubble"), but what will break if they don't? At some point social stability starts to break down, more riots, political movements gain momentum, and so on. Either that, or they have to take down the stock and housing markets.

I think people mistake bubble with inflation. When borrowing is this cheap, people spend it and invest it however they can. What is the alternative when the real inflation is this high?

I believe things will quickly change when the interest rates eventually increase.

Everything you're seeing is the result of massive QE and artificially low interest rates. 40% of all the USD in economy has been created in the last 2 years. In 2008 the FEDS balance sheet was 800 Billion, today it is almost 9 trillion. All that money they created out of nothing has to go somewhere and finds its way into the markets, housing, etc. Can you imagine what would happen if the FED tried to remove just a couple of those trillions? Imagine if the FED 0.25 Interest Rate was 5% + it was just 12 years ago.

Can the madness continue, yes and much longer than you can imagine. This will only end when the fed decides it ends, only they know the time and day.

Bitcoin is down ~40% from its all time high in October 2021. It may still be in a bit of a bubble, but there's also an argument to be made that gone down enough that it's now oversold (or nearing oversold territory). And when bitcoin goes down, it takes pretty much the rest of the crypto market with it, with very few exceptions. I personally don't think we're currently in a bubble for crypto.

The rest I do think are in a bubble and are probably overdue for a nice correction. I'm not sure what will trigger it, though. Maybe if/when the Fed raise the interest rates? I don't know if that'll be enough by itself, though.

I found this 30 min summary by Ray Dalio really helpful. He breaks down how an economy works in a clear and concise way. Stupid simple like me. :)

https://youtu.be/PHe0bXAIuk0

I also found this recent interview with him had a number of interesting angles on the state of things in the US/world as a whole.

https://www.theinvestorspodcast.com/episodes/the-changing-wo...

Would definitely love to hear counter points to these to continue improving my thinking.

I personally believe this chart the explains housing prices single handedly:

https://fred.stlouisfed.org/series/ACTLISCOUUS

Kind of yes, kind of no.

We've had historically low interest rates for a while, which allows for asset inflation proportional to the reduction in the historical cost to borrow money to purchase those assets, which is not really a bubble, but people associate with bubbles.

Some of these assets are likely valued more than they would be even with higher interest rates, and those are somewhat bubbly.

There are also intermediate examples between these two where things are a little bubbly, but that bubbliness is in part because of a combination of easy access to capital and particular financial instruments/behaviors.

> yet we are in the middle of pandemic, millions get sick every day,

What does this have to do with a financial bubble? Millions of people get sick every day in a normal year, you just weren't paying attention to it.

Crypto is sort of in it's own category because it's mostly traded by speculators, but housing feels like a bubble. Companies like Amazon Facebook and Google actually make a ton of profit and I think have led the stock market. I also think vc lending money to zero profit companies is not new. Low or no profit companies like the two boxes and Twitter also seems to be sustaining on new debt. On average it feels like we are holding steady but no worse for the pandemic. So not a new bubble in my opinion.

Yields on investment (the ratio of how much you pay vs. how much future cash flow you get) are as low as they have ever been. Bonds, Treasuries, Stocks, Mortgages, everything. So that makes people think we're in a bubble.

On the other hand - yields have been slowing going down for the last 40 years.

So we're at this weird spot where one of those two patterns has to reverse since yields are zero. Your guess is as good as mine but that's why things seem like they can't continue as they are (they can't).

Perhaps that irrational rise in stock value is due to inflation. The actual value of the stock doesn’t change much, but the money you pay for it is worth less, therefore the nominal value increases.

Another possible reason could be that it’s currently still more difficult to spend money for things and leisure than in 2019. People therefore buy stocks, pushing the price up.

If this is the case then the best thing to do currently is to buy stock, and pull out once it is possible again to have parties in Ibiza on short notice.

Earlier I felt like we are in a bubble and I was expecting a pop and for things to come down. Now I’ve changed my outlook due to the mass printing of money and lowering of interest rates. I just think we have higher inflation than we are being told and it’s even worse in specific areas. Will the market “pop” if your dollar as significantly less buying power but the original asset has kept the same value? Maybe inflation speeds up and the market keeps growing double digits.

I'll answer simply: yes.

We're always either inflating or deflating. There's so many risk factors on the horizon for a bubble pop it's ridiculous and obvious. That said, am I pulling out my 401K? No. Why? Because it's easy to see and get out of a downslide. It's extremely difficult to buy back into a market, because the recoveries are usually very swift. You'll miss it.

