I'm enjoying this ride as it's been quite profitable. Will it crest $10? Maybe. Will it top out there? Maybe.
Will it take a quick dive shortly after? Maybe, maybe not. Time will tell.
Now is the time to do your due diligence. We're at historical record levels and every time this situation has peaked, the results have been dramatic at best.
Not telling anyone to sell, that's your call.
This is part of an article from Posthaste this morning.
Then, like now, a narrow group of tech stocks was driving gains, and the Federal Reserve was cutting interest rates.
Then there was the global financial crisis — few saw it coming and when it did most failed to understand how bad it would be, said Allen.
In 2007 before the crisis hit, markets were in pretty good shape with the S&P 500 exceeding its previous record in March 2000. Volatility was low and credit spreads were tight, just like today.
The crisis in 2008 came after a long period of calm and the same can be said of today, a decade and a half after the financial crisis.
“As the economist Hyman Minsky argued, a lengthy period of stability can itself be a destabilizing force. That’s because it can induce risk-taking and complacency that itself lays the foundations for the next period of financial instability,” wrote Allen.
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Valuations became increasingly stretched, said Allen, and by November of that year there were signs the rally was turning. What followed was a massive selloff in 2022 in which the S&P 500 fell 25 per cent from its peak.
The bottom line: “In all three cases, there was little scope for further gains since valuations were already so stretched to start with, and they were each followed by a significant correction,” he said.
One striking thing about all three episodes in retrospect is the “bubble mindset” and a strong belief that good times will continue, said Allen. In 2000, the Congressional Budget Office was predicting that the United States would pay down its entire national debt and in the mid-2000s before the financial crisis, there was talk of the “Great Moderation,” a time of macroeconomic stability. When the global economy began to recover from the shock of COVID-19, there was skepticism that inflation would get as bad as it did.
“So turning points can happen quickly,” he wrote.