Ray Dalio says Stocks are NOT in a BUBBLE
šAre US Stocks in a Bubble? The S&P 500 $SPX500 is at all time high even though we have a recession. The CAPE ratio is very high. The Buffett indicator is at 200%. š¼š”š” šØššš£šØ š¤š š ššŖššš”š. š½šŖš© š¬š ššš£ ššš«š šš§ššŖš¢šš£š©šØ ššššš£šØš© š ššŖššš”š. Maybe the CAPE ratio is so high because of zero interest rates. The Buffett indicator can be flawed because it doesn't take into consideration the balance sheet of the Federal Reserve System or that most US companies such as Apple $AAPL draws much of their revenues overseas.
šRay Dalio, the founder of the largest hedge fund in the world, Bridgewater Associates, has another metric (which is proprietary) and according to this metric, US Stocks are š³š³% šš£ š š½šŖššš”š, unlike 1929 and 2000 when we were 100% in a bubble.
āRay Dalio talks about š² š¢ššš£ š„š¤šš£š©šØ š©ššš© ššš©šš§š¢šš£š š ššŖššš”š:
1. How high are prices relative to traditional measures? Somewhat Frothy
2. Are prices discounting unsustainable conditions? No Bubble
3. How many new buyers (i.e., those who werenāt previously in the market) have entered the market? Frothy
4. How broadly bullish is sentiment? Frothy
5. Are purchases being financed by high leverage? Somewhat Frothy
6. Have buyers made exceptionally extended forward purchases (e.g., built inventory, contracted forward purchases, etc.) to speculate or protect themselves against future price gains? No Bubble
š But Ray Dalio sees š ššŖššš”š šš£ šš¢šš§ššš£š š©ššš. We have seen in recent years how the NASDAQ $NSDQ100 has outperformed the S&P 500. There are stocks with no real earnings with market caps of over $600 billion (I'm talking about Tesla $TSLA ) and investors are still expecting these stocks to be tenbaggers. I find it very unlikely for Tesla to be worth $6 trillion in 2030 and Apple $20 Trillion.
šµ The bubble is here but only in some stocks. If you know where to look, you can still find cheap stocks. ššš¢šš¢ššš§ š©š¤ šš”š¬šš®šØ šš¤ššŖšØ š¤š£ š©šš ššŖš£ššš¢šš£š©šš”šØ šš£š š©ššš© š©šššØ ššØ š š”š¤š£š-š©šš§š¢ ššš¢š.
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