
Ask HN: Are we in another tech bubble? - s3nnyy
VGT is up (Information tech worldwide ETF) and CQQQ (Chinese tech) even more.<p>The &quot;Technology Select Sector SPDR Fund&quot; (Ticker: XLK) is again at the same price as it was before the dot-com crash. Obviously, many things changed in the last 17 years.<p>But still I am thinking: Are we in a bubble?
======
cujic9
I think the entire investor class in the US is currently experiencing a
bubble. By "investor class" I mean anybody who has a significant amount of
money in stocks or bonds.

The bubble was inflated by the quantitative easing that the Fed has done
across the past 9 years in order to prevent the 2008 recession from turning
into another great depression.

The bubble has led to asset price inflation both in the US and elsewhere.
Basically, investors have money, but consumers don't. So the money is chasing
assets (stocks, bonds, houses, Bitcoin) rather than starting new businesses or
growing existing businesses. (Why build a business if your potential customers
are broke?)

The average US consumer with no savings, on the other hand, has seen wages
stagnate. As a result, the prices of consumer goods have stayed roughly the
same. That's why the Fed has been able to pump trillions of dollars into the
economy without causing massive inflation. The inflation is happening, just
not in consumer goods where we typically measure it.

That's why the Fed's recent decision to reduce their balance sheet is so
interesting and so important. They are going to gradually make a few trillion
dollars of easy money disappear, and it's going to let the air out of the
bubble. To do this, they are going to stop buying new bonds with the cash from
old bonds that have matured.

The hope is that by deflating the bubble in a transparent and gradual way,
they can avoid any type of severe market movements, and can take their foot
off the gas pedal (or brake, more accurately) if/when necessary.

~~~
s3nnyy
Interesting points.

I was asking on HN to get a Bay Area perspective. Your answer sounds more
Wallstreet'ish - no offense.

The dot-com crash happened because there unreasonable businesses like pets.com
got millions.

The 2008 crash happened because poor people got loans on houses who shouldn't
have gotten those loans.

What about 2018?

~~~
cujic9
No offense taken. I was on Wall Street in another life.

I don't know if there will be a crash. The market went up slowly, it could
also go down slowly. That's the Fed's goal, it seems.

I do think that any time a bunch of people are making a bunch of money without
knowing _how or why_ , but by simply following the herd, it is leading to a
dangerous place.

This is happening right now in the S&P 500 and other index funds. Everybody is
getting the same advice ("buy index funds") and following it blindly.

I expect there will either be some kind of sea change where the herd starts
moving (possibly stampeding) in the other direction, or someone on Wall Street
is going to figure out how to take advantage of the movements of the herd.

But this is all speculation. If I knew for sure, I'd be a billionaire in the
next few years.

~~~
s3nnyy
> someone on Wall Street is going to figure out how to take advantage of the
> movements of the herd.

Maybe by buying "reverse etf s&p 500"?

~~~
cujic9
That's too risky. It relies on the herd running in a specific direction.

I'm talking about profiting off of the predictability that exists as a result
of there being a herd. You can find a way to make money no matter what
direction the herd moves.

To put it a different way, see that tree over there? Right now it is much more
likely that 1,000 buffalo run past that tree vs. one and only one buffalo runs
past that tree. That's how a herd works. This is the opposite of how the
market usually behaves, and I imagine there is some mis-pricing to be found as
a result.

