One thing was obvious to me: nothing stays the same when it comes to finance. Blatantly stating that the US stock market

Paying tax is something everybody notices. The cost of printing money out of thin air and devaluing your purchasing power is something many people are unaware of. So, central banks and governments keep doing it.

Into assets like stocks. Historically, if you own stocks, then great. You will make money. If you don’t own assets like stocks, your money is devalued and your purchasing power decreases.

The same thing can be said about relationships. If you truly love someone, you should put aside some of your needs. They might seem like life or death matters to you, but sometimes they are just silly things of no value that you can let go to be with your partner for the rest of your life.

The Federal Reserve controls how much money is in the US economy. Right now they are creating money out of thin air as the central bank. So far they have created trillions of dollars from nothing.

The euphoria was out of control. It resulted in a massive recession and a collapse in stock prices. Look at the chart above. The 2000s Dotcom Bubble is tiny compared to the stock bubble we’re in right now.

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suit of boxing glory, I ignored important relationships. When failure hit, I had an opportunity to revisit and refresh critical personal connections. I wrote letters to family members and old friends and spent time with those nearby. Some of those connections formed the building blocks for the next phase of my life.

Retail investors are still flocking to stocks, fuelled by cheap investing advice you can get from places like Youtube, that sheepishly says “buy stocks.” As a result, retail investors are currently willing to pay about double the historical average for stocks (see chart below — average is around 16).

Roughly 20% of the stock market is retail. 80% is institutional investors — vanguard, BlackRock, JP Morgan, pension funds, etc. The reason institutional investors keep buying stocks and joining the retail investors in fuelling the bubble is because they feel The Federal Reserve has their back. “Don’t fight The Fed,” they say.

The problem is other parts of the world like Europe and China want to challenge the US’s world reserve currency status. The world reserve currency has changed multiple times in history. It could definitely happen again.

Institutional investors are aware of the problem and place their spare cash into financial assets like stocks to retain their purchasing power. They’re happy to do this because they know The Federal Reserve has their back and will cover up any cracks in the financial system with freshly printed money.

The contrarians argue that it doesn’t matter if stocks are overvalued by 200%. “Buy and hold has always worked,” they say. That logic only applies if you live in a bubble.

Stock prices reflect overconfidence and hype. Stock prices are predicting the future — where the economy bounces back strongly. If that doesn’t happen then stock prices will have to adjust to meet reality.

Popular Investor and the Chairman of Bridgewater Associates, Ray Dalio (popularised by Tony Robbins), goes one step further. He looked at history for answers. He argues that there are cycles where the world order changes and so does the world reserve currency — they’re inevitable. He claims another big change is due, which could change the US’s dominance over financial markets.

The best example in history of overconfidence in stocks and money printing going wrong is Japan’s Lost Decade. Japan still hasn’t fully recovered. They too thought stocks would go up forever and the Bank of Japan could keep buying financial assets to save the markets through quantitate easing.

If Japan suffered from hype, overconfidence, and too much intervention from governments and central banks, what makes the US invincible? Well, roughly 80% of global trade is done in US dollars because it is the World’s Reserve Currency. Perhaps that means the US can survive the crisis longer.