So here we are... its 2000 all over again. Bubbles here, bubbles there, bubbles everywhere! Right? That's all I see on the financial news networks and twitter.
Anyone remember 2000? In 2000 you could fund a brokerage account with a CREDIT CARD!
In 2000 the credit card companies were sending out 0% APR checks like they were candy.
Compared to 2021.. the consumer was in Terrible shape.
The FED funds rate in 2000 was 6% in 2007 it was almost 5% today? It's 0%
How about the consumer? For one they are saving like never before.. despite an almost 0% savings rate.
savings deposits? record highs
and the serviceability of the debt consumers have? Stellar.
And yet this is 2000 over again.
You know what else is different in 2021?
The money supply is exploding!!
We have more stimulus checks on the way. Billions in PPP loans that are getting forgiven. The money supply is going to continue to grow in 2021.
My question is....if the stock market is a bubble, as so many are saying now.. what are you going to do with your money when you sell?
Put it in a money market account? Buy bonds? Or... like I saw last night on a survey... put it in cash.
The same cash that has exploded in quantity the last 10 months.
It makes sense why bitcoin is rallying. It's not being used to stimulate the economy. It's not being used to keep small businesses afloat. It's not being used to hand out stimulus checks to Americans.
Don't get me wrong. I actually like what the FED and the gov't are doing to help everyone thats struggling.
They have no choice.
On the flip side we are seeing risk assets get bought.
It makes sense.
We are in an everything bubble. Money supply, bonds, stocks, gold, bitcoin... but its all relative.
Saying milk is overvalued at $3.50 a gallon today because it used to cost $1 a gallon in 1980.... well if you want to make the same case for stocks here.. then sell and sit in cash.
We are seeing 'micro'bubbles in certain stocks. No doubt. Its speculation.
But don't mistake this economy for the one in 2000, when investors were maxing out their credit cards to buy pets.com.
With interest rates at 5% in 2000... you could at least put your money in a savings account and earn a return. That's not the case in 2021.
With the money supply exploding higher... moving to cash... well... you be the judge.
We have the FED meeting today and tomorrow.
Any hint of tightening, or taking the foot off the gas pedal will take stocks down over the short term. However I think it will remain like every dip we've seen... another great buying opportunity.
In my opinion, rampant inflation remains the biggest threat for this market. The FED has said they will let the economy run hot. Ironically with stocks trading at record highs... we aren't even warm yet.