Here are six indications that are a danger to me (and many others) that a proper correction, with a louder word known from the yellow media, will soon (impossible to say exactly) await us in the economy.
1. Investors are overly optimistic about the future
Public issues of shares, ie IPOs, are mostly overwhelmed, regardless of the price, and are often oversubscribed several (ten) times. Stock indices are on the ceiling. For example, the Rusell 2000 index, which brings together the smallest listed companies in the US in 2000, has risen by more than 120% (!) From the low point of the corona crisis over the past year. Historically, Rusell 2000 has spent a full decade doubling. Yes, the crown crisis also quickly pushed stock prices down by about -40%, but that still doesn't explain the current frantic rally.
2. Speculative "investments" are the norm
When we interact with potential investors in WOWW, it is very coincidental and, as by the way, that cryptocurrencies, small business share purchase platforms, etc. are also topics of interest for investment. There would be nothing crazy about this if they did not see it all in the context of long-term investment. If stock prices or cryptocurrencies are primarily about the value of their resale, not the fundamental value of the company or payment instrument being bought, then it is certainly not an investment, but purely speculation.
3. Corporate values have flown through all kinds of roofs
The estimated values of start-up companies have probably raised eyebrows for many of us. Some of them (perhaps 5%, for example) are also perfectly justified. Some companies are the world's next Google, Facebook and YouTube. As it is difficult to calculate with tens of billions, I will give a closer example on a smaller scale. In 2019, our team ran a small but well-growing travel company.
We got in touch with a fund investing in small businesses, which offered to inject seed money into our company. For the value of the company, they offered something in the order of 2-20 million dollars (we then had to start "researching" it more precisely and "sketching" it on slides). Today, the value of this travel company is about 2 thousand euros, I would suggest. Now imagine when people buy shares of companies overvalued with such insane formulas ... The only way to earn is through resale (this option ends with the end of the boom), not real value.
4. Expanding circle of people investing, ordinary people are investing ... and by and large
Investing is pop again, it's being talked about at the birthday table! Again, there are times when you can get investment advice from a so-called "elevator boy" (using US 1920s terminology). This is a sign to big gurus that they need to move to fundamentally strong and more conservative assets.
5. The last big drop was already 14 years ago
Human memory is so constructed that we tend to forget the bad. It is now 14 years since the beginning of the great financial crisis. Usually, one cycle of ascension lasts 10 to 12 years. This has always been the case in capitalist countries for the last 100 years. It is not plausible to assume that this upswing cycle will last, for example, 24 years.
6. Markets are manipulated with fake money
If you or I reproduce money, it is a criminal offense. When NCBs reproduce money, it has many beautiful names, such as: "quantitative easing", "easing of financial markets", "keeping interest rates under control", "aid packages for sectors in crisis" /.../. Once the rhythm is in hand, you can continue to generate suitable names yourself. But don't be fooled by the beautiful names, in essence, it is still dishonest money that has fallen into the arms of individuals and (especially) institutions, and which, as an undesirable side effect of printing money, takes on highly speculative positions in various highly leveraged markets for financial instruments.
The world's first known boom
Tulip mania is the story of the world's first known economic bubble in the Netherlands in the 17th century. The details are still debated today, but it is quite certain that the prices of tulips reached completely astronomical heights by the beginning of 1637 and then dropped to a level of 1-2 percent of the peak in just a few weeks. It was the goldsmith of the Netherlands as a fresh trading nation. At the peak of the boom, some rarer tulip bulbs could be exchanged for a house or a large farmland, for example.
Now imagine for a moment a father who sold his whole family's houses, land and animals and bought a few handfuls of tulip bulbs for the money he received, hoping to find a buyer for them at a much higher price in the future. After a few failed auctions and the resulting panic, he discovered that he had just a handful of onions worth about 100 times less than he expected them to be in a speculative market.
This story would sound like a fairy tale from a long time ago, but right now many people in the world are selling their real assets (such as an apartment) and taking money to the speculative cryptocurrency trading market (or elsewhere), for example. It's a true story, it's not a fairy tale - it happens in our time, here now and now. The simply terrible end has not yet come.
So what to do?
You will still be permanently rich by time, money and interest. If many people are looking for short-term quick ways to get rich at once, this story will not end beautifully. Yes, the truth sounds boring and unsexual. It happens that many dreams break. Those who invest in long-term values are successful: shares of companies with fundamentally strong indicators, high-quality and necessary real estate, etc.