Investing In 2021: My Thoughts on the “Everything Bubble”

The economy seems strange right now, doesn’t it? Even if you’re not sure what’s happening, you’d be dumb as a rock not to have noticed that something highly unusual seems to be happening.

Like, the “once-in-a-generation” kind of unusual.

Real estate prices are skyrocketing, the costs of building, rehabbing or improving property (lumber, steel, copper, etc.) just keep going up…

Plus the stocks & crypto markets keep breaking records in a way that just seems to not make much sense…

It’s being called “The Everything Bubble” and seems like a kind of counterfeit prosperity, doesn’t it?

It’s like the water that surges out for a time right before a great tsunami swells in and destroys almost anything in its path.

In this Everything Bubble, money is more and more plentiful, credit more available than ever, and the “stimulus” faucet just keeps it running.

Everything bubble stimulus faucet

But prices aren’t really rising, and things aren’t really improving. It’s the value of money being systematically undermined.

The Primary Reason For This Everything Bubble…

The interruption of the supply chain, which was a result of COVID.

When plants that were producing screws and 2x4s and toilets — anything and everything you could buy at Home Depot — were shut because of COVID, there was a massive interruption in the manufacturing process, which, from a high-altitude perspective is the supply chain for everything there is in the world.

Honestly, I think it’s going to take several years before we’re back to normal from that disruption… from the impact that we see in everything — and not just 2x4s and sheetrock screws — but also in cars and appliances… anything and everything that we consume.

I also think that the pricing will never go back to what it was pre-COVID— in part because of the disruption and the ripple effect that it’s had… but also in much larger part because of inflation — you know, that thing that the federal government wants you to believe keeps steady at about 2%…

Um no, I’m thinking we’re seeing something around 10% inflation.

And you might argue, “Well, a basket of goods is only up 2% in the past 365 days…” And I’d say, “Well, what’s in that basket?”

See, I’m tired of the way the Fed manipulates our inflation numbers to serve them and to effectively erase the debt at our expense.

The other thing is, if they tell us, “Well, our target rate of inflation is 2% and there are indications that we’re on target there,” then you and I don’t get worried, and we don’t start to think about hedging against the dollar.

And that’s the same reason they manipulate the price of silver to keep it down — so you and I don’t look at it as a hedge against the dollar.

And this is not political, by the way, it’s apolitical — doesn’t matter who’s in office. The Fed’s been doing this forever.

So, I think there’s a solid argument that we’re seeing inflation rates of 10% across the board, and in some cases, much, much higher on some products and services.

Smart Money Is Hedging Against The Dollar…

Here’s what the smart money is doing in an attempt to hedge the dollar: buying anything and everything that is a tangible, hard asset at any price whatsoever, who cares how much, just buy it — just put your money into something, anything — get out of the dollar and get into hard goods, hard assets.

That’s why the stock market continues to go up with price-to-earnings ratios that you and I would never dream of buying a business at!

A price-to-earnings ratio is like a multiple… so, if you have a business, you’re thinking, “I could get 8x EBITA (earnings before interest, taxes, and amortization)! Stocks are trading at 200x to 300x EBITA — nobody would ever buy them at that! They’re so insanely inflated.”

Oh and, by the way, Tesla did turn a profit recently. If you bought Tesla stock, you can now actually win the argument from those who say that Tesla doesn’t make a profit… because it did.

I realize this is all slightly tangential, but it’s something I’m passionate about. I study a lot of macroeconomics and have since last March.

But anyway, that’s what’s driving real estate prices up in addition to demand — that’s what’s driving the cost of everything through the roof.

Prices going through the roof from the everything bubble

So, I’m a car guy. I’ve got a collection of cars. I watch what they sell for at auctions. And I can’t believe what they’re selling for! It’s crazy.

I’m thinking I should sell some of my cars… and then I think, noooo! I’m not going to do that — I’ve already hedged the dollar by buying them. Selling them just puts me back in dollars. And that’s not good.

Oh boy. Now, do you see why I said counterfeit prosperity?

Man, I sure did hop way up on my soapbox, huh?!

But I hope I clearly explained why I think we’re seeing this Everything Bubble and how it applies to goods, money, real estate, and well, everything.

Perhaps you’re now seeing things a bit more for what they really are (read: smart $ hedges against the dollar)? Let me know your thoughts on the Everything Bubble in the comments!

Regards,

Cam Dunlap

P.S. If you want to hear my thoughts on more topics like this, I host a bi-monthly Deal Maker Webinar for my Private Inner Circle students, which you can learn more about here.

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