Bubbles only burst when no one thinks they can burst
I am fed up with WhatsApp groups about investment. I don’t know if you have any and if you don’t I’ll summarize how mine behaves. On the one hand, we have that friend who shares the relevant news, it is appreciated, it makes you be up to date doing very little research and you can go to the point in case you want interesting for a particular topic.
On the other hand, we have a friend who only comments when his shares rise: ‘Teladoc has presented bad results, and is up 7%’, ‘I got a 20-bagger with NET [They do not know the name of the company and say the ticker]’…
The funny thing about this is that lately, everything goes up, regardless of sector, industry, company capitalization, profits… So you can imagine how my WhatsApp groups are currently. This has made me reflect on the market situation we are in.
I, as a consultant, am a very practical person and my Google search has been the following: ‘Investor Sentiment Index’ and how could it be otherwise this has led us to the ‘Fear & Greed Index’ of CNN, although you already know which the best indicator is. This indicator is as currently shown below:
This situation is astonishing after leading central bankers have rejected the thesis that inflation is not transitory, or after the CEO of Coca Cola said:
‘Inflationary pressures — particularly surrounding some of our key commodities — it looks like it is going to be more of a headwind in [2021 and 2022]…I think it is important to highlight that, as an overarching principle around the world, we typically look to take pricing in line with inflation. And I would expect that principle will continue to be adhered to as we move into the back half of 2021 and even into 2022’
Or that, just today, ECB President Lagarde said:
‘We expect inflation to rise further in the short term.’
However, I consider myself a very sceptical person and even if we believe that in a world as developed as the one we live in this could not happen (I am talking about inflation), I firmly believe that in past times, for example, the Hyperinflation in Germany in 1923, they could be thinking exactly the same as we are thinking today.
For all this, I think we should move away from easy money and reread fantastic books of past histories, such as ‘Lessons of History’. Even if in the meantime what we keep coming across on a daily basis is: