Everything is melting up

This year has been extremely rewarding as an investor.

If you have invested in a broad market index fund like VWRA which is a low-cost index fund tracking the total world stock market, then your year-to-date gains are close to 19%, or 91% up from the lows of March 2020.

If you had taken a more concentrated position in the US equity market, then SPY which tracks the 500 companies in the S&P 500 has returned 26.6% year-to-date and 104% since the lows of the pandemic crash.

Taking on a riskier bet like QQQ which tracks the Nasdaq 100 index, would have returned 27% year-to-date and 131% since the pandemic low.

If you’re invested in cryptocurrencies, the market cap of all cryptocurrencies according to CoinGecko is almost US$3.1T, up 393% year-to-date and 1700% from the pandemic lows.

Risk assets have performed significantly well

Risk assets have performed very well this year and since the pandemic lows of March 2020.

It’s not hard to see why – there’s still far too much cash in the economy (US M2 money supply has not stopped growing) leading to asset inflation across all financial markets.

There’s really nowhere else for cash to go with bond yields still low and cash deposit rates in banks below 0.5%. Even if you’re putting money in a high yield savings account paying 1% per year, Singapore inflation is forecasted to be 1-2% next year (US consumer inflation rate has recently hit a 30-year high in October), your real return on cash is negative.

So where else would money go?

Other than public stock and cryptocurrency markets, money is flowing into venture capital. According to Pitchbook, more than US$100B of capital has been raised in just 3 quarters of 2021, topping the record set last year. The undeployed capital is US$222B – a level not seen in history.

Private properties have also seen a surge in demand. Good Class Bungalows (GCB) sales have been flourishing, with more than $2.5 billion in deals recorded as of end-October.

Digital assets are well supported with their continued adoption and asset repricing. I believe in the long-term growth of cryptocurrencies as explained in this article. The tokenisation of everything, Web 3.0 efficiencies and metaverses will bring a whole new world of interactions over the next decade.

It’s also incentivising gambling-like behaviours in the market. Prices of meme stocks and cryptocurrencies like Shiba Inu and Dogecoin have shot up to the stratosphere – TikTok teenagers are making millions from the stonk market as they ape together strong.

Lasting inflation in China and the US from supply-chain shocks are also putting cost pressures on the economy. We’ve seen prices of everything rising, from Brompton bikes and luxury watches to prices of commodities and housing markets.

If you aren’t invested in any assets, then this year alone you’d have seen the value of your money depreciate far faster than any other years before.

Since there is no better alternative to investing your money right now, and cash is trash, it might be prudent to accumulate some investing power for dips, which could be in stablecoins earning interest.

Are we in the greatest bubble of all time? Or is the dollar losing its purchasing power at the fastest pace?


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