What if the Economy Melts UP Rather Than Melts Down?

My economic thesis is that we’re in an “everything bubble” and the stock market, real estate market, and others are headed for a crash.

There’s plenty in history to support that with all the data we’re looking at, real estate and stock prices are set to significantly correct downward, if not crash. Perhaps even 1929 Depression-era crash, when the stock market lost 80% of its value and up to a quarter of Americans were out of work.

But I wanted to point out that a small minority of the really smart analysts I listen to have a very different thesis:

They believe that the stock market and real estate market prices and others could just shoot to the moon. I have a hard time believing their thesis--because demand will go to zero, if, for instance, real estate prices go up dramatically from here.

(Is BlackRock so rich that it, and a few megabillion-dollar companies, could buy up all the real estate, even at higher prices? That’s the only way I can see that increasing prices don’t completely freeze real estate markets.)

However, Pat Bet-David (Valuetainment) and Mark Moss, who both have this thesis, make points that shouldn’t be ignored. Because none of us know what is going to happen; so we have to live in a world of probabilities.

I think there’s a 10-20% probability that the stock market continues to soar, even though the “Magnificent 7” (or “Magnificent 5,” if you will, with a couple of them falling now) are trading at hundreds of times a reasonable valuation for their stock.

As they say, “the markets can remain liquid longer than you can remain solvent.”

I was betting on a stock market crash in 2022, placed a short position, and have lost most of that $50K now. I’ve been wrong, believing the market would crash by now—as have many people who manage money for a living. (And I shouldn’t have bought that position—the stock market is NOT my forte, as an investor.)

But this smaller number of contrarians who believe that we’ll see a melt-up:

You may be tempted to see this as good—like, whew, my house value won’t drop below what I owe on it.

But also, for those of us parents of adult children, this despair: my children will never, ever own a house. (My youngest son would be so angry with me, if Pat Bet-David’s and Mark Moss’ and a few others’ thesis is accurate--telling him to WAIT to buy a house till real estate dropped, like it did in the Great Financial Crisis—real estate “hit bottom” Feb of 2012!)

I think there’s an 80-90% chance there’s a real estate price crash, a stock market crash, and potentially even gold that keeps seeing higher all-time highs, oil and gas, and other commodities crash in price.

Just my $0.02 as I have listened for 4.5 years now to about 20 hours a week of the smartest analysts who invest money for a living, have worked at the Fed, or have a fulltime job interacting with every kind of financial analyst out there.

(Thoughtful Money. Kitco News. Mark Moss. Rebel Capitalist. Sachs Real Estate. Valuetainment. Tom Bilyeu. Some of my favorite podcasts and content. Yes, this is what I do with my free time. Though I often doing it sitting on the beach.)

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