Signs of a Bubble, but not in stocks or bonds!

by Brian C. Beasley, CPWA® 

Crypto Currencies

You've probably heard about Bitcoin. The article below crossed my newsfeed this weekend, and I just had to share it.  

Often when investing our clients' money, we're always asking ourselves, "Where is the bubble?"  Where is the "easy money" that everyone is talking about? When are amateur investors telling professionals, "We don't need you because all we need is to invest in XYZ!"?

There have been two major investment bubbles in my own 23-year career, and those who fell for the lust of easy money got hurt badly.

The internet craze of the late 1990s was obvious to all but those poor souls that lost their shirts betting on internet stocks at the peak in early 2000. One person told me "You're not qualified because I'm now a multimillionaire" because his employer's stock had appreciated so much. He took out a second mortgage and invested everything in that stock. It dropped 95% the next year.  All he had to do was diversify his millions, and he'd be debt free and retired. Oops.

The second bubble was in mortgages in the mid-2000's. When this one began to burst in 2007-2009, everyone felt it. People were living large on easy money, borrowed from banks that took even more risk by borrowing against their own loan portfolios. We were being told, "We don't need financial planning or investment advice. We are flipping condos in Arizona/Florida/wherever." This past Friday night, a friend told me that a relative owned 50 homes at one point!  He lost it all.

So where is the bubble today?  Some would say it's developing in the stock market, but we aren't seeing the all-knowing amateur investors clamoring to invest in stocks. Same with bonds and real estate. If there ever was a bubble developing, it's likely to be in these "miraculous" crypto-currencies like Bitcoin.  The article below goes into it in more detail. For a deep dive into this world, check out this podcast episode on the topic. Click HERE for the podcast episode.

The allure of easy money with lots of commas can be intoxicating. Please consider this blog post your inoculation against that insanity. You don't need to risk your life savings on speculation to succeed. Just save at least 10-20% of your income, plan wisely, and follow best practices for personal finance and investing.  If you need assistance, please let us know.  We're happy to help without risking your future on tulips, Bitcoin, or any other "too good to be true" investments.

Here is a link to that article: CLICK HERE