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HOT TOPIC Is a market crash coming? Or massive hyper-inflation?

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SebastianSkinner

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Hi All,

Recently I have been doing a lot of reading around historic market crashes, current state of affairs across a myriad of industries and economics in general.

I am interested in discussing with my fellow Fastlaners their views on the state of the economy both nationally and globally and their future predictions of what they see unfolding. I am writing from the perspective of someone based from the UK.

My research to date has highlighted the following:
  1. It is clear that we have been in a bull market for a prolonged period of time since around 2009 onwards that has only seen a temporary dip when the Corona Virus pandemic struck.
  2. Interest rates for borrowing such as mortgages are still at an all time low. This is unprecedented, if there was to be a shift in variables it could drastically effect the vast amount of peoples ability to pay on their current loans and default.
  3. The amount of relief provided in the UK and that is still on going through schemes such as Furlough has seen our national debt at an all time high only rivalled since debt levels from WW2. Additionally, I believe that I read that the US has printed 22% of all the US dollars in circulation in 2020 alone...
  4. The valuation of certain company's such as Tesla are outrageous. Don't get me wrong, Elon is doing amazing things and has interesting projects and technology's in the pipeline but no company's PE Ratio should be 1,232. So in essence the PE Ratio is currently trading at $1,232 per $1 of earning... High right?
  5. Crypto currency's in general a plethora of the coins are still seeing rises linked to a bull market even though some of the technology's behind them are not leading the charge such as Doge Coin.
  6. The property market. In the UK I work for a property developers and it is clear at the moment that the market is beginning to slow. This was artificially stimulated throughout 2021 during the pandemic when the government provided Stamp Duty and Land Tax (SDLT) relief on property purchases up to the value of £500k. For any readers from outside of the UK this can save an individual up to £15k if they were to move or purchase a property. Now that this relief is coming to a close it has resulted in a slow in demand in the market.
These are just a few of my observations but I would be interested to hear other peoples thoughts on this.

In my opinion something has to give at some point... It can't be good times forever. The pandemic's effects I don't believe have still not truly been felt as there should be a spoke in unemployment rates once the Furlough Scheme comes to a close, in the UK anyway. 2022 I think will prove to be an interesting year.

Just my 2 cents.

Best,

S
 

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We've been talking about a market crash around here for years. It did happen on several occasions only to recover shortly thereafter. I think the market is due for a pull-back, but not something enduring.

I believe there is too much inflationary pressure to keep equity prices low -- cash is trash and is becoming more and more worthless by the day.

$10000 in the bank is becoming more risky than $10000 in Amazon stock.

In 6 months, your $10000 will be worth $9200 and your Amazon stock $11,000.

This keeps equity prices rising.
 

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We've been talking about a market crash around here for years. It did happen on several occasions only to recover shortly thereafter. I think the market is due for a pull-back, but not something enduring.

I believe there is too much inflationary pressure to keep equity prices low -- cash is trash and is becoming more and more worthless by the day.

$10000 in the bank is becoming more risky than $10000 in Amazon stock.

In 6 months, your $10000 will be worth $9200 and your Amazon stock $11,000.

This keeps equity prices rising.
Yep. A bit of a melt up.
 

monfii

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"The market can remain irrational longer than you can remain solvent".

I love that quote.

My own 0.02€:

You could estimate that the current market is overpriced because the price of money is correct.

In that case:
1. The crash will happen when those that own the above-quoted assets will sell them. That could happen in 2 situations.

a. They estimate the asset grew enough and sell to cash in.

b. They need cash to put food on the table.

At the moment, the government is giving money to anyone, so it is unlikely to happen. The reason why so much money is going into Tesla, btc etc is because on one hand, people can't spend it anywhere else cuz cOrOnA, and on the other, government is printing, and that money has to end up somewhere.

Side note: why is the gvt giving money since 2009? One word: growth. Our society has stopped growing, and that causes a huge politico-socialo-economic problem. Gvt hoped they could sustain growth by printing but lol they never heard about productivity per capita apparently.

Read "The rise and fall of American growth", or listen to Peter Thiel and Eric Weinstein.

2. As long as government is printing, it keeps the bubble afloat, and even grow it.

There will come a time when:

a. The gvt will stop printing
b. We ll have to refund what was borrowed

Then expect the bubble to pop. Whatever we printed will have to be refunded. And who will refund the money? People that have it.

The other vision: there is no bubble.

In that case, you decide that whatever asset price you see is correct, and that money hasn't yet caught up to its real price (inflation is coming). When you think about it, TSLA at its current price would make more sense if minimum salary was 50$ per hour, no?

As such, this vision would pretend that the stock market is not overdue, but actually represents the future.

