My “Four Horsemen of the Stock Market Apocalypse” Scenario
A gentleman has shared his own view on this topic, and I largely agree with him, though I add a few different angles to his perspective.
First Horseman: Overvaluation. Are current prices unreasonably high by historical standards and expert opinion? Absolutely—by so many measures that you would need a calculator to count them all.
Second Horseman: Bubble beliefs. Are an unusually large number of market participants saying prices are too high but likely to climb even higher? Yes—and in one form or another, they all insist “this time is different,” even though it never turns out that way.
Third Horseman: Issuance. Over the past year, have we seen unusually high equity issuance from both existing companies and new firms through IPOs, while insiders have become aggressive sellers? Bingo.
Fourth Horseman: Inflows. Are we seeing an unusually large wave of new participants enter the market, with many—like gamblers at a hot craps table—betting far too aggressively through margin, options, futures, and other tools? Yes, we are.
My stock market mentor told me decades ago to start selling when I could not even justify buying with “found money.” That advice fits perfectly today. Aside from the metals and mining sector, I see little real value anywhere else.
Yes, I missed this melt-up, but I pursued other opportunities that have performed just as well, if not better, so far.
I also hold on to another lesson from a mentor: “It’s not how much you make, but how much you avoid losing, that usually separates the winners from the losers.”
