Author Topic: What are your bubble indicators?  (Read 15067 times)

Steeze

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Re: What are your bubble indicators?
« Reply #150 on: February 17, 2021, 12:46:19 PM »
I just saw an add for transparentbusiness.com IPO.

The entire pitch was “IPOs make people rich, Amazon is up 10 million %, we have an IPO, it’s just 2$ a share, what are you waiting for? Get the pre-ipo shares now”

Had 0 information about their business, just random info about how great IPOs are. Was a 4min long ad on YouTube.

err.. isn't that a lack of transparency in their business?....  asking for a friend. 

Tl;Dr  ...   Lotsa claims, looks like micromanagement from here.

I think it's very transparent. There is no business, only an IPO. People don't want to buy businesses; they want an IPO. So there you go, an IPO!

https://transparentbusiness.com/invest.html

I really can't tell if this site is just a troll or what. Just look at this page, it has a unicorn on as the background with a heading "A 10,000% Return on Investment Opportunity?"

The video I was talking about is there also

Is this as good as an investment as Prestige Worldwide??

Has to be some sort of crazy pyramid scheme.
« Last Edit: February 17, 2021, 12:53:52 PM by Steeze »

Imanuels

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Re: What are your bubble indicators?
« Reply #151 on: February 22, 2021, 09:19:03 AM »
Ray Dalio posted some of his analysis and thoughts on this subject today: Are We In a Stock Market Bubble?
https://www.linkedin.com/pulse/we-stock-market-bubble-ray-dalio/?trackingId=PngJstqlRyiMGUTvH%2BBZBw%3D%3D

His conclusion is that the “bubble stocks” are in a bubble :-).

There is a very big divergence in the readings across stocks. Some stocks are, by these measures, in extreme bubbles (particularly emerging technology companies), while some stocks are not in bubbles.

ChpBstrd

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Re: What are your bubble indicators?
« Reply #152 on: February 22, 2021, 11:17:07 AM »
Ray Dalio posted some of his analysis and thoughts on this subject today: Are We In a Stock Market Bubble?
https://www.linkedin.com/pulse/we-stock-market-bubble-ray-dalio/?trackingId=PngJstqlRyiMGUTvH%2BBZBw%3D%3D

His conclusion is that the “bubble stocks” are in a bubble :-).

There is a very big divergence in the readings across stocks. Some stocks are, by these measures, in extreme bubbles (particularly emerging technology companies), while some stocks are not in bubbles.

I saw that! It fits my view that we have 10-20% further to go up until it's time to really consider hedging more of one's portfolio. The next injection of financial adrenaline is coming, and that would be an unwise time to sit out.

However, there is a risk right now that a meltdown in ultra-risk assets could lead to a 20-30% correction in lower-risk assets. E.g. Bitcoin's "market cap" just exceeded $1T and doesn't appear to be on Dalio's bubble radar. At some point, we're talking about asset bubbles on the same scale as mortgage bundles in 2007, or tech stocks in 2000.

dividendman

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Re: What are your bubble indicators?
« Reply #153 on: February 22, 2021, 11:47:14 AM »
Ray Dalio posted some of his analysis and thoughts on this subject today: Are We In a Stock Market Bubble?
https://www.linkedin.com/pulse/we-stock-market-bubble-ray-dalio/?trackingId=PngJstqlRyiMGUTvH%2BBZBw%3D%3D

His conclusion is that the “bubble stocks” are in a bubble :-).

There is a very big divergence in the readings across stocks. Some stocks are, by these measures, in extreme bubbles (particularly emerging technology companies), while some stocks are not in bubbles.

I saw that! It fits my view that we have 10-20% further to go up until it's time to really consider hedging more of one's portfolio. The next injection of financial adrenaline is coming, and that would be an unwise time to sit out.

However, there is a risk right now that a meltdown in ultra-risk assets could lead to a 20-30% correction in lower-risk assets. E.g. Bitcoin's "market cap" just exceeded $1T and doesn't appear to be on Dalio's bubble radar. At some point, we're talking about asset bubbles on the same scale as mortgage bundles in 2007, or tech stocks in 2000.

Don't you think it's the opposite regarding Bitcoin? Bitcoin price going up means other assets aren't going up - i.e. it's like people taking money out of the market/bonds/etc. and putting it under their mattress.

When bitcoin drops (lots of people take their money out to spend/invest/etc.) then stocks etc. should go up. Bitcoin going up is actually keeping inflation of other assets down.

BicycleB

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Re: What are your bubble indicators?
« Reply #154 on: February 22, 2021, 12:04:26 PM »
Ray Dalio posted some of his analysis and thoughts on this subject today: Are We In a Stock Market Bubble?
https://www.linkedin.com/pulse/we-stock-market-bubble-ray-dalio/?trackingId=PngJstqlRyiMGUTvH%2BBZBw%3D%3D

His conclusion is that the “bubble stocks” are in a bubble :-).

There is a very big divergence in the readings across stocks. Some stocks are, by these measures, in extreme bubbles (particularly emerging technology companies), while some stocks are not in bubbles.

I saw that! It fits my view that we have 10-20% further to go up until it's time to really consider hedging more of one's portfolio. The next injection of financial adrenaline is coming, and that would be an unwise time to sit out.

However, there is a risk right now that a meltdown in ultra-risk assets could lead to a 20-30% correction in lower-risk assets. E.g. Bitcoin's "market cap" just exceeded $1T and doesn't appear to be on Dalio's bubble radar. At some point, we're talking about asset bubbles on the same scale as mortgage bundles in 2007, or tech stocks in 2000.

