What's the next stock market bubble?

[4TimeAway]

Now 36.70 is greater than 33.5, but as John Wayne said in Rio Bravo, "I'd hate to have to live on the difference".

I point all this out to remind you that the dollar has been shrinking in purchasing power for many decades. Much of that stock return is illusion, it's just effect of inflation. If you don't like metals, look at the price of hamburgers over the same period, or other stable technology products. (No matter how cheap and fast computers get, a hamburger is still going to be a hamburger.)

Its always compared to what..

From my perspective, in an inflationary world locking as much of your expenses as possible is a key strategy rarely contemplated.

Housing at sub-3% 30 year should prove to be a hedge. The rest of life unless you live on a farm, seem rough. I think the Midwest and South have an advantage with water and sun most of the year.

For example, I used to ignore electrical power as the promise of too cheap to meter, we also thought to be a rounding error. In LA, CA, DWP used to be about 0.08/kwh in say 2008-10. The politicians moved off coal, reduced natural gas and increased solar early in the cycle, shockingly I’m seeing 0.30/kwh on some bills. 300% in 15 years seems a bit tough to manage, even if only 7% compounded. Solar might be the play.

Same with hamburger it seems to me. I seem to recall on sale $1-$2/pound, good luck with that these days, even with the pink slime.

Bottomline: There is downward pressure on perceived standard of living, while some technologies seem to be getting cheaper, they are not adding to the quality of life. It seems to me that AI is a real pressure in the next couple of years forever. I mean I’ll be planning to hire “agents” to perform routine tasks in a set it up and monitor it fashion like an employee.


Maybe we will soon be deceived by deflation. Its scary to think how that might look.

 

[PigsDad]

Also, look at the dotcom bubble in the late 1990's and the NASDAQ drop of 78% by the end of 2002, or the real estate bubble in the mid 2000's. Every market has bubbles. The price of burgers still went up. . .

The stock market took 25 years to recover from the 1929 crash.

Yes, there are bubbles, but no major market has ever taken 45 years just to recover from baseline. And you are incorrect on how long the stock market took to recover from the 1929 crash -- it was actually 15 years, not 25, as you need to include total return with the dividends. The actual longest negative equities market was 1966 to 1982 (16 years).

Kurt

 

[Carolinian]

And if you would have started that silver investment in January, 1980 (45 years ago), your return would be negative as of today. I know that was an anomaly (although silver did top out around $48 again in 2011), but it just goes to show how volatile silver has been in the past. If history repeats itself, this may also be a silver bubble and in 2070 (45 years from now) the price of silver will be the same as it is today.

Kurt

Silver's rise has to do mostly with its industrial uses, in solar panels, AI, EV's, etc., even cruise missile guidance systems. Demand for industrial and other uses has exceeded mine supply now for several years, and that mine supply shortage is projected to get worse. Supply and demand are very much in play here. Ramping up new silver mines even if more deposits are discovered, takes years. The US and other major countries are now stockpiling silver due to its military uses. It was recently declared a "critical mineral" by our own government.

Gold, although also a precious metal that trades as a currency in the FX market, with a cross against all other currencies, is a different animal. It is central bank buying that is driving that price rise. Central banks are systematically dumping fiat currencies - dollars, euros, pounds, yen, yuan, etc, - to buy gold because of the counterparty risks of the heavily indebted fiat currency issuers.

Silver got caught up in investor speculation during the Hunt Brothers episode, but that has not been in play in the recent run-up.

 

[Brett]

September 29, 2025

https://www.wsj.com/finance/investing/market-bubble-history-f6b3487b?gaa_at=eafs&gaa_n=ASWzDAhlgPYwouqMrpdTwjzXseqJD4MnDhRM6_GytuN8TRos5ZVV1hcdzV3y&gaa_ts=68dacd4b&gaa_sig=QbZuCIAc68BtaQiuXG7LJLO08RgkMBhaDrLaCmiCZICyFyZyIrS4nGnB3cpnzv9tb26AcytI1_POnQbbauPOBg==


"Bubbles loom large in our historical understanding of the financial markets. They are memorable. They are colorful. They are scary. They raise questions about investor psychology and the madness of crowds. In good times, we worry if we’re going to be caught in the next big bubble.

