Transcription
[Music] The stock market is very expensive. We're in a bubble about to burst. At least that's what most people are saying. So, a few notable people have said that stock prices are way overvalued. Starting with Jerome Powell, the Fed chair. He said recently that equity prices are fairly highly valued. And then Lisa Cook, a Fed governor, also said valuations are elevated. Jamie Diamond, the CEO of JP Morgan, said asset prices are uh at the top 10 or 15% of historic valuations. We've got Jeff Bezos uh founder of Amazon recently saying that we are in an industrial bubble. And of course, if you look at YouTube, almost every mother, father, son is using the word, you know, bubble, right? AI market bubble. Uh lots of bubble in US tech. We've got early days of a bubble. AI bubble about to burst. History tells us this bubble in stocks will not end well. So million-dollar question, is the stock market in a bubble? Is it overvalued? The answer is yes and no. So why?
So yes, there are certain parts of the stock market that are in a bubble. They are way overpriced certain parts of the market. But then again, there are also some other parts of the market that are actually very very cheap. They're very undervalued. But as a whole, I would say the market is not cheap. It is not cheap, but it's also not in a bubble overall. Okay. So, let me first talk about the overall market, why I don't think it's in a bubble, and then I'll talk about the parts that are in a bubble and the parts that are really cheap right now.
So, first reason, why isn't the market uh in a bubble? So people who say the market is very expensive, they're looking at certain metrics uh like the PE ratio and they're saying that the PE ratio is now uh higher than its average in the last 10 15 years. But I've said many many times that PE ratio um can be very misleading. Why? Because whether a PE is high or low doesn't matter unless you look at the growth of the earnings. Okay? And it doesn't make sense to compare today's market PE ratio with the PE ratio 10, 20, 30 years ago because companies are now growing their earnings with higher profit margins which are in fact triple the profit margins of companies 20 30 years ago. So a more accurate way to measure the overall value of the market is to use the pack ratio. I've said this many many times. So the pack ratio is actually the PE ratio divided by the growth of the earnings. That is a better comparison. And if you take the pack ratio where are we today? So today the S&P 500 the pack ratio is at 1.36 right there which says it is not cheap but it's also not at the bubble territory. Okay. So to give you some comparisons, you can see that the pack ratio was in fact above two about two years ago right and just after co the pack ratio was above 2.4 and it was 1.7 here it was one close to 1.6 six year close to 1.5 something right so if you look at the pack ratio today it's actually lower than many times in the last couple of years so that's why I say the market is not in a bubble right it's not cheap but it's not that expensive so don't be fooled by all these oh the market's in a bubble right and more and more people are beginning to compare today's market with the dotcom bubble in the year 2000 and the funny thing is that I would say more than half the people who are comparing it were too young to be in the market in 2000. Not me, right? In the year 2000, I was already in the market. I started investing in the US markets in about 1997. So, yeah, I saw it firsthand. So, I can tell you that this is very different from the dot uh bubble. Why? Because number one, during the com bubble, the stocks that were going up like crazy, they were all these com stocks that made no money. They had no profits and anything with the com name just went up purely on hype that you know the internet will change the world. But today many of the companies again not all but many of the companies like the hyperscalers your Amazon's your meta Microsoft your Nvidia are they making money? Hell yeah. They're making huge amounts of free cash flow. There's huge profit mar profit margins. So it's a very different case.
So let's put the.com bubble and the current situation side by side. So the.com bubble actually started with uh the idea of the internet. All right. And that started sometime in 97 just before I entered the market. And uh this current moment started with the AI revolution with the launch of Czech GPT which was back in uh November 2022. So you can compare this with this. Now remember ultimately what makes the market to be in a bubble? What makes stocks in a bubble is when the the price the share price is not supported by the earnings or the cash flow of the company. Very very simple. Remember the value of a business is based on how much cash it can generate. How much profits it can generate. So if the stock price goes up 100%. But the profits go up 100%. It's not expensive, right? Because the price is supported by the profits. But if the stock price goes up 100% but there's no profits then that's a bubble. So understand that distinction.