Don't you think it's the opposite regarding Bitcoin? Bitcoin price going up means other assets aren't going up - i.e. it's like people taking money out of the market/bonds/etc. and putting it under their mattress.

When bitcoin drops (lots of people take their money out to spend/invest/etc.) then stocks etc. should go up. Bitcoin going up is actually keeping inflation of other assets down.

Maybe there's a general speculative enthusiasm, with some going into BTC and some to stocks. BTC would be making stocks go up less than if BTC didn't exist, but when the "animal spirits" of enthusiasm go down, both will drop?


JAYSLOL

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Re: What are your bubble indicators?
« Reply #155 on: February 22, 2021, 06:08:14 PM »
Ray Dalio posted some of his analysis and thoughts on this subject today: Are We In a Stock Market Bubble?
https://www.linkedin.com/pulse/we-stock-market-bubble-ray-dalio/?trackingId=PngJstqlRyiMGUTvH%2BBZBw%3D%3D

His conclusion is that the “bubble stocks” are in a bubble :-).

There is a very big divergence in the readings across stocks. Some stocks are, by these measures, in extreme bubbles (particularly emerging technology companies), while some stocks are not in bubbles.

I saw that! It fits my view that we have 10-20% further to go up until it's time to really consider hedging more of one's portfolio. The next injection of financial adrenaline is coming, and that would be an unwise time to sit out.

However, there is a risk right now that a meltdown in ultra-risk assets could lead to a 20-30% correction in lower-risk assets. E.g. Bitcoin's "market cap" just exceeded $1T and doesn't appear to be on Dalio's bubble radar. At some point, we're talking about asset bubbles on the same scale as mortgage bundles in 2007, or tech stocks in 2000.

Don't you think it's the opposite regarding Bitcoin? Bitcoin price going up means other assets aren't going up - i.e. it's like people taking money out of the market/bonds/etc. and putting it under their mattress.

When bitcoin drops (lots of people take their money out to spend/invest/etc.) then stocks etc. should go up. Bitcoin going up is actually keeping inflation of other assets down.

Bitcoin is a zero-sum game, when someone buys, there’s another guy selling.  My guess is the guy getting the f out of crypto right now is more likely to put that money in the market than the guy just now getting into crypto ever had plans to.

MustacheAndaHalf

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Re: What are your bubble indicators?
« Reply #156 on: February 22, 2021, 07:57:49 PM »
"A 10,000% Return on Investment Opportunity?"
Ask yourself why that was a question, and if they directly answer it.
"Any investment opportunity that claims you'll receive substantially more than that could be highly risky – or be an outright fraud"
https://www.sec.gov/investor/alerts/ia_endorsement.htm

ChpBstrd

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Re: What are your bubble indicators?
« Reply #157 on: February 22, 2021, 08:16:46 PM »
Ray Dalio posted some of his analysis and thoughts on this subject today: Are We In a Stock Market Bubble?
https://www.linkedin.com/pulse/we-stock-market-bubble-ray-dalio/?trackingId=PngJstqlRyiMGUTvH%2BBZBw%3D%3D

His conclusion is that the “bubble stocks” are in a bubble :-).

There is a very big divergence in the readings across stocks. Some stocks are, by these measures, in extreme bubbles (particularly emerging technology companies), while some stocks are not in bubbles.

I saw that! It fits my view that we have 10-20% further to go up until it's time to really consider hedging more of one's portfolio. The next injection of financial adrenaline is coming, and that would be an unwise time to sit out.

However, there is a risk right now that a meltdown in ultra-risk assets could lead to a 20-30% correction in lower-risk assets. E.g. Bitcoin's "market cap" just exceeded $1T and doesn't appear to be on Dalio's bubble radar. At some point, we're talking about asset bubbles on the same scale as mortgage bundles in 2007, or tech stocks in 2000.

Don't you think it's the opposite regarding Bitcoin? Bitcoin price going up means other assets aren't going up - i.e. it's like people taking money out of the market/bonds/etc. and putting it under their mattress.

When bitcoin drops (lots of people take their money out to spend/invest/etc.) then stocks etc. should go up. Bitcoin going up is actually keeping inflation of other assets down.

This forum contains lots of people who casually describe their Bitcoin digits as part of their asset allocation, so clearly cryptos are diverting some retail investor dollars from the markets. Does this affect the price of stocks/bonds? It's possible I suppose, although the effect would be small. It's not like Tesla is being evaluated by institutional investors on the basis of its PE ratio or something, and the retail investors would push its price beyond the fair value they calculated as their willingness to pay.

However, Bitcoin's $1T "market cap" is not the same thing as the amount of money invested in Bitcoin. The guy who bought at $100 all those years ago only took $100 out of the stock/bond market, not $50k. Remember, only 13% of Bitcoin is available for sale. The rest is being hoarded by long-term true believers.https://medium.com/technicity/bitcoins-free-float-declines-to-just-13-of-its-total-supply-lowest-since-2014-52c20beca899
 
Additionally, as @JAYSLOL notes, it's a zero-sum trade. Whoever sells their Bitcoin for $50k receives cash that they will presumably invest somewhere else, just like the person who bought the Bitcoin gives away cash that they presumably could have invested somewhere else. Overall it's a wash unless for some reason a big population of sellers wanted into the stocks/bonds markets and sold to a population of people spending the cash under their mattresses, or vice versa.

tooqk4u22

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Re: What are your bubble indicators?
« Reply #158 on: February 23, 2021, 10:55:53 AM »
Ray Dalio posted some of his analysis and thoughts on this subject today: Are We In a Stock Market Bubble?
https://www.linkedin.com/pulse/we-stock-market-bubble-ray-dalio/?trackingId=PngJstqlRyiMGUTvH%2BBZBw%3D%3D

His conclusion is that the “bubble stocks” are in a bubble :-).

There is a very big divergence in the readings across stocks. Some stocks are, by these measures, in extreme bubbles (particularly emerging technology companies), while some stocks are not in bubbles.

I saw that! It fits my view that we have 10-20% further to go up until it's time to really consider hedging more of one's portfolio. The next injection of financial adrenaline is coming, and that would be an unwise time to sit out.

However, there is a risk right now that a meltdown in ultra-risk assets could lead to a 20-30% correction in lower-risk assets. E.g. Bitcoin's "market cap" just exceeded $1T and doesn't appear to be on Dalio's bubble radar. At some point, we're talking about asset bubbles on the same scale as mortgage bundles in 2007, or tech stocks in 2000.

Don't you think it's the opposite regarding Bitcoin? Bitcoin price going up means other assets aren't going up - i.e. it's like people taking money out of the market/bonds/etc. and putting it under their mattress.

When bitcoin drops (lots of people take their money out to spend/invest/etc.) then stocks etc. should go up. Bitcoin going up is actually keeping inflation of other assets down.

This forum contains lots of people who casually describe their Bitcoin digits as part of their asset allocation, so clearly cryptos are diverting some retail investor dollars from the markets. Does this affect the price of stocks/bonds? It's possible I suppose, although the effect would be small. It's not like Tesla is being evaluated by institutional investors on the basis of its PE ratio or something, and the retail investors would push its price beyond the fair value they calculated as their willingness to pay.

However, Bitcoin's $1T "market cap" is not the same thing as the amount of money invested in Bitcoin. The guy who bought at $100 all those years ago only took $100 out of the stock/bond market, not $50k. Remember, only 13% of Bitcoin is available for sale. The rest is being hoarded by long-term true believers.https://medium.com/technicity/bitcoins-free-float-declines-to-just-13-of-its-total-supply-lowest-since-2014-52c20beca899
 
Additionally, as @JAYSLOL notes, it's a zero-sum trade. Whoever sells their Bitcoin for $50k receives cash that they will presumably invest somewhere else, just like the person who bought the Bitcoin gives away cash that they presumably could have invested somewhere else. Overall it's a wash unless for some reason a big population of sellers wanted into the stocks/bonds markets and sold to a population of people spending the cash under their mattresses, or vice versa.

This is true of everything.....the amount a current purchaser is willing to pay sets the price.   If tomorrow, the most anybody wants to pay for BTC or TSLA is $10 then that's the price.   Doesn't matter if the seller bought it for $1 or $50,000.   The price is the price. 


PDXTabs

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Re: What are your bubble indicators?
« Reply #159 on: February 23, 2021, 12:01:10 PM »
This is true of everything.....the amount a current purchaser is willing to pay sets the price.   If tomorrow, the most anybody wants to pay for BTC or TSLA is $10 then that's the price.   Doesn't matter if the seller bought it for $1 or $50,000.   The price is the price.

Yes, but BTC is a little different than TSLA in that TSLA presumably has some book value while BTC does not. With that said, I have no idea if TSLA's book value is a positive or negative number.

maizefolk

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Re: What are your bubble indicators?
« Reply #160 on: February 23, 2021, 04:24:04 PM »
This is true of everything.....the amount a current purchaser is willing to pay sets the price.   If tomorrow, the most anybody wants to pay for BTC or TSLA is $10 then that's the price.   Doesn't matter if the seller bought it for $1 or $50,000.   The price is the price.

Yes, but BTC is a little different than TSLA in that TSLA presumably has some book value while BTC does not. With that said, I have no idea if TSLA's book value is a positive or negative number.

The weird thing is that I'm guessing the $1.5B of bitcoin TSLA bought would count towards their book value, wouldn't it?

effigy98

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Re: What are your bubble indicators?
« Reply #161 on: February 23, 2021, 04:26:47 PM »
Favorite bubble indicator:

Casinos in states without covid restrictions are PACKED FULL of STIMMIE check recipients.

PDXTabs

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Re: What are your bubble indicators?
« Reply #162 on: February 23, 2021, 11:10:33 PM »
This is true of everything.....the amount a current purchaser is willing to pay sets the price.   If tomorrow, the most anybody wants to pay for BTC or TSLA is $10 then that's the price.   Doesn't matter if the seller bought it for $1 or $50,000.   The price is the price.

Yes, but BTC is a little different than TSLA in that TSLA presumably has some book value while BTC does not. With that said, I have no idea if TSLA's book value is a positive or negative number.

The weird thing is that I'm guessing the $1.5B of bitcoin TSLA bought would count towards their book value, wouldn't it?

You're not wrong. mind blown

frugalnacho

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Re: What are your bubble indicators?
« Reply #163 on: February 24, 2021, 08:13:01 AM »
There are an insane amount of sports betting billboards up in my area.   About half the billboards are for some sports betting site, and the other half are for recreational marijuana. 

MustacheAndaHalf

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Re: What are your bubble indicators?
« Reply #164 on: February 24, 2021, 09:37:56 AM »
There are an insane amount of sports betting billboards up in my area.   About half the billboards are for some sports betting site, and the other half are for recreational marijuana.
They haven't combined both hobbies yet?  Gambling on pot legalization:
https://etfdb.com/themes/marijuana-etfs/

ChpBstrd

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Re: What are your bubble indicators?
« Reply #165 on: February 24, 2021, 02:55:45 PM »
There is a gambling mood in the air. Tesla, Bitcoin, Gamestop, travel and tourism industries, tech stocks, etc. For the last 12 months, the people who made the most money have been the people piling into the things which are least justifiable. Watching them succeed has caused a lot of investors to change their risk profile (guilty).

There must be something rational about the herds rushing toward risk. Perhaps the probability of a 2nd stimulus bill happening in March has everyone seeing a repeat of April 2020. Perhaps buying into high-beta stocks at a time when the S&P500 and Nasdaq just hit PE ratios of 40 is done with the expectation that there is a bit more valuation expansion to squeeze out until we correct.

The S&P500 returned 19.5% in 1999, even as the irrational exuberance was obvious. Thus, the cost of being correct about the existence of a dangerous bubble in late 1998 and therefore going to cash was 20% in a year, plus dividends, - although in all fairness, one would probably get into a treasury yielding 6% or so - an option we don't get today.

In hindsight, the correct way to play the 90's bubble, if one didn't know the exact timing, was with trailing stops and an IPS that said you'd stay out a year or two three* when the breach indicated the bubble was over. One would receive returns up to the end and then maybe get out after losing only, let's say, 10% of the winnings. If enough market participants are playing with stop loss orders, and they are doing so with the most volatile stocks, the stage could be set for a flash crash, maybe faster than what we saw in March 2020, or maybe a series of corrections and rebounds as they are stopped out, buy back in, and repeat. 

I'm looking at other strategies that I could ride through a potential correction, or lack thereof:
-Calls & Cash: 10% S&P500 LEAPS call options, 90% short duration or muni bonds.
-Collar: Limit losses and gains to 15% a year, at minimal cost.
-S&P Long Calls + VIX Long Spreads: Hedge using volatility, and maybe win both ways.

*The staying out part would be hard for someone who escaped the carnage in 2000, but didn't know they had 2001-2003 to go.

vand

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Re: What are your bubble indicators?
« Reply #166 on: March 01, 2021, 02:27:56 AM »
Personally I think there may well be a final "headfake" phase of the bubble before we see the multi-year top.. that would be a final rush into tech and the bubble stocks even as the fundamentals supporting those prices are quickly crumbling away, so Nasdaq could move higher even while interest rates climb, blowing the doors off the "future growth is supported by low discount rates" argument. This - finally - gets just about everyone convinced that the bubble is sustainable and so sows the seeds of the collapse.

I remember this dynamic playing out in the real estate bubble in 2006. As central banks tightened and interest rates were rising, instead of cooling the market we saw a final rush into the market that drove it temporarily even higher because,  their argument went, "we need to get on board before interest rates go even higher!"



waltworks

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Re: What are your bubble indicators?
« Reply #168 on: March 01, 2021, 07:49:25 AM »
It's a shame there's no way to know how or when it all ends. I mean, if I had to bet, I'd bet <12 months. But I would have told you that last year too.

-W

MustacheAndaHalf

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Re: What are your bubble indicators?
« Reply #169 on: March 01, 2021, 09:13:38 AM »
The S&P500 returned 19.5% in 1999, even as the irrational exuberance was obvious. Thus, the cost of being correct about the existence of a dangerous bubble in late 1998 and therefore going to cash was 20% in a year, plus dividends, - although in all fairness, one would probably get into a treasury yielding 6% or so - an option we don't get today.
You've stumbled upon something I often use: Fed Chairman Greenspan's "Irrational Exuberance" speech given Dec 5, 1996.  The exuberance was in 1996, 1997, etc.  It was there all the way up, for years.
https://en.wikipedia.org/wiki/Irrational_exuberance

Investing starting one month after the "irrational exuberance" speech, 1997, and staying invested 1997-2002 actually left you +26% richer, despite the 3 losing years in a row.  So it's very important to distinguish if this year is more like 1999, or 1997.

ctuser1

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Re: What are your bubble indicators?
« Reply #170 on: March 01, 2021, 09:55:23 AM »
I'm watching CNBC. There was a WSB guy on a minute ago.

WSB on CNBC feels quite scary, and is sure bubbly.
 

PDXTabs

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Re: What are your bubble indicators?
« Reply #171 on: March 01, 2021, 12:57:06 PM »
The S&P500 returned 19.5% in 1999, even as the irrational exuberance was obvious. Thus, the cost of being correct about the existence of a dangerous bubble in late 1998 and therefore going to cash was 20% in a year, plus dividends, - although in all fairness, one would probably get into a treasury yielding 6% or so - an option we don't get today.
You've stumbled upon something I often use: Fed Chairman Greenspan's "Irrational Exuberance" speech given Dec 5, 1996.  The exuberance was in 1996, 1997, etc.  It was there all the way up, for years.
https://en.wikipedia.org/wiki/Irrational_exuberance

Investing starting one month after the "irrational exuberance" speech, 1997, and staying invested 1997-2002 actually left you +26% richer, despite the 3 losing years in a row.  So it's very important to distinguish if this year is more like 1999, or 1997.

100%

And since I'm not prescient I just keep buying every paycheck.

vand

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Re: What are your bubble indicators?
« Reply #172 on: March 01, 2021, 01:14:33 PM »
Jared Dillian writes:

"I like to say that the definition of a bubble is when people are making money all out of proportion to their intelligence or work ethic."

I couldn't agree more. Jonny Shoeshines are regularly piling into anyoldstock.com and getting higher returns in a week than the stock market has historically delivered over a year.

https://www.mauldineconomics.com/the-10th-man/elevator-action

ice_beard

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Re: What are your bubble indicators?
« Reply #173 on: March 01, 2021, 01:20:41 PM »
I'm watching CNBC. There was a WSB guy on a minute ago.

WSB on CNBC feels quite scary, and is sure bubbly.

I'm of the impression that retail investors are a large part of the reason evaluations are so high and why dips quickly evaporate.  (Caution!  The next statement might be a bubble indicator in itself!)  Watching the algos crush stocks and then watch them pop back (wtf was that huge shakeout last week?  It felt like a coordinated stop loss raid) makes me think that retailers are having an impact and it's not just MMs who are moving stocks.  That's certainly the case for the most popular names like AAPL and as we've seen, GME.  So I'm not so sure having a representative of an increasingly large sector of the market on CNBC is all that unusual. 

WSB gets a lot of flack from this site and it seems Mungeresque.  I don't participate in their style of investing, but they (retailers, like us) are all part of the same group as non institutional investors. 

waltworks

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Re: What are your bubble indicators?
« Reply #174 on: March 01, 2021, 02:35:35 PM »
Jared Dillian writes:

"I like to say that the definition of a bubble is when people are making money all out of proportion to their intelligence or work ethic."

I couldn't agree more. Jonny Shoeshines are regularly piling into anyoldstock.com and getting higher returns in a week than the stock market has historically delivered over a year.

https://www.mauldineconomics.com/the-10th-man/elevator-action

I agree with all of that... but as @MustacheAndaHalf points out, this kind of information isn't actionable. The shoeshine boys could keep getting rich for another 3 years and the subsequent crash might not even drop you back to the point where you've improved your position (ie, the late 90s tech crash if you'd invested in 97). Or it could crash tomorrow and you'd be cursing yourself for not selling last week.

-W

Hall11235

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Re: What are your bubble indicators?
« Reply #175 on: March 02, 2021, 07:43:02 AM »
Jared Dillian writes:

"I like to say that the definition of a bubble is when people are making money all out of proportion to their intelligence or work ethic."

I couldn't agree more. Jonny Shoeshines are regularly piling into anyoldstock.com and getting higher returns in a week than the stock market has historically delivered over a year.

https://www.mauldineconomics.com/the-10th-man/elevator-action

I agree with all of that... but as @MustacheAndaHalf points out, this kind of information isn't actionable. The shoeshine boys could keep getting rich for another 3 years and the subsequent crash might not even drop you back to the point where you've improved your position (ie, the late 90s tech crash if you'd invested in 97). Or it could crash tomorrow and you'd be cursing yourself for not selling last week.

-W

I am too young to really remember the dot com bubble, and I was in high school in 07-08, so I don't really remember any indicators relative to that bubble, but, to me, a rough 'dipstick' test for bubble-ness is how much my non-financial peers are discussing 'stonks.' When a coworker of mine who can't explain what a cryptocurrency is, but is putting money into it since his 'cousin' tells him it is a free money machine, and my DW's coworkers are talking about selling their potentially extremely lucrative Pharma stock holdings to buy rando stocks (when the potential payout on the pharma stocks is huge), that indicated a bubble to me. Also, people look at me like I'm a nutjob when I caution against retail investing like GME, et al.

WB said to be "Greedy when others are fearful, and fearful when others are greedy." Well, people are greedy AF right now.

I don't have a strategy when the bust happens other than to increase my investments into the fire sale that the market will be on in 12-18 months.

**Edited for clarity

vand

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Re: What are your bubble indicators?
« Reply #176 on: March 04, 2021, 06:34:45 AM »
Jared Dillian writes:

"I like to say that the definition of a bubble is when people are making money all out of proportion to their intelligence or work ethic."

I couldn't agree more. Jonny Shoeshines are regularly piling into anyoldstock.com and getting higher returns in a week than the stock market has historically delivered over a year.

https://www.mauldineconomics.com/the-10th-man/elevator-action

I agree with all of that... but as @MustacheAndaHalf points out, this kind of information isn't actionable. The shoeshine boys could keep getting rich for another 3 years and the subsequent crash might not even drop you back to the point where you've improved your position (ie, the late 90s tech crash if you'd invested in 97). Or it could crash tomorrow and you'd be cursing yourself for not selling last week.

-W

It is very actionable. I am actioning on it :)

Yes it is true that the market can keep on going higher and you can "miss out on further gains". But are you always going to wheel out the FOMO argument whenever someone suggests you do something different?

Ultimately you are always going to regret not buying more of something that is going up and not selling more of something that is not going down, but your regrets must be balanced with your appetite for risk. Right now I judge there to be a lot of risk in the market in relation to the expected reward, so I choose to dial it back. I don't have a crystal ball and could well be wrong, but we can only each come to our own individual conclusions by our own internal comfort levels.
« Last Edit: March 04, 2021, 06:36:22 AM by vand »

waltworks

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Re: What are your bubble indicators?
« Reply #177 on: March 04, 2021, 07:06:34 AM »
The problem is that for most people, fear of losses outweighs desire for gains so much that they trade themselves broke. We have reams of data and all the famous people like Buffet all saying market timing doesn't work.

Vand, what specific actions have you taken? Sold shares? Shorted things?

-W

vand

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Re: What are your bubble indicators?
« Reply #178 on: March 04, 2021, 09:17:11 AM »
The problem is that for most people, fear of losses outweighs desire for gains so much that they trade themselves broke. We have reams of data and all the famous people like Buffet all saying market timing doesn't work.

Vand, what specific actions have you taken? Sold shares? Shorted things?

-W

Nothing that would be considered earth shattering. I've simply repositioned myself below my personal "default aggression level" because I judge the market to be much more euphoric than normal.  Less stocks, more mid & short term bonds, cash, gold, and within stocks I've positioned myself away from growth and towards value.

One money manager who I think is worth reading is Howard Marks. There's a good interview with him here about how you should position yourself judged against your overall barometer of the enthusiasm.

https://mebfaber.com/2018/10/03/episode-124-howard-marks-its-not-what-you-buy-its-what-you-pay-for-it-that-determines-whether-something-is-a-good-investment/


Quote
It’s not a matter of in or out, or today or tomorrow, all of which have so much precision and definiteness to them, but rather think of it as a speedometer from 0 to 100. And 0 is maximum defence all cash and 100 is maximum offense fully invested in aggressive and risky assets. My reference to calibrating is really saying, “Where should we be in between those extremes of 0 to 100?” Nobody should run his portfolio that today I’m 0 and two weeks I’m a 100 and then I go back to 0. We should adjust moderately within the range. First of all, I would encourage each of your readers to think about where, from 0 to a 100, they should normally be. Think about your age, think about your earnings, think about your future, think about how much assets you have, think about your circumstances, how much assets you might need in a pinch, think about your psychological makeup and your ability to live with risk. You might say, “You know what, I’m a young person. I have a bright future. I have a good income. I’m making more money than I need every day. I’m putting some aside into the market. I’ve been through this before. I can stand to live with fluctuations. I think I’m a 75 or an 80. My normal risk posture is 75 or 80.” So I think it’s important to do that. Of course, it’s really important to do it accurately. And one of the problems is that people, in good times, people overestimate their ability to live with pain. And I remember the people who back in ’97 when the tech stocks were booming, people saying, “Oh, you know what? I wouldn’t mind if I lost 30% of my 401k portfolio not so much, it’d be fine.” Believe me when they went down 40% they weren’t fine.

So I would encourage everybody who’s listening to try to think about what their normal risk posture should be and need to do it in the form of my speedometer from 0 to a 100. So we have a person who says, “I’m normally a 75.” Now the next question is, “Okay, then where should you be today?” Today are we in the depressed part of the cycle and are things undervalued relative to history and are people moping around and willing to take risk in which environment I would say you should amp up your risk because you’ll be getting a lot of bargains? Or are we in the elevated part of the cycle where everybody’s happy, nobody sees anything to worry about, everybody thinks risk is their friend, that the more risk they take, the more money they’ll make. And so securities are priced above their historic levels and the mood is very positive, which means that there’s probably a lot of optimism priced into every security. If you think you’re in the elevated portion of the cycle, then I think you wanna turn the speedometer down and maybe you wanna only be a 50 or a 60 at that time. You don’t have to have the certainty to go from your normal 75 to 0 in order to do a good job of managing our assets and adjustment within the range, I think, is all that most people can do.



vand

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Re: What are your bubble indicators?
« Reply #179 on: April 08, 2021, 02:13:33 AM »
Don't know if anyone has been following this story:
https://www.nytimes.com/2021/03/28/business/greensill-capital-collapse.html
https://www.youtube.com/watch?v=hhHdtDyQD90

the bull argument is that profits are continuing to grow...
but you wonder how much other financial trickery, similar to this, is being used to tart up company balance sheets and will be exposed in due course.

tooqk4u22

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Re: What are your bubble indicators?
« Reply #180 on: April 08, 2021, 05:57:05 AM »
Don't know if anyone has been following this story:
https://www.nytimes.com/2021/03/28/business/greensill-capital-collapse.html
https://www.youtube.com/watch?v=hhHdtDyQD90

the bull argument is that profits are continuing to grow...
but you wonder how much other financial trickery, similar to this, is being used to tart up company balance sheets and will be exposed in due course.

Didn't read bc of paywall but accounting or lack of any oversight applies to 95% of the SPACS, I mean all they have to say is trust us we will have something of value at some point in the very far future.

talltexan

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Re: What are your bubble indicators?
« Reply #181 on: April 08, 2021, 06:49:08 AM »
When I was in High School, particularly my Freshman year, a group of us were playing Magic: The Gathering. I recently noticed that the best player of this group was hawking his cards (including his "Power 9" set) on Facebook. When I commented on the post, he private messaged me, offering me a $5,000 discount on a group of cards.

Rather than buy Magic Cards--it still astounds me how much those things seem to be worth--I immediate went to eTrade and bought two options contracts for $VTI. No way I'm missing out on the "Everything Bubble"!