I don't believe in this, because I don't believe in inflation as long as production remains steady and consumption doesn't rise.

Conclusion: it's kinda tough. We're living in a brand new economic paradigm, one where there is a lot of printing without government rates getting higher, and where the demographic pyramid is inversed.

I think this is a bubble, and that it will all pop eventually, in a situation meeting all of these conditions:

1. Economy opens back, rona is dead, people can go back on holidays and no longer wish to spend money on assets
2. Government stops printing
3. Government raises taxes because unemployment is high,
4. Government raises taxes because it's time to refund the money we've spent during lockdown.
5. The asset prices are so incredibly high that "omg let's cash in".


I mean, the inflation of asset value was logical: if you close everything, people dont have any ways to spend their money + you give them money = let's invest. WSB and Robinhood didn't help either.
 

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It happens like once every 10 years. And even then it V recovers in no time.

For something like March to repeat you will need something very material and very negative. But you can count on a correction as that’s just part of the cycle.

As of now I think the market has to be right about inflation. It might be pricing in too little or too much. Wages and housing will be the big tell.
 

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Investments must beat inflation by a significant amount, otherwise taxes will leave you with a negative real yield. Gold for instance has very bad tax treatment.
 

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Also FED has pumped some $600B of printed money into stock market when most people
struggled with covid.
They will probably print more cash and by more stocks.
This dilutes value of cash and makes stock market look like it looks now.
 

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We've been talking about a market crash around here for years.
Yep.

Believe the thread was actually renamed from "The...2018-2019..." to the 2019-2020 it was carrying on so long.
 

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We've been talking about a market crash around here for years. It did happen on several occasions only to recover shortly thereafter. I think the market is due for a pull-back, but not something enduring.

I believe there is too much inflationary pressure to keep equity prices low -- cash is trash and is becoming more and more worthless by the day.

$10000 in the bank is becoming more risky than $10000 in Amazon stock.

In 6 months, your $10000 will be worth $9200 and your Amazon stock $11,000.

This keeps equity prices rising.

Bring back the rep system but this time it’s RepCoin hah!
 

Zaratustra

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we have been in a bull market for a prolonged period of time since around 2009
Was it a "bull" market or just humans being more productive than ever in the history of humankind?
Sure, Tesla and cryptocurrencies are overhyped, but real-estate, oil and coca-cola stocks seem more valuable than ever.
 

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JScott

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It is clear that we have been in a bull market for a prolonged period of time since around 2009 onwards that has only seen a temporary dip when the Corona Virus pandemic struck.

What market are you talking about? There are thousands of "markets" and not all of them are doing well.

Several are doing tremendously poorly (check out most of the commodities markets).

And, if you're talking about the economy as a whole, an argument can be made that it's currently pretty crappy, other than a few specific asset classes.
 

danielroberts147

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Feb 14, 2021
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Hi All,

Recently I have been doing a lot of reading around historic market crashes, current state of affairs across a myriad of industries and economics in general.

I am interested in discussing with my fellow Fastlaners their views on the state of the economy both nationally and globally and their future predictions of what they see unfolding. I am writing from the perspective of someone based from the UK.

My research to date has highlighted the following:
  1. It is clear that we have been in a bull market for a prolonged period of time since around 2009 onwards that has only seen a temporary dip when the Corona Virus pandemic struck.
  2. Interest rates for borrowing such as mortgages are still at an all time low. This is unprecedented, if there was to be a shift in variables it could drastically effect the vast amount of peoples ability to pay on their current loans and default.
  3. The amount of relief provided in the UK and that is still on going through schemes such as Furlough has seen our national debt at an all time high only rivalled since debt levels from WW2. Additionally, I believe that I read that the US has printed 22% of all the US dollars in circulation in 2020 alone...
  4. The valuation of certain company's such as Tesla are outrageous. Don't get me wrong, Elon is doing amazing things and has interesting projects and technology's in the pipeline but no company's PE Ratio should be 1,232. So in essence the PE Ratio is currently trading at $1,232 per $1 of earning... High right?
  5. Crypto currency's in general a plethora of the coins are still seeing rises linked to a bull market even though some of the technology's behind them are not leading the charge such as Doge Coin.
  6. The property market. In the UK I work for a property developers and it is clear at the moment that the market is beginning to slow. This was artificially stimulated throughout 2021 during the pandemic when the government provided Stamp Duty and Land Tax (SDLT) relief on property purchases up to the value of £500k. For any readers from outside of the UK this can save an individual up to £15k if they were to move or purchase a property. Now that this relief is coming to a close it has resulted in a slow in demand in the market.
These are just a few of my observations but I would be interested to hear other peoples thoughts on this.