And you can still win in any market. You just need to work harder at it sometimes.

yes, but they can go on for much longer than you'd think while you're in one of them

Yeah interest rates will rise and money printer may stop, but there's 7 trillion highly concentrated new monies already in the economy created by quantitative easing since 2008. That money is already there, is highly concentrated (S&P500), doesn't trickle down and is looking for work. Holding it in cash doesn't work, as that's a guaranteed -{inflation}% return on investment per year.

I’m not sure if we’re in a bubble, but the fed recklessly printing infinite money with no plan or capability to pay it back, not to mention the economy absolutely did not need the cash, should not be tolerated. These politicians are mortgaging your future to gain karma points with other politicians (“look how many jobs we created!”). Idk how people fall for this shit.

Honestly, if anyone actually knew these answers, then they would be billionaires. Even the professionals don't really know.

Zero interest rates create artificial events, the longer the rarest. This is uncharted land.

What can people do with their money if bonds are “worthless”? Keep it in the bank?

No: invest.

And now comes inflation.

When you play with fire (as the central banks have been doing for quite a while) you end up burning.

This (the Nasdaq especially) is not a “bubble”, it is a zeppelin. In some sense it is most scary but at the same time, it is auto-mobile.

I don’t know if we’re in a bubble, that really is the trillion dollar question. I’ve personally thought we were in a bubble since ~2018. I think high asset valuations are just a reflection of the amount of capital out there looking for investments. I look at it as the market behaving as if it was going through it’s own inflation

I think we are in a bubble, but I don't see the bubble bursting like in the past. It'll take unrest or worse, since the bubble is inflating via inequality and wealth transfer. Once people are really fed up, then the music stops.

In theory, the bubble bursting should herald some social and economical reforms.

Interest rates are very low. This makes asset prices high. This is not quite the same thing as a bubble, though i'm sure when the Fed inevitably raises rates and prices crash, people will declare it to have been a bubble. That doesn't mean that specific sectors aren't in some sort of bubble (e.g. crypto). But high asset prices across the board can be explained most simply by the incredibly low interest rate environment, which values future cash flows nearly equally with present cash flows. Inflation pushes nominal asset prices up even further, too.

If you think inflation is going to continue due to supply chain pressure in China, and/or labor pressure in the US, then the Fed is going to have to raise rates. When they do that, one of two things will happen: Either they'll be sufficiently large to curb inflation, which means that asset prices will probably decline fairly significantly, or they won't, in which case inflation will continue, and asset prices will stay elevated, though perhaps not keeping up with inflation.

It's also possible that China will be less disrupted by Omicron than some people think, and that US businesses will re-allocate labor more efficiently and more quickly than some people expect (via some mix of increased automation and rationalization), and the supply side issues will resolve themselves. If that's the case, the Fed may be able to leave rates alone for now. And in that scenario, there's no major reason for a significant decline in asset prices, though that doesn't mean one can't happen for other reasons.

Ultimately, inflation is the ratio between money and stuff (including services). Asset prices are the risk adjusted present value of future cash flows. Both of these things are influenced simultaneously by interest rates, and the underlying real economy.

Another thing to note is that, to some extent, what we're seeing in the public stock market is the effect of increasing returns to scale. People mistakenly equate the public markets with the broader economy, and while that intuition isn't completely wrong, it's not completely right, either. The stock market is heavily biased towards large scale businesses, and nearly uniformly excludes small businesses. This isn't some nefarious plot, just the mathematics of the cost of listing and the utility of exogenous capital. But the bias that encodes is that at a time when small businesses are rapidly failing and large businesses are absorbing their market share, the stock market may be performing quite well, despite the underlying economy experiencing troubles. This isn't irrational in an economic sense, it's just that the stock market doesn't perfectly track the underlying economy for this, and other reasons.

   yes.

I kind of warned them weeks ago to run away from the markets. [0] It was expected and very unsurprising.

Oh well.

[0] https://news.ycombinator.com/item?id=29508194

There's a saying: "Bulls make money. Bears make money. Pigs get slaughtered."

I wouldn't call it a bubble. This is just what human species always do – building a pyramid of classes (castes). With a chain of command. And with the only sense of life in it – climbing to the top. Everything else is secondary.

There's a difference between economics and finance. It is possible to have real economic problems while having sound financial flows. That's what's happening now. Inflation is the consequence: there's more money chasing the same (or fewer) goods. That's not to say that a crash can't happen... because it did in 2020. It can happen again. But under these conditions, we can expect an aggressive recovery (like we just had).

