Articles come out every single day warning you that you're going to be in for 300 years of stock market returns in the negative. Which leads you to believe Hey, wait a second. Not only in my lifetime or stocks just gonna go down, but in my grandson's grandson's grandson's lifetime, stocks are only going to go down. Why even buy stocks? You look at Triple Q, which represents the biggest 100 players in the Nasdaq.

After the Covet dip early last year, it's really taken off like crazy and it's like, whoa, wait a second, Charlie, that's looking awfully bubblish, ain't it People are saying hey, you know, maybe that means that we're in for the biggest sell-off of our lifetime. And of course, by nature of charts and the way that percentage gains work, while every current bullish trend is going to indeed look like a bubble, and you can zoom back throughout the last decade to see that that is always true. So pretty much anytime you have a very strong bullish trend, you can always say that hey, it's looking like a bubble. And obviously that's pretty deceiving.

But that doesn't mean that we're not in a bubble, it just simply means that the chart may not be the best way to determine whether we're in a bubble or not. Pretty much everything is at all time highs and has been steadily going up for a long time. You look at the S P 500, You look at the dow, You look at the Arc growth funds. Obviously, Arc had some turbulence in the beginning of the year and it had like a partial comeback, but overall, if you look the last two years, it's up massively dramatic dramatic rise.

And of course, the big fear right now is hey, isn't all of this just propped up by easy money, propped up by stimulus that appeared out of thin air and propped up by just some greedy speculation. And while nobody can tell you exactly when the market is going to crash, it's very important to talk about some of the biggest red flags right now so that you can prepare and actually have a realistic expectation. That's not naive into assuming that we're never going to have a crash, but also is it naive enough to assume that we're always in for a crash and that you should wait 25 years after five more crashes pass in order to buy a simple index fund? Fact of the matter is that traders survive by being aware of market condition and trading off inconsistencies with true value. Which means when things are going way way under value, you're milking that when things are getting way way overvalued, you're milking that as well, trading momentum, or you're buying good deals and you're having a realistic context of what's going on.

But anyways, the only thing that I asked in return for this video is that you hit that ravishing like button. A button that never goes into a recession, by the way. So feel free and safe to invest in it. And yes, that is like button.

advice. And also don't forget to subscribe either. Also, quick reminder: our zip trader you 75 off coupon code is expiring this week. So if you'd like to join us and get access to our step-by-step lessons, our private chat, and of course our daily morning briefings, I will go ahead and put a link to that below.

We do offer lifetime access for that one-time payment, so if you were thinking about it or you're on the sidelines, maybe give it another look before that coupon code expires. Okay, let's start with some quick updates on plays and what happened today. So yesterday we were talking about my prediction that Spce the not Virgin Virgin Galactic would have an initial rally as the last people fo' mode in on the news and that it would eventually end in a sell-off and then eventually sleep until the next catalyst. That was true, but not in the way that I imagined.

It had an original pop to 59.99 in the pre-market and then sold off into Open. As Virgin Galactic decided to do an offering, I am continuing to watch it for signs of bottoming, but certainly not a buy and hold play of ours. Perhaps a catalyst play in the future though. We covered Epstein on Friday's video, talking about how it was a perfect combination of an actually good company with increasing metrics in terms of what they're delivering on as well as combined with being a good short squeeze candidate.

And it looks like the Sacks over at Goldman agreed with me. In fact, they put it as a buy just today with a price target of 147, which helped contribute to a 9 rally today at highs. I guess you could say that we pre-sacked the Sacks over at Goldman Sachs by calling it out before them. They say, in order to de-sac Goldman Sachs, you have to pre-sack them about three times, so we're one out of three in terms of de-sacking them Next, Not much in terms of opportunities for catalyst play.

Sometimes you get a lot, sometimes you get none, sometimes you get a mix. We did have one that nearly doubled Sgoc. We did get lucky on this play on a pretty bad day overall, with mostly disc luck to be fair, but we did brief on this one 30 minutes prior to market open. At about 1570ish a share, it ran to 29 bucks and then it sold off again.

I found that the momentum in the pre-market combined with the volume inflow that was expected at market open would contribute to a high probability of this running. That being said, a lot of my other stocks that I thought had a lot of opportunity this morning didn't end up having opportunity. Aegl, for example, had a little bit of taking and it's like you had so many different short and quick fake outs. It was insane.

so I can't say that it was a good catalyst day. It just simply wasn't okay. let's go ahead and get to work with the main topic at hand. So famed money manager Ray Dalio put out a video and a chart discussing exactly what the conditions he feels indicate a coming market bubble.

I'll link to it below. Ray Dalio is one of the hedge fund managers that actually founded a lot of my own trading and investing theories and outlook. So if you're looking for somebody from the hedge fund world that you could actually respect, I would say that Ray Dalio is probably one of the best. That being said, let's go ahead and go through the metrics that he presented for a bubble.

Number One: prices are high relative to traditional measures and for today's market, he says somewhat frothy. For emerging tech, he says very frothy number three and we're just doing some major bullet points. That's why we're skipping around a little bit. Number Three: New buyers are entering the market Total Market He says frothy emerging tech He says bubble.