"Looking at financial bubbles since 1790, however, we find that they are much rarer than their presence in the public imagination—and not necessarily purely negative. They sometimes set the stage for major changes in people’s worldviews, upending old ideas about the possibilities and limitations of business. Sometimes bubbles remake society itself, as all that investor money funds technological advances that change the world.

"The story of American bubbles and spectacular crashes might lead one to think that the stock market is a perilous place, best left to experts or those with cast-iron stomachs. However, one of the biggest mistakes an investor can make is to rely on a handful of colorful historical episodes and ignore the long intervals in between: the sequence of quiet gains that markets have made over the decades and centuries they have existed. A statistician will tell you that the smaller your sample of data, the less reliable it is for forecasting—particularly when the sample is chosen particularly because it is interesting

 

[emeryjre]

This may help in determining why certain commodities and prices are rising
The world has experienced population growth of around 2 Billion people in the last 25 years
These people are competing for food, energy, housing, transportation, etc. etc.
Providing more people with declining outputs of certain items results in cost increases
NIMBY behavior worldwide has slowed the output of key materials such as copper, nickel, gold, silver
Surprisingly food supplies have kept up relatively well
The distribution of these supplies is out of balance, but there is not widespread worldwide famine
Traders follow the trends set up these patterns and try to find the growth opportunities as the develop
Nuclear power has been a good one
AI has been another


The world population from 2000 to present has shown significant growth:

• In 2000, the world population was approximately 6.1 billion.
• By 2010, it increased to about 6.9 billion.
• In 2020, the population reached around 7.8 billion.
• As of 2023, the estimated world population is approximately 8 billion.
  
  

 

[Carolinian]

What constitutes the sword of Damocles hanging over the market is the debt bomb, both private, and even more worryingly government debt. Something called Modern Monetary Theory has thrown caution to the winds, and there is likely to be a huge reckoning for that at some point. More traditional economists have argued that a country gets into real danger territory with debt over 100% of GDP. In the treaty setting up the euro, the key standard on government debt was agreed that countries should not let their debt exceed 60% of GDP. Now, most European countries have blown past that, with several including one of the largest economies, France, at twice that level. Even the supposedly prudent Germans are well past it, and with huge new off-the-books borrowing to get around their Constitutional "debt brake" they are headed the way of economic basket case France. Japan is in even worse shape. And the US? In 2008, our national debt to GDP ratio was under 70%, but now it is over 122%.

Every major fiat currency is issued by a country or issuer with a massive debt bomb. As to the market, margin debt of investors is now over a trillion dollars. Margin calls can easily become a doom loop at that level.

So, if something blows up the economy what happens. One scenario is a massive deflation as occurred in the Great Depression. The other is a massive inflation as happened in Germany in 1923. My guess is that the inclination of today's central banks is money printing so the second scenario would be more likely. Of course, we can all keep our fingers crossed and hope that policy makers can muddle through without the debt bomb blowing up in their faces. Unless we can get control of government debt, however, that is not likely to happen.

 

[Carolinian]

The problem with gold is that it doesn't have any inherent value. It could end up being worth as much as other historic stores of value like frankincense and myhrr

"Paper money eventually returns to its intrinsic value - zero" - Voltaire

 

[Ralph Sir Edward]

What constitutes the sword of Damocles hanging over the market is the debt bomb, both private, and even more worryingly government debt. Something called Modern Monetary Theory has thrown caution to the winds, and there is likely to be a huge reckoning for that at some point. More traditional economists have argued that a country gets into real danger territory with debt over 100% of GDP. In the treaty setting up the euro, the key standard on government debt was agreed that countries should not let their debt exceed 60% of GDP. Now, most European countries have blown past that, with several including one of the largest economies, France, at twice that level. Even the supposedly prudent Germans are well past it, and with huge new off-the-books borrowing to get around their Constitutional "debt brake" they are headed the way of economic basket case France. Japan is in even worse shape. And the US? In 2008, our national debt to GDP ratio was under 70%, but now it is over 122%.