In my opinion something has to give at some point... It can't be good times forever. The pandemic's effects I don't believe have still not truly been felt as there should be a spoke in unemployment rates once the Furlough Scheme comes to a close, in the UK anyway. 2022 I think will prove to be an interesting year.

Just my 2 cents.

Best,

S
If history doesn't repeat itself at the very least it rhymes! 20% of every dollar was created in 2020 with that and the fed pumping money into the market to try and stop a much needed market correction I feel like it's a double edged sword and a lot of people will fall on it unfortunately
 

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As long as we follow Keynesian Economics, a major market crash is coming.

A bigger question imo is what are you going to do about it?
 

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As long as we follow Keynesian Economics, a major market crash is coming.

A bigger question imo is what are you going to do about it?

It won't happen. Everyday more people are going all in into crypto with Elon Musk leading the charge. In this new age, financial wealth can only go to the moon. There was an article some time back saying that the government and bankers have manipulated the stock market to the point that it's not possible for it to crash like the ones we saw in 10 and 20 years ago. People have been talking about market crash since 2017 due to the 10 year crash theory but I don't see it happening. Maybe the stock markets bend to Elon's Will.
 

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It won't happen. Everyday more people are going all in into crypto with Elon Musk leading the charge. In this new age, financial wealth can only go to the moon. There was an article some time back saying that the government and bankers have manipulated the stock market to the point that it's not possible for it to crash like the ones we saw in 10 and 20 years ago. People have been talking about market crash since 2017 due to the 10 year crash theory but I don't see it happening. Maybe the stock markets bend to Elon's Will.

Sounds like we are in the "Mania phase" of the bubble :smile2:
 

Tourmaline

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It won't happen. Everyday more people are going all in into crypto with Elon Musk leading the charge. In this new age, financial wealth can only go to the moon. There was an article some time back saying that the government and bankers have manipulated the stock market to the point that it's not possible for it to crash like the ones we saw in 10 and 20 years ago. People have been talking about market crash since 2017 due to the 10 year crash theory but I don't see it happening. Maybe the stock markets bend to Elon's Will.

Things have definitely changed. There's a lot of sentiment investing now instead of fundamentals investing.

The rules of money say it's impossible for it not to crash again.

I'd also ask how many of those same people said the '08 crash would never happen.
 

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Technically we've already had a market crash in early 2020 because of Covid.

Question is, is a "market crash" a crash only if a 2-5 year recession/depression follows?

Or is a crash a crash when it recovers mere months later?

Because right now we're talking apples to oranges.
 

monfii

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Technically we've already had a market crash in early 2020 because of Covid.

Question is, is a "market crash" a crash only if a 2-5 year recession/depression follows?

Or is a crash a crash when it recovers mere months later?

Because right now we're talking apples to oranges.
So the question is:

Had not the FED saved the stock market with degenerate printing, where would it stand as we speak?
 

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I admit it’s kinda irritating to see these high asset prices but the Fed did promise inflation so we are getting it. Although they are kind of dishonest about how much inflation. Those inflation indexes are kind of easy to “tweak”.

What was different this time around from 2008 was the actual central bank response. They pretend they don’t pay attention to the stock market but everything is intertwined in the financial markets. So they kind of resort to indirect and legal manipulation/intervention. Like getting help from other central banks or giving money to Blackrock.

One thing I’ve notice is; why is Powell always so nervous when he speaks. I mean public speaking is not easy but It makes me think he is scared of something.
 
Last edited:

JScott

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As long as we follow Keynesian Economics, a major market crash is coming.

A bigger question imo is what are you going to do about it?

Keynesian Economics is a *model* about how the economy works. Whether you believe Keynesian Economics is an accurate model or not won't change what happens in the economy...

It's like saying that if you follow the theory of gravity, things will fall to the earth. They'll actually fall to the earth whether you believe in the theory of gravity or not.

(And no, I'm not saying that I believe Keynes models are the best to use... I'm just saying that they are simply models, and don't actually control the economy. Non-Keynesian models also talk about what is likely to happen when fiscal policy is controlled by a central organization.)
 

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Tourmaline

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Technically we've already had a market crash in early 2020 because of Covid.

Question is, is a "market crash" a crash only if a 2-5 year recession/depression follows?

Or is a crash a crash when it recovers mere months later?

Because right now we're talking apples to oranges.

The point of a crash(correction) is to reallocate the investment of capital towards what the market truly demands.

The crash due to lockdown is entirely different than what a crash typically is.

Typically a crash is due to a bubble bursting. The businesses that contract or fail as a result are due to the market no longer consuming the same level of, or any of, the businesses offering.