There have indeed been an unprecedented amount of new market participants. Just look at retail and how the numbers have grown. In terms of a lot of these retail brokerages not mentioned in the hood of Robin and you've seen the impacts of that with massive short squeeze it's pretty much daily. These days.

Retail and all these new market participants have had a huge impact. But in this context, they're implying that when you have all these new participants making easy money, then hey, maybe you're in a speculative bubble. And he uses this as an indication for the total stock market. So he's not just talking about some of these popular squeeze plays.

Number four: you have broad, bullish sentiment. He says frothy and bubble. Number five, you have purchases are being financed by high leverage. He says somewhat frothy and then bubble.

And these are some of the main points that I want to show data for. So so on the short. In the blue you see the S P 500, and in the red you see the margin debt. Now, margin debt tends to expand during periods of low interest rates and upward momentum in the market.

Makes sense when interest rates go down and borrowing requirements go down. you get more leverage for your buck and at a cheaper price. What does that mean? Well, institutions and people start buying more and more and more and more stock because they have more and more buying power. On the flip side, when interest rates go up, you start seeing a lot of that leverage pull back.

But you can also see leverage pull back even if interest rates are low. When the stock market's future seems sort of uncertain, it doesn't seem like there's a clear trend. Well, what happens with a lot of that leverage that was going to be in there for like a three to six month period starts pulling back. They're like, okay, well, I don't see a good three to six months in the future.

So they start pulling back and all the other leveraged carriers pull back. and they pull back and the market tanks. And that's kind of what you saw on the chart in 2018. With some of that taper tantrum that we saw when the Fed was trying to raise interest rates, they did raise interest rates and it caused a little bit of selling off.

And then a couple years later, they had to dramatically lower them again in order to deal with this pandemic. And in totality, since the 2020 crash, you've seen margin debt move steadily upward, with the S P implying some of the most consistent increases in leverage in market history. Big red flag here is that hey, when you have such a breathless increase in margin, history dictates that margin is going to take a breath, and margin hasn't really taken much of a breath since that crash in any meaningful way. Throughout the broader market, we saw some deleveraging in some sectors of the market earlier this year.

we see the leveraging in crypto currencies, but we haven't seen that in the broader market, and that's and that is present on the chart. You can see that, and when you see unprecedented margin increases and no breathing for long periods of time, well, that certainly is one red flag. Now the third point, and probably the most practical point to talk about, is really the fundamentals. Do the fundamentals: line up with what the company's doing now or what the companies are doing reasonably in the upcoming years and what the economy suggests can happen.

Many people use P E ratios, which aren't my favorite, but we're going to start with that to actually gauge how much you're paying for company profits relative to the price of the stock. Look at the P E ratio of the S P 500. You're certainly factoring in quite a lot. We are seeing numbers that are higher than the Dot-com Bubble, but not nearly as high as that pre-great Recession jump.

Keep in mind though, that this is misleading because there's a lot of different industries that haven't gotten back to their mature growth rates yet. If you're comparing today's P E ratios for American Airlines, Delta Airlines, or whatever other airline you want to talk about to those same companies from 2014, 2015, and 2016, Well, it's a completely different growth rate. Because of the pandemic, the business of airlines went down dramatically. so you have a much higher growth rate in order to get back to that mature level.

So when you're looking at these P E ratios, it's like hey, you're paying a lot for no profits, But in reality there's a lot of high, high, and pretty certain growth expectations that are going to be following in the upcoming years. I would also argue that a better look at valuations is the Buffett indicator. The Buffett indicator basically takes the entire U.s stock market and relates it to Gdp of the Us. That way you can get an actual comparison of the market to the economy.

And by that metric, we are at a price higher than the Internet Bubble. We are at a 233 ratio of market value to Gdp, and are 87 percent higher than that of the longer term trend line. This is more like a conditional red flag. It's a red flag if the economy can't reach the expectations that the stocks have factored in and again.

that sounds obvious. But, but the reason that this is so deep in the overvalued category is specifically because the fair value is dictated by Gdp, and Gdp is artificially or I should say, co-vittedly low right now. and as that damn virus and the ramifications from that damn virus fade away, you're going to start seeing that fair value tip upwards, which will push the valuations more consistent with that fair value trend. If Gdp grows substantially, that means that the ratio of current valuations, the Gdp will move from strongly overvalued closer to fair value.

And I'd say that the biggest takeaway here is that certainly we factored in a lot. No, it's not sustainable forever, But it's certainly possible that we can see this fair value trend line trend upward once Gdp catches up, and as long as economic growth can trend upward and easy money policies remain in place, which projections are that they will. There's nothing that suggests that this immediately has to stop. I don't think the problem comes from companies being overvalued right now because the things that made them get to this value in the first place are still present and the Gdp is yet to really catch up to the extent where it can push it back down to fair value.

And if Gdp catches up, then they actually have more room to run and in which case, you certainly don't have to make a case for a dramatic drop. But obviously the two big factors here are, well, if the recovery is actually going to go as planned, and if inflation is going to get out of control where the Fed has to go in and change their policies because obviously changing interest rates can screw the valuations and screw the recovery at the same time. and of course, not having the correct Gdp growth and not having the profits delivered for these companies gonna make them look a lot more pricey come upcoming quarters. So what these valuations imply is that hey, yes, it can run a lot more, but you're certainly on this thin line here where it needs to be perfect.

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