So what you see in this dark line over here. So the dark line is the market price of tech stocks back in 2000 or or leading to 2000 right and this gray line are the earnings of the company. So see the big difference during the dotcom boom you can see stock prices were going up like crazy going up like crazy going up like crazy but the profits that were generated by the companies were either un there was no profits or the profits were very little so this is what we call a bubble it's kind of like profits are here market price is here it's like you know it's the market price is going way above what profits have created so eventually what happens it will snap and collapse But in today's market you can see that yeah the stock price which again is in the dark brown is going up going up going up going up going up but it is supported by the profits. Look at that profits are going up supporting the market. So it's a very different situation and that's why I say the market is not cheap but it's also not super expensive. But Adam the Fed chair said it's very expensive. What the hell does he know? Okay. Now by the way that triggers some memories for me. I remember that back in uh 1996 December at the time the Fed chairman Alan Greenspan he said the same thing. In fact he said which was back in December 1996 he said that investors are undergoing a bout of irrational exuberance. So what does that mean? He's saying that the investors are crazy. the market is in a bubble. And he said that when the S&P was at 750 points. Now, what happened after he said that? The market continued to go up for the next four years by another 100%. When it eventually topped out in uh February 2000 before the dotcom bust and the S&P reached 1,500 points. So, what am I saying? I'm saying that the Fed chairman can say that we are expensive and the market can still go up for the next four years by 100%. Right? So, it doesn't mean we're at the top. Now, could this time be different? Of course, everything is possible, but I'm just looking at uh probabilities. And if you ask me, are we near the top? I don't think so.
Now, another thing that you can look at would be the history of bull markets. Now some of you may feel that this bull market has run too far and too long. Nope. Now recall something. This bull market started in October 2022. All right. So from October 2022 to October 2025, this bull market is only 3 years old. We're only in the third year of the bull market. Now on average, how long do bull markets last? These are, by the way, what we call cyclical bull markets, not long-term bull markets. Short-term bull markets last roughly about five to six years. That is the average. So, for example, this boom market over here lasted 5 years. And this boom market over here lasted 6 years. This boom market lasted 5 years. This boom market over here lasted 11 years. And this boom market over here lasted 12 years. So boom markets can last from 5 years to 12 years. And again in this current boom market we are only in the third year which tells me based on normal bull market cycles uh this bull market should run another at least two to three more years at least. Okay. Could it last another six more years? Yes, it is possible. That's what happened in this bull market that started in December 87. Everything is possible. Now, like I said, while the whole market may not be in a bubble yet, maybe in three, four years it will be in a bubble, but not yet.
But there are certain areas of the market that are in a freaking bubble that are really overpriced. Okay, so what are these areas? Well, I've identified five of these areas. First are certain parts of the AI industry. Now, again, people like to give a broad stroke. All AI stocks are expensive. No, there are some AI stocks that are not that expensive. For example, in my opinion, well, not my opinion, it's a fact. All right, Nvidia is not that expensive. It is not cheap, but it's not that expensive. If you look at ASML, also not cheap, but not that expensive. Why? Because the stock price has gone up, but the profits have gone up even more than the stock price. So, it is not that expensive. But there are certain AI related stocks that are in a bubble. Why? Because the market price has gone up like crazy, but the companies are not making any money. So people are basically paying for future profits that one day it's going to make a lot of money but now no money right so that's what we call a bubble always check the fundamentals of what you are investing in or what you're trading so again if you look at Nvidia you can see that it is making a lot of money it is very very profitable take a look at that you can see that you know the revenue is growing the profits are growing the free cash was going growing is actually making a lot of money and the intrinsic value which is based on the discount rate of all the future cash flows. The intrinsic value is 175 and right now the stock price is at 185. It is slightly overvalued but it's not like super overpriced, right? So not cheap but again not super expensive. And ASML same thing. If you look at ASML again look at the fundamentals you can see that again revenue is growing like crazy and profit growing as well. Free cash flow is you know growing as well. All right. Um, and the intrinsic value is 948. Now, if you recall, not too long ago, I did share in my video at the time, the ASML was below the intrinsic value. Was cheap, but now it has gone up, right? And now it's about $1,000 43. So, it's above the intrinsic value. So, again, it is not cheap, but it's also not super expensive. But if you look at some AI stocks which are not profitable which I call speculative AI stocks then yes they are in a bubble they are very very overvalued. So a good example would be core weave. Another one would be Nibbius. If you look at core weave you can see that again uh if you look at the financials if you don't like to look at lines you can look at charts right you can see that yeah so revenue is growing but the profit is negative. So it is still losing money. It's not making any money, right? It's losing money. And you can see that the intrinsic value is 115 and now it's 133 the the share price. So, it's also a bit expensive, right? If you look at Nibbius, for example, NBIS, same thing. You can see that uh the intrinsic value is $49, but it's now selling at $125. So, it's selling at double what it is actually worth. And you can see that it is also not profitable. It is not making any money. It's it's losing money. In fact, the revenue drop is is not profitable. Okay.