Lockdown did not burst any bubbles. It shutdown the economy. The businesses that contracted or failed are due to the market being *unable* to consume the same level of, or any of, the businesses offering.

The businesses that fail/contract during a bubble crash do so because the market demanded it.

The businesses that fail/contract during an economic shutdown do so because the market being manipulated(distorted).

The result with the lockdown crash is that many businesses that would have survived a bubble crash failed/contracted.

However, many of the businesses that would not have survived a bubble crash did so due to financial resilience, or strong adaptation.

My conclusion is this:

The lockdown crash achieved some of the desired effect of a bubble crash. So it will likely stave off a bubble crash for some time, but not as long as if an actual bubble crash took place(as is inevitable). However the lockdown crash also has a strong negative side effect of damaging many good and desired businesses, by damaging the economy as a whole.

Keynesian Economics is a *model* about how the economy works. Whether you believe Keynesian Economics is an accurate model or not won't change what happens in the economy...

It's like saying that if you follow the theory of gravity, things will fall to the earth. They'll actually fall to the earth whether you believe in the theory of gravity or not.

(And no, I'm not saying that I believe Keynes models are the best to use... I'm just saying that they are simply models, and don't actually control the economy. Non-Keynesian models also talk about what is likely to happen when fiscal policy is controlled by a central organization.)

I am not sure it is fruitful to really get into it, but a better comparison is apt as it seems the given is a false equivalence. I am not sure if that's intentional or not, I don't think it is.

The economy is like the theory of gravity, not keynesian economics.

I think perhaps the core issue is that keynesian economics believes market contractions are bad, and manipulating the economy via controlling interest rates and monetary supply can be desirable. Especially when the later is done to avoid a contraction.
 

MJ DeMarco

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Looks like the a lot of the nearly $2,000,000,000,000 in "stimulus" money recently printed is going exactly where everyone thought it would go... into the stock market.

But yea, inflation is under control as the house I considered buying last year went from $2M to $3.5M in less than 12 months while that cool new Ford truck is six figures, as is your Corvette. Oh and my favorite bread (the one not filled with chemicals and preservatives) is close to $7 a loaf. I paid $6+ for a single 2x4 at Home Depot last week (lumber). Inflation? NAWWWWWWWWWWWW....

How do you know the Fed Reserve bankers are lying? Their mouths are moving.
 

thechosen1

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Looks like the a lot of the nearly $2,000,000,000,000 in "stimulus" money recently printed is going exactly where everyone thought it would go... into the stock market.

But yea, inflation is under control as the house I considered buying last year went from $2.5M to $4.5M in less than 12 months while that cool new Ford truck is six figures, as is your Corvette. Oh and my favorite bread (the one not filled with chemicals and preservatives) is close to $7 a loaf. I paid $6+ for a single 2x4 at Home Depot last week (lumber). Inflation? NAWWWWWWWWWWWW....

How do you know the Fed Reserve bankers are lying? Their mouths are moving.
What can we do about this? I'm afraid these problems are a lot bigger than people even realize.
Something needs to change.
 

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Looks like the a lot of the nearly $2,000,000,000,000 in "stimulus" money recently printed is going exactly where everyone thought it would go... into the stock market.

But yea, inflation is under control as the house I considered buying last year went from $2.5M to $4.5M in less than 12 months while that cool new Ford truck is six figures, as is your Corvette. Oh and my favorite bread (the one not filled with chemicals and preservatives) is close to $7 a loaf. I paid $6+ for a single 2x4 at Home Depot last week (lumber). Inflation? NAWWWWWWWWWWWW....

How do you know the Fed Reserve bankers are lying? Their mouths are moving.
View: https://twitter.com/redditinvestors/status/1377326082970554377
 

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Looks like the a lot of the nearly $2,000,000,000,000 in "stimulus" money recently printed is going exactly where everyone thought it would go... into the stock market.

Obviously the market is inflating but I’m trying to understand the mechanics behind it. I find it hard to believe that average Americans who have been unemployed are using stimulus money to purchase stocks. Is this growth being driven by institutional investors taking advantage of low interest rates to borrow cash and purchase assets? Businesses looking for alternatives to holding cash? Or is it the case that stimulus is driving increased consumption which is ultimately driving up stocks indirectly? All of the above? Something entirely different?
 

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Most of the stimulus is given directly and not to individuals but to big business. The US government has scrapped the law that forbade stock buybacks by companies and recently also banks. It's all artificial.
So yeah, a market crash will follow and it will be immense. But not in a short while.

First, the dollar and all other fiat currencies must crumble.
 

thechosen1

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Our government has created an epically massive bubble, and they can bankrupt everyone with a snap of their fingers by raising interest rates.
 

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