The Market Is Extremely Greedy Now – Signs Of Caution?

Over the past few weeks, we have been consuming more and more content surrounding the US market.

And through that too, we finally caught up with the ARK fund and all the hype around it. Prior to this, we have heard of them, but did not really pay attention to why they were so popular.

The ARK fund is probably the best performing fund manager now, and even their worst performing fund still returned over 70+% in returns this year. That’s mad, especially if you compare the returns vs the SP500 or vs Bershire.

And perhaps because of that, everyone in the market in looking at what they are buying, and perhaps also following most of their purchases.

On top of that, there is an EV stock hype now, with every investors around the world snatching up EV related stocks especially those from China.

It seems that this has probably led to a lot of pump and dump in the market, with price moving 20-30% a day.

Here’s a look at some drastic share price movements:

22% in a day, 70% in 5 days.
50% in 5 days

And then there are news of Slack potentially getting acquired by Salesforce, sending the stock up 37% in a day.

37% in a day

It seemed like there is a lot of big drastic share price movement in the US market, and it can be a black hole to be sucked into.

There are also a lot of financial youtubers giving advices on stocks that can potentially 5-10x.

See this for example:

A day after the video was uploaded, the stock he recommended went up by 23% in a day, with after market trading at 11%.

23% in a day.

It seems as though there are a lot of money moving around the market, pushing up share prices, and that people are getting very very optimistic about the market – and they are just investing in whatever that comes their way.

The CNN fear and greed index is also now at extreme greed, with the market pricing in the best possible returns.

It seems as though everyone is dreaming of getting the 10-20% daily gain stocks, and just throwing whatever money they have into the market.

To be honest, we are also feeling the fomo, watching prices of these hot stocks going up and wanting to jump onto the bandwagon too.

While some of these companies are potentially good company, we are mindful about the euphoric state of the market now, with stock prices exploding through the roof.

Where there is a high stock rally, it will be followed by a pullback. And during this time, we are slowly reading up and researching on some of these new companies we’ve come across, and to deploy our funds in tranches should the opportunity comes.

Other than stocks, there is also a resurgence of cyptocurrency which happened over the last 2 weeks:

Bitcoin has returned to their price levels 3 years ago, and altcoins like XRP and ETH are also rallying over the past 2 months.

Similarly, the greed index for crypto is at an extreme level:

For readers who are looking to jump into the bandwagon now, for both US and crypto, I’d advise against in as the prices are probably a bit too high now. I wouldnt be surprise to see some market pull back over the next few weeks, but anything can happen.

If you have managed to deploy some funds earlier this month or last month, congrats and enjoy the ride! Good luck and happy hunting.

Counters on our watch list:
1. Square
2. Tesla
3. NIO
4. Mastercard

Happy hunting and happy investing!

Also Read: Our New Investment Thesis

4 thoughts on “The Market Is Extremely Greedy Now – Signs Of Caution?

  1. Absolutely agree. Market is basically too euphoric and 1 bad news is all it takes to send these rocket ships back to Earth. The higher they go the harder the crash! I personally invested in PLTR/TSLA/WORK before they flew off so it was quite a good feeling that they are going up so high right now but at the same time I am extremely cautious.

    At what % drop will you be looking to add into your watchlist stocks? I am also looking to enter SQ/MA and add on more TSLA if a pullback comes. Anyways, great article and happy investing!

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    1. Mr Budget

      Hello there!

      For us, we have a monthly allocation of money to be invested. So every month we will most likely buy 1 or 2 stocks. We will look at the stocks in our counters to see which are at fair / acceptable price points at the point when we want to buy, and then we will make the purchase.

      So if the counters drop back to the fair value or at least close to the fair value, we will deploy our funds. Probably a 10-20% drop will really make us curious a bit. πŸ™‚

      There are quite a lot of interesting tech companies and we are mindful to not overdiversify our holdings, and instead average in our higher conviction stocks. For now the Mrs and I aim to have only 10-15 growth (US) stocks to hold for 10 years, and we are already reaching that amount! The mrs has 7 growth stocks and I am holding 12 growth stocks now.

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  2. Agree with the sentiment. While I have been happy to have been invested, it won’t take much for a reversal to happen. But until that happens, keep holding (especially Tesla!). I’m also interested in Ark ETFs, but I demurred cause I can replicate their major holdings and avoid the 0.75% annual fee.

    Like

    1. Mr Budget

      Hello sir!

      Yeaps saw your update! Congrats on getting into palantir! πŸ™‚

      Yeaps been studying Ark’s position movement too but probably too many stocks to cover. But it seems as though most investors who invested in tesla in the past 12 month would have gotten a decent return.

      Like

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