Every major fiat currency is issued by a country or issuer with a massive debt bomb. As to the market, margin debt of investors is now over a trillion dollars. Margin calls can easily become a doom loop at that level.

So, if something blows up the economy what happens. One scenario is a massive deflation as occurred in the Great Depression. The other is a massive inflation as happened in Germany in 1923. My guess is that the inclination of today's central banks is money printing so the second scenario would be more likely. Of course, we can all keep our fingers crossed and hope that policy makers can muddle through without the debt bomb blowing up in their faces. Unless we can get control of government debt, however, that is not likely to happen.

Carolinian, government debt failures cause deflation when the currency the debt is tied to has a hard link to something (the link prevents the government from printing more currency).

Government debt failures cause inflation when the currency the debt is tied to has no hard links to anything. (The government can try to print its way out of the debt, causing inflation).

Private debt failures are deflationary, unless the government tries to print enough currency to replace the defaulted debt. (The see above.)

 

[TolmiePeak]

"Paper money eventually returns to its intrinsic value - zero" - Voltaire

How much intrinsic value does gold have? Again it is zero. 100% of the gold supply could be eliminated tomorrow without a big impact on the economy.

 

[Carolinian]

How much intrinsic value does gold have? Again it is zero. 100% of the gold supply could be eliminated tomorrow without a big impact on the economy.

It's big value now is that central banks do not fully trust each others fiat currencies due to debt level and are systematically but gradually dumping fiat currencies and buying gold. Gold is a first tier (most desirable) asset class under the Basel III banking regulations. Stocks are not. As long as the central banks of the world give the intrinsic value of gold a higher status than each other's fiat currencies, it will continue to reign supreme as a currency. Indeed, this morning, gold is on the verge of breaking $3,900, a new all time high, while silver has broken $48.

Some years ago, there was a period when central banks were moving away from gold, with the British selling a lot of their stockpile and Canada selling all of its gold. Ironically, the central bank governor who did that in Canada is now its prime minister, Mark Carney. Those countries certainly now wish they still had that gold. Central banks are now stocking up on gold and have been for a number of years.

 

[Carolinian]

Carolinian, government debt failures cause deflation when the currency the debt is tied to has a hard link to something (the link prevents the government from printing more currency).

Government debt failures cause inflation when the currency the debt is tied to has no hard links to anything. (The government can try to print its way out of the debt, causing inflation).

Private debt failures are deflationary, unless the government tries to print enough currency to replace the defaulted debt. (The see above.)

Exactly. In 1923 Germany, they tried to print their way out and destroyed the old German mark. They re-stabilized their currency with the new Rentenmark, quickly replaced at par with the Reichsmark. In 1933 the US, Roosevelt tried for a devaluation by calling in all the gold and changing the dollar's peg to gold from $20 to $35.

Politicians and central bankers now are fond of money printing to solve problems and they have no constraints on doing so. I strongly suspect that if the economy hits a wall, that is the direction they will go. The German 1923 model is more likely. From the government's perspective, it also monetizes and eliminates the debt.

 

[Elan]

There's a lot of money being invested right now in technologies that are highly speculative, such as quantum computing, small modular nuclear reactors and solid state batteries. It will be interesting to see how quickly some of these will become profitable.

Sent from my Pixel 9a using Tapatalk

 

[Carolinian]

Here is a big difference in the silver market these days. Twenty years ago, industrial demand for silver was 35% of the market. Now it is between 60% and 70% and rising. When investors pile in on top of that, it can really move the market.