MustacheAndaHalf

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Re: What are your bubble indicators?
« Reply #182 on: April 08, 2021, 08:43:13 AM »
Rather than buy Magic Cards--it still astounds me how much those things seem to be worth--I immediate went to eTrade and bought two options contracts for $VTI. No way I'm missing out on the "Everything Bubble"!
Magic the Gathering cards have been valuable for a long time.  I recall a story about the earliest edition, most valuable card going for $100,000.  Looking now, that card is in the $100k to $250k range.  But if you see that as a bubble indicator, check if those cards were also valuable before 2020.

BicycleB

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Re: What are your bubble indicators?
« Reply #183 on: April 08, 2021, 11:56:19 AM »
Fwiw:

1) In my city, average home prices are up about 35% since 12 months ago. ETA: Median prices up 25% to 30% depending on neighborhood.
2) Stats from specific realtors support general articles on this. The best realtor I've discussed it with says "Comps from 2020 don't count. I only use comps from the last two months and presales, because the gap from beyond that is too much."
3) Said realtor: "We're in the post-COVID boom."

***

Re Greensill - sounds extremely fraudulent, arguably bubbly. Followed the story on Bloomberg Opinion's Money Stuff (Matt Levine). Lending effectively long term against imaginary receivables, borrowing to finance the loans while claiming they were secured and short term? Disaster! Original article: https://www.bloomberg.com/news/newsletters/2021-03-17/greensill-didn-t-just-finance-bluestone-s-supply-chain-kmdn7w8h
« Last Edit: April 08, 2021, 02:12:43 PM by BicycleB »

tooqk4u22

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Re: What are your bubble indicators?
« Reply #184 on: April 08, 2021, 02:08:18 PM »
Fwiw:

1) In my city and my neighborhood, median and average home prices are up about 35% since 12 months ago.
2) Stats from specific realtors support general articles on this. The best realtor I've discussed it with says "Comps from 2020 don't count. I only use comps from the last two months and presales, because the gap from beyond that is too much."
3) Said realtor: "We're in the post-COVID boom."

***

Re Greensill - sounds extremely fraudulent, arguably bubbly. Followed the story on Bloomberg Opinion's Money Stuff (Matt Levine). Lending effectively long term against imaginary receivables, borrowing to finance the loans while claiming they were secured and short term? Disaster! Original article: https://www.bloomberg.com/news/newsletters/2021-03-17/greensill-didn-t-just-finance-bluestone-s-supply-chain-kmdn7w8h

I heard this morning that the median home price in all of US is $370k now, that is staggering to me.   Can't just be the coasts if it is up that high.   

BicycleB

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Re: What are your bubble indicators?
« Reply #185 on: April 08, 2021, 02:15:16 PM »

I heard this morning that the median home price in all of US is $370k now, that is staggering to me.   Can't just be the coasts if it is up that high.   

I'm not on the coast, but still in a city - Austin - that benefits from the tech boom. Am curious about how widespread any US real estate bubble is.

(side note - edited details in original post)

tooqk4u22

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Re: What are your bubble indicators?
« Reply #186 on: April 08, 2021, 02:22:31 PM »

I heard this morning that the median home price in all of US is $370k now, that is staggering to me.   Can't just be the coasts if it is up that high.   

I'm not on the coast, but still in a city - Austin - that benefits from the tech boom. Am curious about how widespread any US real estate bubble is.

(side note - edited details in original post)

That's what I meant, can't be all the coasts.   Austin is out of control.  Denver metro (incl Boulder, ft collins areas) out of control.   Florida out of control.  Nashville out of control.  I could go on.   Combination of low rates, Corp relocations to business/tax friendly areas (like Austin) although the irony is that the people running and working for these companies tend to be coming from blue states (and have those ideals) but seem to have a limit to what is fair for them to pay,, and the covid mass wfh rush has just pushed things further (not sure what happens when these people have to go back to the office.

But don't worry about it bc there is no inflation! 
« Last Edit: April 08, 2021, 02:37:54 PM by tooqk4u22 »

ChpBstrd

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Re: What are your bubble indicators?
« Reply #187 on: April 08, 2021, 03:09:45 PM »

I heard this morning that the median home price in all of US is $370k now, that is staggering to me.   Can't just be the coasts if it is up that high.   

I'm not on the coast, but still in a city - Austin - that benefits from the tech boom. Am curious about how widespread any US real estate bubble is.

(side note - edited details in original post)

That's what I meant, can't be all the coasts.   Austin is out of control.  Denver metro (incl Boulder, ft collins areas) out of control.   Florida out of control.  Nashville out of control.  I could go on.   Combination of low rates, Corp relocations to business/tax friendly areas (like Austin) although the irony is that the people running and working for these companies tend to be coming from blue states (and have those ideals) but seem to have a limit to what is fair for them to pay,, and the covid mass wfh rush has just pushed things further (not sure what happens when these people have to go back to the office.

But don't worry about it bc there is no inflation!

Some cites like Houston, Pittsburg, Salt Lake City, San Antonio, and Kansas City saw very little or negative appreciation in 2020.

https://www.kiplinger.com/article/real-estate/t010-c000-s002-home-price-changes-in-the-100-largest-metro-areas.html

Cities like Toledo, McAllen TX, Rochester, Buffalo, Lansing MI, or most of Ohio are definitely not experiencing bubbles. Homes in those places generally cost less than the cost of construction alone.

