TLDR:Stocks are massively overvalued, thanks to Central Banks, but things can go on like that for quite some time.
Hello, Traders! This is the post that is aimed to bring to your attention, That TESLA, a car company, will be added to the S&P500 Index on Monday 21st of December 2020 Stock market cap exceeded 621 Billion Dollars! Yet, I am not calling you to marvel at the genius of Elon Musk But to wonder, how is it possible, that a company that delivers 0.5 million cars per year Is worth 3 times as much as the next most expensive car company Toyota, that delivers 10.5 million cars a year A question that is shadowed by the enigma of the stock market beating all-time-highs In the middle of the worst economic recessions since the Great Depression Just to make it clear: I am not saying, that Tesla makes bad cars, or that it is a bad company But is it overvalued? It everything overvalued? I think the answer is obvious:YES Another question then how long will this insanity last A year? 10 years? Or the Central will just keep printing money till the whole world starts resembling Venezuela? If you want to short-do so with options, as your downside is fixed and limited Because the markets can stay irrational far longer than you can stay solvent Anyway, I think that 2021 will bring a wave of bankruptcies in the real sector Which is a solvency crisis, not the liquidity crisis. The difference? In the liquidity crisis, you want to borrow,but cant do so In the solvency crisis, you haven't got enough cashflow to service a loan Even if you are offered one. And that is the kind of crisis that the FED can't solve At least within its current framework.
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