 

[Brett]

How much intrinsic value does gold have? Again it is zero. 100% of the gold supply could be eliminated tomorrow without a big impact on the economy.

Some would say the "intrinsic" value of gold is more than $ 0 !

If all the gold suddenly left the earth then another scarce metal would probably take its place. Gold has value but like the conquistadors eventually discovered, the real wealth was in people and land.


.
Diversification for a (potential) "bubble collapse"


.

 

[Elan]

Also will be interesting to see how well companies can monetize AI.

Sent from my Pixel 9a using Tapatalk

 

[Carolinian]

Gold's value as a currency is increasing due to central banks growing lack of full trust in other fiat currencies, so they are downsizing their holdings of other fiat currencies and upsizing their holdings of gold. They have been doing that now for several years as the debt levels of the issuers of fiat currencies have skyrocketed, making them less reliable. Given that government debt is just increasing, that is not likely to stop. Since central banks are major holders of gold, their actions have a huge bearing on the price. Sometimes they screw up. Gordon Brown as UK Chancellor of the Exchequer sold off half the British gold reserves to foolishly buy euros at a low point in the gold market. That cost his country a boatload of money. Brown did that at about the time the euro was launched as a currency. Then Mark Carney as Governor of the Bank of Canada sold off all of that country's gold at about the same time to put it in fiat currency, again a very bad financial deal for the country, but Carney is now their prime minister. Fortunately, most central banks were smarter than that during that time period.

Central banks do not dish out investment advice to citizens, but watching what they do with their own reserves can tell investors a lot if they would just pay attention.

Given the growing industrial demand for silver, the difficulty and time lag in increasing supply, and now government stockpiling of silver as a critical mineral, it is not the safe asset market that will mostly drive silver prices, although it will be a component. Industrial and government demand will be the big drivers. As the price of gold increases, less wealthy "stackers" are turning more to silver. The many citizens in Asia who hold precious metals as a store of value have traditionally favored silver over gold anyway and the prices situation is likely to push them even more heavily into silver. Then there is India where direct use of silver and gold as day to day currency got a strong boost from a government project to limit the large "underground economy". They did that by suddenly demonetizing the largest denomination rupee banknotes, allowing them to be exchanged for other banknotes only if the holders could show that they were acquired legally and taxes had been paid on them. After that most in the underground economy became skittish about transactions in rupees, so they turned to precious metals, which many households in India possess along with some foreign currencies.

 

[Carolinian]

Some would say the "intrinsic" value of gold is more than $ 0 !

If all the gold suddenly left the earth then another scarce metal would probably take its place. Gold has value but like the conquistadors eventually discovered, the real wealth was in people and land.


.
Diversification for a (potential) "bubble collapse"


.

That chart that you repetitively post (once is enough!) is not true diversification. Hard assets, not financial products, are the best defensive assets to ride out an economic storm. Direct ownership of residential rental property is not on your list, as the list tilts to financial products, but is a heck of a lot safer than REITs.

The richest man in Germany after the 1923 debacle was a minor industrialist who was smart enough to max out loans in marks to buy productive hard assets like factories and mortgage them to the hilt. Then when the currency collapsed, he paid off the loans at face value in near worthless marks and had all of that productive property free and clear.

The first three of the chart's "defensive assets" probably would be defensive EXCEPT for the debt bomb ticking away under most fiat currencies. Now if those cash and bonds were in currencies issued by low-debt countries like Switzerland and Norway, yes they would be defensive, but not in fiat currencies issued by high-debt countries or entities. Swiss and Norwegian government debt is less than 40% of GDP, and in the case of Norway, they have a sovereign wealth fund from oil revenues that exceeds their national debt so as a practical matter they are debt free. Switzerland has a "debt brake" in its Constitution to keep debt from getting out of hand. Of course, there is also the government debt of neighboring Liechtenstein which also uses the Swiss franc as a currency but has maintained government debt of under 1% of GDP for years.

