Economic bubbles... We all remember the American housing bubble that triggered the credit crisis in the USA in 2007. Seven years earlier, investors lost a lot of money when the Dot-com bubble burst. Investors never seem to learn from previous bubbles, because spotting a bubble is not always easy. Of course it's easy afterwards, but even while a market is in a bubble it can always go higher. Even much higher!
The Everything Bubble
According to Jared Dillian, economist at Mauldin Economics, everything is a bubble at the moment. Together with his colleagues at Mauldin Economics he created the infographic below to show us all the bubbles he believes we are currently dealing with.
In 2000, we had the dot-com bubble.
In 2007, we had the housing bubble.
In 2017, we have the everything bubble.
S&P 500 Stock Index
Is the stock market in a bubble right now? Below is a chart of the S&P 500 Stock Index. How can one argue this is not a huge bubble? Can the index go higher? Sure, but corrections and crashes will always come one day. No asset goes straight to the top without corrections and crashes. The last correction was in January 2016 and the last stock market crash was during the crisis of 2008. We haven't seen a correction in almost 2 years. This is not normal! Look how overbought this market is on the RSI indicator in the chart below. A correction will surely come, you just don't know exactly when.
Cryptocurrencies
Do you remember when the Bitcoin bubble burst when Bitcoin Exchange Mt. Gox collapsed in 2013? Below is a chart of the total market capitalization of all cryptocurrencies. As you can see the bubble of 2013 was nothing compared to today's prices. The question remains if cryptocurrencies are in a bubble right now? Only the future knows.
To put things in perspective...
| Asset | Value |
|---|---|
| Value of all gold in the world | $7,823 billion |
| Value of all companies on the NASDAQ in March 2000 | $6,710 billion |
| Value of all Apple stocks | $805 billion |
| Value of all Google stocks | $679 billion |
| Value of all Facebook stocks | $498 billion |
| Value of all cryptocurrencies combined | $154 billion |
| Value of all Bitcoins | $80 billion |
| Value of all STEEM | $243 million |
As you see... If the cryptocurrency market is currently a bubble then it is a relative small one.
Which bubble do you think is going to burst first?