There Is A HUGE BUBBLE in the stock market I NEED TO SHOW YOU
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Right now there is a huge bubble I see going on in the stock market in this particular sector. In this video, we will dive into the past 3 major financial bubbles.
Which included the 2000 tech bubble, the real estate bubble of 2005-2007, and the cryptocurrency bubble of late 2017. We will discuss if the stock market, in general, is a bubble currently. I will show you which sector or industry is in a major bubble in the stock market currently. Almost all stocks in that sector are in a bubble. Lastly, we will talk about the bunch of stocks that I believe should be in bubble territory right now but are not. Enjoy today’s video.
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Well, good day subscribers Hope you guys are having a great day out there. As always, we have four very, very important things I wanted to discuss in today’s video. Okay, the first is I want to discuss the three major financial bubbles we have had since the year 2000.
There have been three of them, I want to discuss those in detail. If you don’t really understand the past financial bubbles, then it’s really hard to understand bubbles that might be going on today or in future years. And that leads me The second thing we got to talk about in today’s video is the stock market in general in a bubble right now this is super important.
I know a ton of you guys are stock market investors, you have considerable amounts of your wealth, invest in the stock market very important to pay attention to it. Look, we’re gonna look at a ton of charts they they’re gonna kind of show you is the stock market in general in a bubble right now, the third thing.
I want to discuss is where a bubble absolutely is in the stock market right now there absolutely is an industry of stocks that are absolutely in a bubble right now I want to talk about that. And the fourth thing is, is I think there’s a sector that shouldn’t be in bubble territory, or let’s just put it this way, a sector that should have much higher valuations on it right now than it does because it has massive growth ahead.
And everybody’s asleep at the wheel on the sector in an absolutely amazes me. Okay, so those are the four things we’ll discuss in today’s video. Hope you guys enjoy it. Let’s start getting into this guys. Alright, so first off, let’s talk about the.com bubble that was one of the three major financial bubbles we have had since the year 2000.
If you don’t know what the.com bubble is, it’s also known as the tech bubble, the internet bubble. It was a historic speculative bubble in a period of excess speculation mainly in the United States that occurred from roughly 1994 really, it got really out of hand from 97 to 2000. Okay, it was a period of extreme growth in the use and adoption of the internet.
Obviously, the NASDAQ composite, which is a stock market index included many internet based companies they peaked in value around March 10 2000, before crashing the burst of the bubble known as a.com. Crash lasted from about March 11 2000 to about October 9 2002.
So needless to say, who was a long crash Okay, this was a long crash. During the crash many online shopping companies such as pets.com, wed van boo calm as well as communication companies such as WorldCom NorthPoint communications global crossing failed and shut down others such as Cisco lost around 86% of their value at Qualcomm lost a massive amount of their value amazon.com did as well he Bay, but eventually, obviously, those ones did recover.
Now to show you how insane the naztech got during this time. Look at this chart here. This shows you basically the NASDAQ from about 1984 to about 2005. There are three things that are really interesting to me. One is back in 1985, the NASDAQ was under 1000 points.
The second thing that’s very interesting about this is over the course the next five years, the NASDAQ going from under 1000 to 5000 it over 5x in about five years. That is the second thing that absolutely amazes me about this. Okay, that’s just ridiculous.
That’s just ridiculous. And the third thing that amazes me about this is look at everything comes tumbling down from 2000 to basically 2002. And then look at my 2005 things aren’t even close to being recovered. I mean, the NASDAQ was at about 2000. In 2005, when once again, it peaked over 5000.
Okay, that’s absolutely amazing. Now, to give you some context, as far as venture capital investments during that time period, although we have very high venture capital investments in recent years, 2014 2015 2017 very high venture capital investment years, they still are anything lows to as high as they were during that tech bubble, which really just shows you how insane things had gotten during that particular time.
Okay, tech bubble, people absolutely gotten a lot of people made a lot of money on the tech bubble run up, you know, there was IPOs, coming out left and right, that basically had, you know, a dream of a business model, not really much there.
And the valuations would go insane in these companies, hundreds of millions of dollars of valuation, billions of dollars of valuation for companies that basically were just an idea of a company, they really didn’t have any real customers at that time or anything like that.
And people were just jumping on investing money like crazy. The companies were losing money. I would say today, if we just look at the IPO market today, I would say the IPO market today I really don’t like where the IPO market is today, because most of these companies that are going IPO are money losers and should be for years to come.
And I have personally I don’t really like that. But I will say it is better than 2000 because at least there are businesses that are like revenues, like 10s of millions of dollars revenue or hundreds of millions or sometimes in some of these companies cases, billions dollars in revenue, but they are money losers.
So although I will say I don’t really like the IPO market currently, it is better than 2000. Okay, but that’s not saying much because 2000 things were ridiculous. Okay. Now the second big huge financial bubble we have had since the year 2000. Was the housing bubble.
Okay, this was from about 2004 to about 2007. And the housing bubble basically was just the fact that like home prices kept going up in such a dramatic fashion. Okay. I remember you know, 2004 house, Mike parents lived in might have been worth like 200k.