> yet we are in the middle of pandemic, millions get sick every day, inflation 30yr high, supply shortages

None of these things impact the aggregate profitability of the corporate sector. Please read "Where Profits Come From" [1]. The Kalecki-Levy profits equation says:

Profits before tax = + Investment – Nonbusiness saving + Dividends + Corporate profits taxes

Profits for the most part come from the "nonbusiness saving" term, which is the government budget deficit minus the trade deficit minus household savings. The numbers are looking very good. [2]

> edit: i can't help but think there will be a counter reaction to the Fed printing dollars recklessly in 2020

> and i'm even more scared Fed will go on a printing spree again to keep the current bubble from popping

It's fascinating to me that in times of outsize fiscal stimulus, people continue to blame monetary policy on all of our economic woes. If you think that monetary policy has a much larger impact than fiscal policy, you have it backwards. Monetary policy has far less impact than is commonly stated. The Fed does not really print money, it swaps one highly liquid US government asset for another. And the size of bank balance sheets do not change when this happens. And repeat after me: banks cannot and do not lend out reserves [3]

[1] https://www.levyforecast.com/assets/Profits.pdf

[2] https://seekingalpha.com/article/4475023-white-house-fed-inf...

[3] https://www.hks.harvard.edu/sites/default/files/centers/mrcb...

Every expansion comes to an end. The trick to declaring a bubble is specifying when it will burst, or betting on it. Likewise, there will be an earthquake that levels San Francisco, we just don't know when.

40% of all existing dollars have been printed in the last 18 months, what do you expect? Nobody wants to be left holding the paper bag, so they buy up any asset, no matter how silly it may look.

Rules and regulations essential to a well-functioning economy, enacted due to lessons learned after previous collapses, were rescinded during this past forty years. Yes, the economy is broken.

https://inflationchart.com/spx-in-m3/?time=10%20years

Not in bubble, but in saturation. So much money and not enough opportunities to invest. It is not going to "pop" bcos there are no other places where to store money.

> Are We in a Bubble?

Yes, absolutely.

> is the economy is broken?

Depends on who you ask. According to our leaders like Jerome Powell and leading economist Paul Krugman, no, its being perfectly controlled through a crisis. According to me, yes, the economic system is blatantly corrupted by power, which personally I think means is broken. Blatant and extremely obvious if you're willing to do a lot of reading.

> should we be expecting a crash/crisis soon?

No, absolutely not.

For what its worth I'm all-in betting that its not. The leaders have their steering wheel on the economy and god forbid they wont allow it to crash, its the worst thing that could happen. Make your plays against what they do.

technology startups are now completely extinguished. nobody wants to get on this train. I hope the web3 bullshit disappears before it drags too many people behind it.

Contrarian widsom: if everyone is talking about whether we're in a bubble, then we're not! *

whilst fully expecting the market to double bluff me and crash tomorrow

Unnacountable oligarchs run the central bank system and engineer crashes as a means of buying up assets for pennies on the dollar, so yes, another is inevitable, its just a matter of when and what all they want with this one (forced SDR coins, national central bank coins, etc to create a more trackable/controllable society, et al)

If you have the means there are ways to ride the oligarchic coat-tails so to speak, usually buy buying the assets up right after the initial pops.

How is it a bubble? The fundamentals seem strong:

- the state prints money and gives it to the rich

- the rich hire propaganda

- the poor believe it and work

- strong and stable

No one will really know until it pops.

In the words of the great John Bogle (who created a great many millionaires):

"Nobody knows nothing."

Three answers already, one yes, one no and one maybe. So we don't know.

The trick with identifying bubble is not to realize there is one, but to identify what will make it pop. This latter problem is much harder, and the former, as we get deeper into the limits of our current system, becomes so obvious it's not worth talking about.

Of course our everyday world is disconnected from reality (this is what a bubble ultimately is after all). Talk to anyone in any field and they'll all tell you the same thing: everything is a house of cards! it's insane that things are still running!

Crypto is insane, ad tech is insane, the stock market is insane, our ability to reason about the pandemic has entirely gone off the rails, democracy (or the illusion of it) is on the verge of collapse around the globe, nothing about our very way of life is remotely sustainable yet we continue to push for faster and faster development. We are in a bubble of the grandest scale imaginable. Some people deny this, but there are plenty of people who realize that this is true.

But pointing out that bubble is not interesting, at least not to me. Depending on how much attention you pay things have been insane for a long time, they don't make sense and the keep on going. Even some post-marxists theorists at one point started to accept that maybe there is no reality in our neoliberal capitalist world.

Reality does exist, our big, big bubble will pop, eventually. If that happens in 1000 years it's not really interesting, if it happens in 1000 days it will be mind blowing. The real interesting question isn't to point out that things don't make sense (they don't) but to start looking at when does the shit hit the fan.

