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This is large but not a black swan by any means. If you trade NQ for several years or more these movements should not be surprising. Even at after the drop, it

This is large but not a black swan by any means. If you trade NQ for several years or more these movements should not be surprising. Even at after the drop, it is (in my opinion) absurdly overvalued, and has been for 5+years. That said… the advice about the market remaining irrational longer than you can remain solvent applies.

jfengel 1y ago
The market has been overvalued for decades. Even the biggest corrections only take it down to a reasonable valuation. There is never a rational buying opportunity... except that people have lived their entire working lives without seeing a reasonable price. (Maybe... 1987?) It's very likely that Tuesday the market will see a buying opportunity and send it right back towards record territory. Which is insane. I think there is a genuinely new factor at work: so much money flows into the market that it has bought up all of the possible future earnings. That was all following reasonable advice, but that advice assumed that the market could absorb all of that money. If too much flowed in new capital opportunities would arise. But even before the AI bubble, that had ceased to hold.
- bjtitus 1y ago
  The quote should be updated from "Markets can remain irrational longer than you can remain solvent" to "Markets can remain irrational longer than you can remain alive".
- andrewmcwatters 1y ago
  At some point, inevitably, bonds have to appear more attractive. Until those, too, get bid up until their coupon rates become effectively worthless compared to bank deposits or worse, inflation.
  - immibis 1y ago
    At some point, all financial instruments look bad, but non-financial markets remain: it's possible to go out and buy goods and services, and it's possible this leads to a better end result than holding financial instruments as long as possible. Even when the market isn't bad, it's still a good idea to consider your balance between financial and non-financial assets. The whole point of holding financial assets is to eventually maximize your non-financial assets, after all.
- Esophagus4 1y ago
  If it’s been “overvalued” for decades, wouldn’t there be a point where we can concede that it is actually valued properly, and it’s your valuation model that needs to adjust, not the market? Surely there is some time horizon at which we can admit that the market is effectively correct. After 100 years of being “overvalued”, can we call that the real value? 1000 years? This seems like that meme where the guy is looking in the mirror and telling himself, “you’re not wrong, the market is wrong”[1] [1]https://i.imgflip.com/639cj2.jpg https://i.imgflip.com/639cj2.jpg
  - solatic 1y ago
    > wouldn’t there be a point where we can concede that it is actually valued properly, and it’s your valuation model that needs to adjust, not the market? Requires an alternate proposal about how to value stocks, and in aggregate, the stock market at large. The only reasonable way to value stocks is in their potential, upon purchase, for the purchase price to be returned via dividends issued on future profits (even stock buybacks ultimately justify their price increase on dividends being divided among fewer shareholders). > After 100 years of being “overvalued”, can we call that the real value? 1000 years? Stocks are being priced at levels that will require longer than a full human lifetime to return their share price via dividends. "Overvalue" is subjective; some people will be fine with the idea that only their children (or, someday, only their grandchildren, and so on ad infinitum) will see a profit. People will also pay a premium for the liquidity of the stock market compared to less-liquid investments (e.g. real estate). There is simply too much cash sloshing around compared to the opportunities for return available.
    - _se 1y ago
      Complete nonsense. Your understanding of investment is entirely flawed. Dividends are one element of the value of a stock, but there are many, many others. Chiefly, the expectation that the stock will rise in value such that you can later sell it for more than you purchased it for. A parallel to draw very easily is an investment in commodities. Those will never pay a dividend, so therefore they're worthless? Obviously not, you invest in them because you expect their value to rise. Same with a stock. An asset is worth what someone is willing to pay for it. That is its value. Intrinsic value is an element, but not the most important one.

jfengel 1y ago

The market has been overvalued for decades. Even the biggest corrections only take it down to a reasonable valuation. There is never a rational buying opportunity... except that people have lived their entire working lives without seeing a reasonable price. (Maybe... 1987?) It's very likely that Tuesday the market will see a buying opportunity and send it right back towards record territory. Which is insane. I think there is a genuinely new factor at work: so much money flows into the market that it has bought up all of the possible future earnings. That was all following reasonable advice, but that advice assumed that the market could absorb all of that money. If too much flowed in new capital opportunities would arise. But even before the AI bubble, that had ceased to hold.

bjtitus 1y ago
The quote should be updated from "Markets can remain irrational longer than you can remain solvent" to "Markets can remain irrational longer than you can remain alive".
andrewmcwatters 1y ago
At some point, inevitably, bonds have to appear more attractive. Until those, too, get bid up until their coupon rates become effectively worthless compared to bank deposits or worse, inflation.
- immibis 1y ago
  At some point, all financial instruments look bad, but non-financial markets remain: it's possible to go out and buy goods and services, and it's possible this leads to a better end result than holding financial instruments as long as possible. Even when the market isn't bad, it's still a good idea to consider your balance between financial and non-financial assets. The whole point of holding financial assets is to eventually maximize your non-financial assets, after all.
Esophagus4 1y ago
If it’s been “overvalued” for decades, wouldn’t there be a point where we can concede that it is actually valued properly, and it’s your valuation model that needs to adjust, not the market? Surely there is some time horizon at which we can admit that the market is effectively correct. After 100 years of being “overvalued”, can we call that the real value? 1000 years? This seems like that meme where the guy is looking in the mirror and telling himself, “you’re not wrong, the market is wrong”[1] [1]https://i.imgflip.com/639cj2.jpg https://i.imgflip.com/639cj2.jpg
- solatic 1y ago
  > wouldn’t there be a point where we can concede that it is actually valued properly, and it’s your valuation model that needs to adjust, not the market? Requires an alternate proposal about how to value stocks, and in aggregate, the stock market at large. The only reasonable way to value stocks is in their potential, upon purchase, for the purchase price to be returned via dividends issued on future profits (even stock buybacks ultimately justify their price increase on dividends being divided among fewer shareholders). > After 100 years of being “overvalued”, can we call that the real value? 1000 years? Stocks are being priced at levels that will require longer than a full human lifetime to return their share price via dividends. "Overvalue" is subjective; some people will be fine with the idea that only their children (or, someday, only their grandchildren, and so on ad infinitum) will see a profit. People will also pay a premium for the liquidity of the stock market compared to less-liquid investments (e.g. real estate). There is simply too much cash sloshing around compared to the opportunities for return available.
  - _se 1y ago
    Complete nonsense. Your understanding of investment is entirely flawed. Dividends are one element of the value of a stock, but there are many, many others. Chiefly, the expectation that the stock will rise in value such that you can later sell it for more than you purchased it for. A parallel to draw very easily is an investment in commodities. Those will never pay a dividend, so therefore they're worthless? Obviously not, you invest in them because you expect their value to rise. Same with a stock. An asset is worth what someone is willing to pay for it. That is its value. Intrinsic value is an element, but not the most important one.