Will The Market Crash?

If you look at the charts of many stocks such as $AAPL $HD or $MSFT you'll find stocks that have ran up so much with little to no downward selling pressure. Lately being determined by trade tensions with China and heightened attention towards interest rates, stocks have resumed its upward trends. Some stocks like $AAPL in the chart you see below, had a month of selling but then resumed it's upward trajectory.

Most people would assume that a crash is inevitable but it's hard to say. My investment mentor always said that nobody can ever truly time the market, and I agree with him to a degree. Nobody can truly know for certain whether a crash will happen or not. A recession similar to 2016? Quite possibly. It's difficult to know if there will merely be a 20 to 30% price cut or if there will truly be massive fear, uncertainty, and despair in the markets in 2020.

A lot of these companies were riding the waves of low interest rates and if you take a look at their balance sheets, most publicly traded companies have had a trend of increasing long term debt. In the short term, some companies have been focusing on refinancing or lowering their long term debts in 2019; especially so with recent  trade tensions.

Based on certain variables, if you take a look at $MSFT's longterm debts, you'll realize that it decreased from 2018, and their current liabilities increased. With just these two variables, you can simply guess that the current liabilities were due to paying down some long term debts, while increasing common stock. The increasing common stock on top of paying down some longterm debts would obviously create higher current liabilities as $MSFT pays a very good dividend. It would take a deeper analysis to truly paint the picture of what the company is up to, but I noticed this pattern with a lot of big stocks.

Earnings per share, or revenue, for these companies have been increasing as well due to a growing economy in the past 10 years due to quantitative easing. So at times Price to Earnings may not be a great indicator at seeing how overvalued some of these companies actually are. However based on the charts alone, you can logically guess that "what goes up, must eventually come down".

Likewise, Real Estate has been having an extensive run up in valuation as well as demand. A lot of times when there are so many good years in a row, people can become complacent. Nobody can time the markets to a T, but one rule of investing remains the same: "don't be greedy" - "Bulls and Bears make money, but pigs get slaughtered".

This doesn't mean not to invest or buy if you are a buyer. Nor does it mean that one should sell immediately. Everyone is different and thus has different needs. What I mean is that one should invest knowing what may happen, and must have risk management in place. Likewise, sellers should absolutely know for certain they want to sell; and not wait too long to sell as a result of being greedy. It's better to take profits than be greedy and absolutely maximize profits. Conversely, buyers should still look for deals in a bull (or uncertain) market so that their downside is minimal to upside. A 2 or more family home can be a wise investment in any market because you can live in one of the units and rent out the others. There will not be much of a shortage in renters as there is always a demand for them (although rent prices will be effected by a recession).

In summary: "don't take the baby out with the bathwater." Know there are opportunities everywhere, you just have to do the research and hire the best people.

Disclaimer: I am not a financial professional; hire all professionals if you want to get expert opinion. Thanks for reading! Check the about me page to learn more about me and read the disclaimer there!
Will The Market Crash? Will The Market Crash? Reviewed by Alex Sung on December 19, 2019 Rating: 5

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