So yeah, it’s ‘official’.
It is popping up everywhere on social media. I just can’t get into Youtube without seeing one of the videos from financial influencers talking about it. A lot of content is made about this topic.
It is an evergreen theme. With the markets back up (especially in the US markets), the t heme is back, strong.
Back with a vengeance.
1) Graham Stephan (2.62M subscribers on Youtube):
2) Meet Kevin (1.03M subscribers on Youtube):
3) Minority Mindset (790K subscribers on Youtube)
4) Cooper Academy – Investing (270K subscribers on Youtube)
So yes, lots of videos/content from people talking about the coming stock market or housing market crashes. However, the issue is when we talk about crashes, the truth is nobody has a clue about when the next crash will be.
Even Ray Dalio, the American billionaire hedge fund manager and philanthropist who has served as co-chief investment officer of the world’s largest hedge fund, famously mentioned ‘Cash is trash” just prior to the Covid-19 stock market crash early this year (Jan 2020), did not had a clue then.
Ray Dalio says ‘cash is trash’ and advises investors hold a global, diversified portfolio (read here).
What do investors want during a market crash? Cash….lots of it.
Howard Marks will never advocate timing the market. Although he talked about the ebb and flow of the markets, highlighted that we can only calibrate our portfolio so as be more defensive or aggressive at certain parts of the market cycle, he would and could not pin point when the markets will crash. He does not like to be drawn into the debate of when markets will crash. Asked if he thinks current markets are overvalued… well, he mentioned that if the global economy does pick up, then the recent valuation would not appear stretched. It’s relative so to speak.
In addition, if you have watched the earlier videos from Peter Lynch, in his talks, he will just tell everyone that as the manager of the Magellan Fund at Fidelity Investments between 1977 and 1990, his fund will go through the volatilities with the markets. Every time the markets went down, his fund also went down with it, and went down more.
Wikipedia defined stock market crashes as follow: “There is no numerically specific definition of a stock market crash but the term commonly applies to declines of over 10% in a stock market index over a period of several days.”
So if we look through the history of stock market crashes (in Wikipedia), the recent crashes, beside the 2020 stock market crash, are 2015–16 stock market selloff, August 2011 stock markets fall, 2010 flash crash, and the big one – Financial crisis of 2007–08.
The previous big stock market crash was in 2007-2008, that was more than a decade ago.
These talks about 2021 Market Crash are not just on Youtube, it is on Facebook, Reddit, etc… everywhere on social media!
There are knock-on effects on the psychology of retail investors. People may get scared out of the markets. And if you do not want to stay invested, you will find A Reason NOT to invest. There are countless reasons why not to stay invested.
If you are familiar with Peter Lynch, you can sense that as compared to other great investors, he has a great sense of optimism (even compared to Howard Marks, Ray Dalio, Warren Buffett, etc)…
To quote the article below: “At the beginning of the third quarter, Berkshire Hathaway’s cash pile stood at an all-time record $147 billion.”
Why Isn’t Buffett Putting More of His Cash to Work? (Read here)
As mentioned by Peter Lynch: There is always something to worry about. It will always be scary, there will always be concerns.
In recent times, Peter Lynch continues to maintain his stand. These days, as he put: Bad news is infinite now.
Well, we can worry about other variants of the coronavirus, 3rd to 4th wave of the pandemic, more defaults and fallouts when the monetary and fiscal stimulus stop, different tax regulations from the Biden administration, the overheated stock market (valuations) & housing markets… never-ending list.
Frankly, personally I have no clue of when is the next crash. However, I do think that people who stay out of the markets will miss out on opportunities and lose out more.
When we are dealing with people’s emotions, I stay out of predictions of the future. Like how I can’t predict my wife’s mood. I continue to research on companies, read about news, and just mentally and financially prepare myself for the next crash – don’t know when that will be.
In the meantime, collecting dividends from those stocks which I have stay invested in.
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