While I believe it is good be short term pessimistic and long term optimistic in life, I do think we have reached a time where we do really need to become more aggressively pessimistic short term wise and and aggressively optimistic long term wise as I believe the global financial markets will go through corrections.
Here is why I believe we need to become more aggressively pessimistic short term wise.
If one were to look at the Nasdaq Composite from a 10 year time line, I believe everyone would agree that it is going through a parabolic shape. Now, anything that has gone through a parabolic growth from a financial market has corrected at some point — without a single exception.
Now, many people would argue that the fundamentals are strong and the economies around the world going well. I do agree with them. However, at the same time, I also see excessive leverages that are hidden below those markets. I believe it has become too easy for both retail and institution investors to gain leverages. Robinhood’s revenue has more than 4xed in a year, and I believe it would be the case for many other trading platforms. All these trading platforms make it extremely easy to get a loan or start margin/option trade. Institutions are also investing money at a too rapid pace with loans coming too easy. Also, looking at VCs, I do believe that valuations of startups are slowing starting to become somewhat too optimistic. I can personally feel that debts are currently piling into financial markets at a pace that is unsustainable. Just like how crypto market always correct when the leverages break down, I believe that exact same thing will happen to the global financial markets quite sooner than what many people expect. The Nasdaq Composite has 2xed in about 16 months. Now, with the current parabolic growth, we can anticipate that the Nasdaq Composite will 2x again in about 8 months, which will push the market to around 30000, which I view to be almost impossible. So I anticipate that the correction will probably happen within 6 months from now, probably during the end of the year or even sooner.
We also need to become more aggresively optimistic long term wise. Markets never stop growing. Corrections are temporary while the growths are perpetual.
I was too young to remember what it would have been like to live during the Dot-com bubble. Now, I have a feeling that it would have been very similar to live in 2021.