And by like, 2007 I remember my dad saying things like, Oh my gosh, our house was worth like twice as much as it was just a few years ago. Okay, it was absolutely ridiculous. You know, a $200,000 house was also worth $400,000. In a matter of a few years, like, like real estate is supposed to get more expensive as time goes on, right?
You’re supposed to buy a house and 10 years from now, or 20 years from now, 30 years from now, it should be more expensive than what it was when you bought it. But in a course of 3456 years, your house should not have doubled in price. Okay, that is absolutely ridiculous. That is a sign of a big bubble, right?
Especially when you’re not coming out of some type of massive recession or something like that which we we’re not coming out of some type of massive recession or something like that. It’s just real estate prices have gotten insane. People were buying second, third fourth homes, everybody was going to also become a real estate investor pricing had gotten absolutely ridiculous.
Okay to show you some context of this, even though Las Vegas home prices, the city I live in, right, a lot of the home prices have come back a ton. They are still below where they were at in 2007. Okay, that was 12 years ago, 12 years ago in Las Vegas, home sales in terms of the price the average home is selling for is still not even back to 2007 levels.
12 years later, that should give you some context on how out of control the housing bubble caught, okay. And a lot of people were hurt dramatically from this, obviously, is part of the reason why we had the great recession. And obviously, that was the worst recession we’ve had in a long, long time in the United States of America.
Okay, that’s the second bubble we’ve had since the year 2000. And the most recent ones, the third big financial bubble we have had since the year 2000. was in the crypto market. Okay, this bubble absolutely got out of hand. Okay. To give you some context of this in December 2017, when the crypto market was kind of peeking out, okay.
The crypto market as a whole was worth around $800 billion, roughly around $800 billion. In a matter of about a year, year and a half time the market cap had dropped to well under $200 billion. Even though the crypto market has recovered a ton this year, the crypto market in general Sterling worth about 250 billion $260 billion, when once again, it was worth over $800 billion less than two years ago.
Okay, so those are the three big financial bubbles we have had since the year 2000. I think it’s very important to understand those very different markets. One was in relation to tech stocks, right in the stock market. One was stock market related. One was real estate market related. One was crypto market related, right, three massive bubbles.
So let’s talk about today. Let’s see where we’re at today. Okay, very important to talk about today. So I want to show you some charts here that will kind of illustrate whether we’re in a bubble in the stock market in general or not. And then I’ll show you absolutely a bubble in the stock market. Okay, so this first one we’re looking at is s&p 500 p e ratio.
So very important metric to look at to understand if the stock market is rich at a particular time as far as evaluations go, or is about where it should be. Okay. Now, when you pull up one of these charts, you can look back as far as you want. But really, you know, what happened in 1880, or 1910 is pretty irrelevant.
Because it was such a long time ago, the environment was very different, the economy was very different. So what I like to look at is like the most recent few decades, right? So I kind of draw the line around 1998. And since basically the 90s, we’ve been in like a low rate environment, which basically means a lot of people if you want to.
You know, make your money into money, you kind of gotta flush money into the stock market, because you’re not going to get much on a savings account or something like that, like you might have in the 70s or 80s or something like that. Okay, so if we look at the 1990s through today in the in 2019. So basically about the last three decades essentially drew line at basically a P of about 25.
And why did I do that is essentially if the P gets above 25. That means we’re getting to real rich valuations right now, you will see in the tech bubble, the P e ratio got completely out of hand right during the tech bubble peas were anywhere from 30 to over 45 like up to all the way up to about a 48 the s&p 500 p e ratios got up to Okay, so the tech bubble, things have gotten absolutely ridiculously overvalued.
In other time, obviously, it looks insanely overvalued was the great recession. That was 2009. No, that was a one off year just basically because all companies either lost money or hardly made any money compared to what they were making. For me the valuations kind of look ridiculous for one particular year in 2009.
And then things kind of got back to balance. So if we look at currently, we’re at about a 21 and a half on the P e ratio right now for the s&p 500. So we’re below that 25 numbers over looking at just the s&p 500 p e ratio in general, I would say we’re not like we’re not richly valued, but at the same time, we’re not undervalued or something like that, like 21 and a half.
That’s about what you can expect in a super low rate environment like we’re in right now. And so as far as that chart makes me feel pretty comfortable. Okay, this next one’s a little more worrisome. This chart here shows you the s&p 500 price to sales ratio. Okay.
Now, keep in mind that last chart, we’ve talked about the P e ratio that looks more at what a company is actually earning in earnings per share, right, and a company can kind of help out the earning Per Share kind of two ways one, they can take basically more shares off the market because they did a big buyback.
The other way that can help the earnings per share is just make making more profits on the bottom line making more net income. And those are really the two main ways you can help your earnings per share in this chart really illustrates that most of the earnings growth is coming from share buybacks because the fact is we’re pretty richly valued when it comes to a price to sales ratio for the s&p 500.
