Are We In A Bubble?

With the run in stocks it has many investors and non-investors asking, "What's the deal?" The disconnect from Main Street and Wall Street seems wide and a lot of day-traders are arriving on the scene. Some may have financial backgrounds and others are riding the Robinhood wave. If your barber, grocery clerk, Uber driver, or neighbor gives you their next hot stock tip, the end is probably near.


Of course that's not an entirely reliable predictor but it does make me feel uneasy when it seems "so easy" to make money daytrading. The recent fad is people sharing stock tips on YouTube and TikTok. "If I can do it, so can you." It makes me cringe thinking about it.


Here's where the next group of players step in. The old-timers who have been there and done that. They go on TV and say "I've seen this before... during the dot com boom.... and then again in 2008." What a lot of these folks forget to mention is they sold out of the market a year or two before the crash so they missed out on the hottest part of the rally.


Here's how it works:

  • That old timer sells stock at $100

  • The stock proceeds to $150

  • Then crashes to $90, where the old timer buys back in

  • Then trades to $200

What was really gained here? Yes, he/she avoided the 50% drop but they really only saved 10%. Furthermore, they had to pick the exact bottom to get back in. Best of luck to you if you think you can do that.


Of course if you didn't sell at all and had to watch your shares fall over 50% that would be painful. You could say, "I'll sell when the market starts to drop and get back in later." Again, good luck to you. Did you sell in February 2020 and buy back into the stock market before April 2020? If you did, you're too smart to be reading this article.


This is the challenge - where do you sell and where do you buy? Timing is incredibly difficult and there are always things to be worried about. Maybe you're worried about all the money from the government supporting the stock market or you're worried about the gamblers day-trading now that sports are on hold. I'm here to tell you that concern is okay - but it isn't a plan. I've talked to 3 people in the past month who told me they wanted to buy the stock market on the next dip and missed their chance in March. What does that tell you about human emotion?


Here's what I can tell you - no one can tell you with certainty what the market is ever going to do. The market could keep going up for years uninterrupted or crash tomorrow. What I've found is having a plan ahead of time helps deal with the emotion before it hits. This has saved me a lot of money and heartache along the way.


For what it's worth, I'm not 100% fully invested. The valuations of companies, the hype of "TikTokers" and "Robinhooders", and the health of the economy all have me concerned. But I'm not holding as much cash as that statement probably makes me sound - and there is where my investing plan protects me.


Portfolio Updates:


Innovative Industrial Properties - IIPR announced a dividend increase of 6% this week (a dividend increase of 77% from last year). This is impressive. Especially since two months ago investors were talking about their ability to collect rent from their tenants. The dividend growth is really driving the share price here (as well as their ability to raise capital at attractive prices).


Fastly - FSLY has been on a tear. I've been unable to add to this name as I originally planned but it is becoming a sizeable position on it's own from the growth. I would love to sell some but because I wasn't able to add I'm going to HODL (hold on for dear life).


Not a ton has changed since we initially invested near $20 other than the tech boom from the pandemic (and maybe investors finally realized how cheap this company was). Shopify is one of their largest customers so maybe that's adding to the performance (take a look at SHOP share price). And while a it's tripled for us, it's still not crazy expensive compared to some other names (like SHOP).


GEO Group - GEO traded off news last week that CoreCivic (CXW) was suspending their dividend and reevaluating their corporate structure. There is zero indication to me GEO would follow in CoreCivic's footsteps, especially after looking at their recent conference call and the aggressive stock buying of their CEO George Zoley.


The bigger risk here is fundamental change from social pressures. We'll continue to monitor this but that kind of change is a long road and GEO has given every indication that they are a solid company.


Enjoy the last full week of June and feel free to reach out with any comments or questions!



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