For Americans, holding foreign currency assets poses problems. I haven't checked lately, but the interest rates on what bonds exist for Swiss government debt pay very low interest rates, at some points it has even been negative interest. There may be some rock solid companies whose debt in Swiss francs might work. The tricky thing about Americans holding any products issued by a bank outside the US are the requirements imposed on foreign banks by the Obamacare act to make reports to the US government on accounts held by American citizens (this on top of a longstanding law requiring the American citizen himself to file such reports with the IRS). Most western European banks reacted by deciding they did not want the hassle and closed out accounts of American expats, even longtime customers. Most eastern European banks, on the other hand, took the position that American law could not require them to do that and they refused to follow it. When I was working full time in eastern Europe, I had bank accounts in both Romania and Moldova, and thought about opening one in Hungary but did not. Romanian banks used Romanian lei, US dollars, euros, and Swiss francs as currencies that accounts and CD's could be maintained in. Moldovan banks used Moldovan lei, euros, or US dollars and paid the best interest rates. An 6 month CD in one of the two major Moldovan banks in US dollars paid interest at over twice the rate of the best CD rate of either of my US credit unions. There are some US financial products denominated in foreign currencies but there is some question if they actually hold those currencies or if it is just a bookkeeping entry.

 

[Brett]

Also will be interesting to see how well companies can monetize AI.

Sent from my Pixel 9a using Tapatalk

yes, if one believes the reports many jobs have already been replaced by "AI"

Meanwhile .........

Oct 1, 2025
https://www.wsj.com/finance/investi...wing-their-way-8d9cbfb7?mod=finance_lead_pos5

"The ETF market has been on fire in 2025. Total assets in U.S. ETFs swelled to a record $12.19 trillion at the end of August, up from $10.35 trillion at the end of last year

"Two familiar names are on top of the fund flow leaderboard: Vanguard’s S&P 500 ETF and BlackRock’s iShares Core S&P 500 ETF, whose
ticker is IVV. These index funds, along with a similar offering from State Street, have combined for almost $140 billion in net inflows this year
through late September, or close to $1 billion a trading day


"Also popular are some relatively new strategies focused on damping the effects of stock volatility and producing dividend income.

.

 

[FunnyFarm]

I suspect a lot of us on this forum are mature and investment is a area of interest.

However for anyone, perhaps they younger crowd, if you have credit card debt conside paying that down.
Instant 16-29% return on investment.

Do not forget to think long term, contributing with any job related matching funds and 401k as well.
Paying off debt too agreesively sometimes leads to a comfort level that increases spending on credit all over again.

Where to invest? Invest in yourself as Wartren Buffet says.

 

[Carolinian]

Warren Buffett's stock gauge hits record... in dot-com bubble risk

America celebrated its first $4trillion company - that sets off some warnings for America's most legendary investor.

www.dailymail.co.uk

 

[Brett]

https://www.d

Finally the Dailymail gives Warren a little credit

.
https://www.investopedia.com/learn-...-the-practical-ways-you-can-apply-it-11823895

 

[easyrider]

Something called Modern Monetary Theory has thrown caution to the winds, and there is likely to be a huge reckoning for that at some point.

Monetary theory & monetary policy evolves. It's been proposed that bitcoin be used to erase the National Debt and a Federal gold price reset be used to buy most likely bitcoin. The Federal Reserve along with other Federal agencies will regulate crypto currencies called Stablecoin's is also part of the discussion.

I doubt there would be some huge pain for regular American's regarding the the roll out of these ideas. Other countries will likely experience currency problems unless they join America. What is likely to happen is asset prices will increase and those without any assets will miss out, imo. This is hypothetical at this point but there are many articles discussing these scenario's this year since the Genius Act came to pass.

Bill

 

[Carolinian]

Why would any government take something real to buy a digital ponzi scheme like bitconn, that is like buying air?