Link to join StockHub free investing discord server: Want to join our free STOCKHUB discord chat? Here is the link
Well good many subscribers hope you guys are having a great day out there as always we have four very very important things i want 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 to b 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 our stock market investors you have considerable amounts of your wealth invest
In the stock market very important to pay attention to and look we’re going to look at a ton of charts today that are going to 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 then it does because it has massive growth ahead and everybody’s asleep at the wheel on this sector in and it absolutely amazes me ok so those
Are four things we’ll discuss in today’s video hope you guys enjoy so start getting into this guys okay so first off let’s talk about the dot-com bubble that was one of the three major financial bubbles we have had since a year 2000 if you don’t know what the dot-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 but really it got really out of hand from 97 to 2000 okay it was a period of extreme growth and the use and adaption of the internet obviously the nasdaq composite which is a stock market index included many internet-based companies they peaked in value around march
10th 2000 before crashing the burst of the bubble known as a dot-com crash lasted from about march 11th 2002 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 pet calm web van boo calm as well as communication companies such as worldcom northpoint communications global
Crossing failed and shutdown others such as cisco lost around 86 percent of their value at qualcomm lost a massive amount of their value amazon.com did as well ebay but eventually obviously those ones did recover no to show you how insane the nasdaq got during this time look at this chart here this shows you basically the nasdaq from about 1994 to about 2005 there
Are three things that are really interesting to me one is back in 1995 the nasdaq was under a thousand points the second thing that’s very interesting about this is over the course of next five years the nasdaq going from under a thousand to five thousand it over 5x – in about five years that is the second thing that absolutely amazes me about this ok that’s just
Ridiculous that’s just ridiculous and the third thing that amazes me about this is look it everything comes tumbling down from 2,000 of basically 2002 and then looking by 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 5,000 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 close 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 got me a lot of people made a lot of money on the tech bubble run-up you know there was i pos 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 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 these
Companies that are going ipo our money losers and should be for years to come and i personally i don’t really like that but i will say it is better than 2,000 because at least there are businesses there are like revenues like tens 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 a 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 my 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 is 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 in ten years from now or 20 years from now or 30 years from now it should be more expensive than what it was when you bought it but in a course of three four five six years your house should not have double 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 were 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 although the home prices have come back a ton they are still below where they were at in 2007 okay there was 12 years ago 12 years ago in las vegas home sales in terms of the price to 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 got 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 the most recent one 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 peaking out okay the crypto market as a whole was
Worth around 800 billion dollars roughly around 800 billion dollars in a matter of about a year year and a half time the market cap had dropped to well under 200 billion dollars even though the crypto market has recovered a ton this year the crypto market in general stolen worth about 250 billion 260 billion dollars when once again it was worth over 800 billion
Dollars less than two years ago okay so those are the three big financial bubbles we have had since a 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 and so i’m gonna show you some charts here that will kind of illustrate whether we’re in a bubble in 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 it’s sp 500 key ratio it’s a 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 then byron 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’m kind of draw the line around 1990 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 and the money you kind of got to flush money into the stock market because
You’re not gonna 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 a line at basically a p/e 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 all right no you’ll see in the tech bubble the p/e ratio got completely out of hand right during the tech bubble peas we’re anywhere from 30 to over 45 like i’m – all the way up to about a 48 the s&p 500 peak ratios got up to okay so the tech bubble things has gotten absolutely ridiculously overvalued and the other time obviously
It looks insanely overvalued was the great recession that was 2009 though 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 from a 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 number so if we’re looking at just the sp500 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 a 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 i’m certain 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 race to sales ratio okay now keep in mind that last chart we talked about the p/e ratio that looks more about what a company is actually earning in earnings per share right and a company can
Kind of help out the earnings per share kind of two ways one that can take basically more shares off the market because they did a big buyback the other way they can help their earnings per share is just meg 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 and this chart
Really illustrates that most of the earnings growth is coming from share buyback 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 two point one six right now okay well 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 the 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 it shows share buybacks were being done in mass okay as p500 price to book value in terms of this one any time it gets over three you’re getting to a little bit of rich valuations when it comes to a price to book value every now we’re at about a three point four on this one okay we’re at about a three point four as of right now which essentially
Means we’re a 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 price the sales ratio for that’s a p500 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 in a particular time or fairly value so here’s the conclusion i kind of draw the market in general is a bit high 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 ok so if you want to see a sector that is very overvalued right now go ahead and look at the software stock valuations or the russell 3000 okay russell 3000 software valuations are extremely high out 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 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 there’s basically a valuation measure that compares the enterprise value of a company to its annual sales evita sales gives investors a quantifiable metric on how much it costs to purchase a company’s sales okay once again this look at this chart if you see at the peak of the tech bubble they were around in eighth okay and basically
Anytime you’re in a six to seven x 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 bubbly okay valuations are extremely rich on so many of the software stocks right now is absolutely ridiculous guys and is a bubble in the stock market absolutely will come crashing down at some
Point in time the question is is going to be a slow fall for that industry of stocks because it needs they need to like somehow give balanced outright they can’t keep trading where those stocks are particularly at right now okay so it’s ugly no the question is there are some stocks that i believe should have very rich valuations on them and 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 ten 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 is really anticipating the type of growth these types of stocks are gonna have and it’s 5g we’re about to have a fundamental shift in the economy when 5g launches in is complete change and really how tech is done and how the tech industry in general can operate 5g is gonna fundamentally shift the businesses for so many companies out
There and i’m looking at a lot of these stocks that are gonna be massive massive players in 5g in their value 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 fiji or these have a chance to be massive players in 5g and are literally trading at peas at nine right now ten eleven twelve so
Many of them have gotten like like sucked into the short term like worries about like china in the trade environment things like that that if people have completely forgotten that over the next five to ten years so many of these companies are gonna 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 gonna be massively faster when it comes to downloads and uploads once we get to 5g and you 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 way 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 three five seven 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 the stock work in a long time where industry is under hike in a massive way and just wait guys it’s going to be special so anyways hope you guys
Enjoyed today’s video just kind of looking at bubbles think it’s very important to take a look at i want to hear your guy’s opinion that comment section is 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
Transcribed from video
There Is A HUGE BUBBLE in the stock market I NEED TO SHOW YOU By Financial Education