If you watch the Big Short you see that the crucial part of that narrative isn't realizing there is a bubble, but realizing precisely when and how it will pop. Right now I don't think anyone has a good answer to these questions for our current bubble or any subset of it. Take crypto, most of us here believe it to be to some degree a scam, but when and how does that scam come to an end? Pointing out a bubble is irrational doesn't make it pop.

We aren't in a bubble because it turns out that you can't eat dollars, and that payment for something does not result in the goods or services actually being rendered.

I don't know. But I am still diligently putting part of my paycheck in the S&P 500 every single month. I don't believe you can accurately time the crash, and by cashing out, you are losing some significant returns [0].

In fact, I remember reading last year, a widely discussed article in HN about how we were in a "Late-Stage Major Bubble" [1], since then, then S&P 500 has gone up more than 20%. I'm glad I stayed invested.

Even if we are in a bubble, the maxim "The stock market can remain irrational longer than you can remain solvent." still applies.

Lastly, regardless of the FED balance sheet, I believe the US remains the best place on earth to start and run a business. America breeds a culture of risk-taking and entrepreneurship and most of the innovation in the world still comes from there.

When asked "What are America’s primary strengths?", Lee Kuan Yew, former Singapore's PM, had this to say:

  Americans have a can-do approach to life: everything can be broken up, analyzed, and redefined. Whether it can or it cannot, Americans believe it can be solved, given enough money, research, and effort. Over the years, I have watched the Americans revise and restructure their economy, after they were going down in the 1980s, when Japan and Germany looked like they were eclipsing America, taking over all the manufacturing. Americans came roaring back. They have the superior system. It is more competitive.

  What has made the U.S. economy preeminent is its entrepreneurial culture… Entrepreneurs and investors alike see risk and failure as natural and necessary for success. When they fail, they pick themselves up and start afresh. The Europeans and the Japanese now have the task of adopting these practices to increase their efficiency and competitiveness. But many American practices go against the grain of the more comfortable and communitarian cultural systems of their own societies—the Japanese with life-long employment for their workers, the Germans with their unions having a say in management under co-determination, and the French with their government supporting the right of unions to pressure businesses from retrenching, by requiring large compensation to be paid to laid-off workers. The U.S. is a frontier society… There is a great urge to start new enterprises and create wealth. The U.S. has been the most dynamic society in innovating, in starting up companies to commercialize new discoveries or inventions, thus creating new wealth. American society is always on the move and changing… For every successful entrepreneur in America, many have tried and failed. Quite a few tried repeatedly until they succeeded. Quite a few who succeeded continued to create and start up new companies as serial entrepreneurs …This is the spirit that generates a dynamic economy.

  The American culture … is that we start from scratch and beat you. That is why I have confidence that the American economy will recover. They were going down against Japan and Germany in manufacturing. But they came up with the Internet, Microsoft and Bill Gates, and Dell… What kind of mindset do you need for that? It is part of their history.
 
  Allison, Graham; Blackwill, Robert D.; Wyne, Ali. Lee Kuan Yew (Belfer center studies in international security) 

[0] https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-co...

[1] https://news.ycombinator.com/item?id=25713696

Yes.

things aren't broken, their just now finally able to twist the metaphorical knife

Stocks are UNDERVALUED. BUY BUY BUY.

Listen to the Saint himself John Bogle! Buy total index funds and call it a day.

Yes we are in a bubble. The fed reserve does not allow bubbles to collapse circa 2008 anymore. There is too much income disparity between top earners and lowest earners. There is too much inflation and too low of interest rates. The healthcare system is beyond fucked, it’s become a mockery or symbol of fuck you to the lower middle class and lower. Housing prices are very high. The fed reserve needs to let the economy crash a bit so there is enough crisis to push legislation forward. We need to get rid of the federal reserve it is a cancer to American society. We also need to send a bill to China for reparations caused to our economy by covid. Having to pick between Sleepy Joe and Dumbo Trumpo can tell us all we need to know about the current state of politics. Too much infighting and polarization yet the discussion at hand is over vaccines instead of income disparity. Luckily I work in tech and have a somewhat privledged background so none or these issues even come close to effecting me so I don’t care as much. Optimistic as education increases I hope to see some good changes.

If you discount the recession due to the pandemic this is the longest we've gone without a major bust for 100 years... maybe the economy is fundamentally different now?

https://fred.stlouisfed.org/series/GDPC1 (shaded areas are recessions)

Though people (including experts) have been speculating about the next bubble burst for 10 years now so ¯\_(ツ)_/¯

I'm a layman, so I just occasionally worry about it. It seems no one really knows.