Priced For Perfection
In late 2021, Bitcoin and Ethereum were trading at all-time highs, and investors didn’t have a care in the world. Valuations were crazy by any objective metric, and inflation had begun, but no one seemed to care in 2021.
Cryptocurrencies were the poster of this moment, hitting highs in November 2021. A year later, values had dropped by 75% as the market transitioned from greed to fear.
The vibe of the market feels similar today as it was in 2021. No-revenue companies are soaring, valuations of the most talked-about stocks are sky high, and people are posting their leveraged trading wins of millions of dollars online. Bitcoin is also at all-time highs again, and Ethereum is getting close, which is always a good indicator of where greed is.
I’m using crypto as an example, but the entire market went through a major drawdown in 2022, coming off the sugar high of the $GameStop(GME)$ and SPAC era. The Nasdaq 100 $NASDAQ 100(NDX)$ fell 34.6% from peak to trough, and many stocks fell 80% or more.
Today feels a lot like late in 2021. We can see a storm coming. In 2021, that storm was inflation and a post-pandemic “normal”. Today it’s inflation, tariffs, rising credit card and auto defaults, and a weakening labor market. I was taught to be fearful when others are greedy, and everyone seems to be REALLY greedy right now.
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