Now, so these are what I call stocks that are in a bubble. Now, having said that, would I short these stocks? No. Can you still make money from these stocks? Yes. Why? Because remember that in the short term, the market is not rational. The market is emotional. So as long as there's momentum, people are excited. These stocks can keep going up. So expensive can become even more expensive. Bubble can grow bigger and bigger and bigger. So am I saying that you can't make money with these stocks? No, you can make money. You can make money. But to make money in these stocks, you don't invest in them. You do short-term swing trading. It is a big difference, right? So the difference is that when you do swing trading, you have to watch it very carefully. You only enter the trade when there's a lowrisk trade setup based on the price action. That's what we teach in our stock trading course, our swing trading course, right? And these stocks like a one night stand, when you enter, you got to have protection. You got to have a stop-loss and you got to have clear profit targets so that as long as the momentum goes up, yep, you can make money. But the moment it drops, hits the stop loss, you got to cut and get out. Why? Because these stocks that are not supported by fundamentals eventually when they drop they will never come back. They will never come back. So these are the ones where you have to cut loss very very fast. These are what I call the one night stand stocks. Okay.
But on the other hand if you look at companies like ASML, Microsoft, Nvidia where they're supported by profits and they are not that expensive. These are what I call stocks for investing. Not one night I stand. These are the stocks that we can marry. And when we invest in these stocks, we know that three, four, five years from now, they're going to be a lot higher. And yeah, the stock price could drop temporarily, but we don't need a stop loss. Or rather, I don't use a stop loss. In fact, the more they drop, the more I buy because I know that these stocks when they drop like a tennis ball, they will always bounce back up because they're supported by fundamentals. But these kind of like nibbas and core where there's no fundamentals yet, there's no profits, you know, they can drop and never come back. So you've got to have a clear distinction between investing stocks and trading stocks. So like I said, these bubble stocks, you can still make money from it. It can still go a lot higher. And basically, we enter as swing trades, right? So you want to enter when you see a lowrisk entry. So for example, if you look at the stock right now, is it is it on an uptrend? Yes, it is. You can see, right? Wave up, wave down, wave up, wave down, wave up. And now it's on a bit of a wave down pattern. So if I was trading this for example, I will wait for again wave up, wave down, wave up, wave down, wave up. When it waves down, for example, and it finds a support, we call this a trend retracement strategy. And we've got a bullish candlestick pattern over there, guess what? We could take the trade. We could enter here and place a stop-loss right below the recent swing low. Or if you want to widen the stop loss, you can even put a stop loss here, depending on how conservative you are. And you can ride it all the way up. All right? And you can of course take profit risking one hour to make two hour, three hour. So you can make money in these bubble stocks as well. But like I said, as they go up, you have to raise your stop loss. So when they eventually burst, you got to cut loss and get out fast and take your profits and run. Okay? But for like Nvidia, ASML, Microsoft, don't need all this funny stuff. No stop-loss, no profit target. Buy, close your eyes through the ups and downs. you be very rich in the long run. So big difference.
Second industry in a bubble quantum computing stocks. Yeah. One day will quantum computing change the world. Yes. But right now the market price has run ahead of fundamentals. Many of these quantum computing stocks are not making any money now. Will they make money in the future? Yeah. But not yet. Right. So stocks like Ion Q, like RGTI, they're in a bubble. But like I said, will I short it? No. Could you still make money from it? Yes, but you got to enter as a trade and not an investment because they could drop and never come back once the bubble burst. And when will it burst? I don't know. Who the hell knows, right? And of course, cryptocurrency stocks, anything l linked to cryptocurrency like your your strategy, which is MSTR, nuclear energy stocks also running ahead of fundamentals, your OLO, your SMR, not making money, price going up like a crazy can make money, but trading, not investing, be very, very clear. So again some of you may say Adam I don't want to do trading it's too stressful I just want to invest then stay away from these stocks nothing wrong but if you want to trade these are the stock to trade right that again put a stop loss and a profit target these are things that you can learn next uranium enrichment stocks which are again tied to the nuclear energy thingy right so stocks like your ticker symbol LEU CCJ high momentum but bubble just be very careful if you're in any of these Please make sure you've got a stop loss. Make sure when the bubble bursts, when it burst, I don't know when, you got to get out fast, take your money, and run. All right, so that's the end of part one of this video. Be sure to subscribe so you get alerted once part two is ready. And in part two, I'll be talking about which parts of the market are undervalued, where are the hidden gems right now in the market, and I also talk about how do how do we prepare for the eventual bursting of the market bubble. It will not burst right now, but it will burst eventually. And when that happens, you got to ensure that your portfolio will do well even when it bursts. So, all that in part two. If you want to catch my latest videos, click on the subscribe button right now. Click on the bell so you get instant notifications once I upload my latest video. If you want to check out my online courses, go on to piranhaprofits.com where you're going to learn how to invest and how to trade the financial markets and create an income from all around the world. If you want to join my live Wealthacademy program, go on to wealthacademy global.com and find out more about how you can learn investing and trading live online. This is Adam Coup and may the markets be with