In general, it’s at about 2.16 right now. Okay. But once again, earnings per share have gone up pretty dramatically over the past few years, but mainly is because of the massive amount of share buybacks that are going on. Okay. So when I look at that chart, I say, Hmm, that’s not as healthy from a stock market perspective.
I like to see a lot of revenues going up I like to see a price to sales ratio that is more fair, the fact is a price to sales ratio is very richly valued. Right now, when you look at the P e ratio, it’s not really richly valued. Once again, share buybacks are being done in mass k, s&p 500 price to book value in terms of this one, anytime it gets over three, you’re getting to a little bit of rich valuations when it comes to a price to book value.
And right now we’re at about a 3.4 on this one. Okay, we’re at about a 3.4 as of right now, which essentially means we’re little richly valued on the price to book value. Now keep in mind in the tech bubble, it was over five, so we’re nothing even remotely close to that. Okay.
So you know, you look at these different charts, you look at, you know, a price to sales ratio for the s&p 500 p e ratios and these different types of things, they’re going to give you some context on if you’re kind of like overvalued or undervalued in the stock market, or particular time, or fairly value. So here’s the conclusion, I kind of dropped the market in general is a big tie.
Okay, it’s a bit high, but it’s not in a bubble. However, with that being said, there are some bubbles in the stock market and there’s some stocks that are you know, bubbles in general right now. There’s some sectors that are bubbles in general in the stock market right now, which I want to go ahead and talk about.
Okay, so if you want to see a sector that is very overvalued right now, go ahead and look at the software stock valuations for the Russell 3000. Okay, Russell 3000 software valuations are extremely high, extremely high, this goes ahead and shows you the enterprise value to sales ratio. And if we look at this, it is unbelievably high is by far and away the highest we have seen since the tech bubble.
And that is obviously a very, very, very bad thing. Just look at how out of whack that chart has basically gotten since about 2014. It is unbelievable, guys. Now if you’re wondering, basically what is the enterprise value to sales ratio we’re talking about is basically a valuation measure that compares the enterprise value of a company to its annual sales, ie to sales gives investors a quantifiable metric on how much it costs to purchase a company’s sales.
Okay? Once again, let’s look at this chart. If you see at the peak of the tech bubble, they were around in eight Okay, and basically anytime you’re in a six to 7x type area, you’re massively overvalued and we see right now we’re in that six to seven range. Okay, which means let’s go ahead and pop some public.
Okay. valuations are extremely rich on so many of the software stocks right now. It’s absolutely ridiculous guys, and is absolutely a bubble in the stock market and absolutely will come crashing down at some point in time. The question is, is it going to be a slow fall for that industry of stock?
Because it needs they need to, like somehow get balanced out? Right? They can’t keep trading where those stocks are particularly at right now. Okay, so it’s ugly. Now, the question is, there are some stocks that I believe should have very rich valuations on them in they don’t right now.
There’s a sector of stocks is like an industry of stocks that have this massive growth potential over the next, let’s say, five to 10 years because of a massive shift in the market that’s about to happen. And everybody’s like asleep at the wheel at this and like no one is like looking at this and pointing out that so many of these stocks are massively undervalued because.
I don’t think anybody’s really anticipating the type of growth these type of stocks are going to have. And it’s 5g, we’re about to have a fundamental shift in the economy when 5g launches in is complete change in really how tech is done and how the tech industry in general can operate.
5g is going to fundamentally shift the businesses for so many companies out there instead and looking at a lot of these stocks that are going to be massive, massive players in 5g in their valued like they have no growth in front of them. There are countless stocks we can point out that are going to be massive players in 5g or at least have a chance to be massive players in 5g and they’re literally trading at Pease at nine right now. 10 1112.
So many of them have gotten like sucked into the short term like worries about like China, in the trade environment, things like that, that people have completely forgotten that over the next five to 10 years, so many of these companies are going to grow massively because they’re going to be huge players in 5g.
Whether they’re supplying chips for the 5g industry, whether they’re supplying the infrastructure to build out the 5g or whether they’re companies that will just benefit huge from the fact that speeds are going to be massively faster when it comes to downloads and uploads when we once we get to 5g and you’re just Look at these 5g stocks and it’s just like no one is paying attention and this rarely happens in the stock market.
This rarely happens and when it does happen you absolutely have to take advantage of this because usually the stock market gets too hyped on an industry at a particular time. And if I’m looking at 5g related stocks, I’m looking at like weigh under height for this sector and.
I don’t think people have any conception of how much earnings are going to grow for a ton of these 5g companies over the next 357 years because of 5g and so if you’re looking at a ton of stocks that are actually pretty undervalued right now look at the 5g stock I haven’t really seen anything like this in stock working a long time where an industry is under hype in a massive way and just wait guys it’s gonna be special.
So anyways, hope you guys enjoyed today’s video just kind of looking at bubbles thinks very important to take a look at I want to hear your guy’s opinion that comment section as always, make sure you smash that thumbs up button. A lot of research wins today’s video. I hope you guys really enjoyed it. Thank you for watching and have a great day.