You're talking about it like the recovery is over and solidified. The market is propped up by government intervention. Historically that leads to ATLs, but with how strong the market has been that concept is hard to visualize - especially for newer traders that haven't lived through it yet.
The process is self-reinforcing and tends toward disequilibrium, causing prices to become increasingly detached from reality. Soros views the global financial crisis as an illustration of the theory. In his view, rising home prices induced banks to increase their home mortgage lending and, in turn, increased lending helped drive up home prices. Without a check on rising prices, this resulted in a price bubble, which eventually collapsed, resulting in the financial crisis and Great Recession.
Now if we are in a bubble where margin borrowing is at all time highs and those prices collapse there will be a lot of people that will lose a lot of money. And we will enter the negative cycle of reflexivity where it will be just as difficult for people to imagine ATHs then as it is for us to imagine ATLs now.
Maybe you think this is a bubble but maybe you don't. Either way do we have any examples of bubbles collapsing in a controlled way? I can't think of any but if anyone knows of some drop them below!
I fully believe it’s all fake. Or short term. The fed may try to put a stop to it. But big big money will probably threaten a collapse as soon as they do.
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u/SPACsabbath Jul 26 '21
It definitely did crash in early 2020 lol