The WFH revolution is about to level out a lot of the local peaks in real estate values. I'd suggest the goal is to sell in places above 5 on Kiplinger's affordability index and buy in places below 5. The bigger question is do we have another mortgage crisis when interest rates rise a couple percent and people don't all have to pile into HCOL areas to get good IT/financial/corporate jobs any more? Recall that the 2008 crisis was largely a phenomenon of HCOL areas. Back then, unaffordability had led people to get creative with loan quality. This time, the WFH revolution might set off a panic and exodus which could feed on itself and cause plummeting prices. I would be living in fear if I owned a $750k condo and was watching coworkers zoom in from their $150k rust belt bungalows.

tooqk4u22

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Re: What are your bubble indicators?
« Reply #188 on: April 08, 2021, 03:29:33 PM »
Mortgage standards are still pretty good so I don't think there will be a mortgage crisis per se.  But as rates rise, and already have a bit, sales will slow down.  Also part of the problem has been inventory along with demand, so as vaccines continue people (older ones especially who didn't want people in their house) will start listing more and hopefully normalize market.   That said if rates do rise and inventory picks up then I could see a slide back some in values.

As for WFH, a lot of financial and tech companies have ready said back in the office is coming for most. 

maizefolk

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Re: What are your bubble indicators?
« Reply #189 on: April 08, 2021, 03:41:50 PM »
I live in a smaller city not close to any oceans and that most people in the USA won't even have heard of. Zillow still thinks my house has increased in value 32% in the last year.

markbike528CBX

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Re: What are your bubble indicators?
« Reply #190 on: April 08, 2021, 08:27:05 PM »
Don't know if anyone has been following this story:
https://www.nytimes.com/2021/03/28/business/greensill-capital-collapse.html
https://www.youtube.com/watch?v=hhHdtDyQD90

the bull argument is that profits are continuing to grow...
but you wonder how much other financial trickery, similar to this, is being used to tart up company balance sheets and will be exposed in due course.

Didn't read bc of paywall but accounting or lack of any oversight applies to 95% of the SPACS, I mean all they have to say is trust us we will have something of value at some point in the very far future.

If the lack of oversight is true then this sounds like:
South Seas Bubble
Mississippi Scheme and others in:

Memoirs of Extraordinary Popular Delusions and the Madness of Crowds
By Charles Mackay


https://www.econlib.org/library/Mackay/macEx.html


RWD

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Re: What are your bubble indicators?
« Reply #191 on: April 08, 2021, 08:37:41 PM »
I live in a smaller city not close to any oceans and that most people in the USA won't even have heard of. Zillow still thinks my house has increased in value 32% in the last year.
If true I think that says more about the people of the USA than the prominence of your city.

tooqk4u22

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Re: What are your bubble indicators?
« Reply #192 on: April 09, 2021, 05:40:35 AM »
Don't know if anyone has been following this story:
https://www.nytimes.com/2021/03/28/business/greensill-capital-collapse.html
https://www.youtube.com/watch?v=hhHdtDyQD90

the bull argument is that profits are continuing to grow...
but you wonder how much other financial trickery, similar to this, is being used to tart up company balance sheets and will be exposed in due course.

Didn't read bc of paywall but accounting or lack of any oversight applies to 95% of the SPACS, I mean all they have to say is trust us we will have something of value at some point in the very far future.

If the lack of oversight is true then this sounds like:
South Seas Bubble
Mississippi Scheme and others in:

Memoirs of Extraordinary Popular Delusions and the Madness of Crowds
By Charles Mackay


https://www.econlib.org/library/Mackay/macEx.html



SEC is finally noticing SEC Statement only 2 years, 600ish deals later.   They are always late to the game so it pretty much confirms SPAC bubble. They are still not doing anything about it and just saying that they see it, what a joke.
« Last Edit: April 09, 2021, 06:04:26 AM by tooqk4u22 »

Steeze

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Re: What are your bubble indicators?
« Reply #193 on: April 09, 2021, 05:58:56 PM »
I live in a smaller city not close to any oceans and that most people in the USA won't even have heard of. Zillow still thinks my house has increased in value 32% in the last year.
If true I think that says more about the people of the USA than the prominence of your city.

I can confirm that in my corner of NYC prices are flat (+\- 5%) over the last ~24 months

ChpBstrd

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Re: What are your bubble indicators?
« Reply #194 on: April 09, 2021, 07:32:48 PM »
Mortgage standards are still pretty good so I don't think there will be a mortgage crisis per se.  But as rates rise, and already have a bit, sales will slow down.  Also part of the problem has been inventory along with demand, so as vaccines continue people (older ones especially who didn't want people in their house) will start listing more and hopefully normalize market.   That said if rates do rise and inventory picks up then I could see a slide back some in values.

As for WFH, a lot of financial and tech companies have ready said back in the office is coming for most.

If one has $2000/mo to spend, one can afford a $480k house at 3% per bankrate's calculator. If rates rise to 5%, then one can only afford $320k, a 33% decrease.

Expand this math across all price points and it becomes obvious prices would have to drop if rates increase. After all, most people buy all the house they can possibly afford, based on the monthly payment. And people are only willing to trade down to a certain extent (i.e. everyone in the market can't switch to buying the cheapest house in the market and the high end runs out of customers who can afford it and must lower prices to move anything).

And we have people buying houses because they say it's an inflation hedge! Um, if we get even a fart of inflation that will raise mortgage rates and trigger another mortgage crisis. It's just the math.




maizefolk

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Re: What are your bubble indicators?
« Reply #195 on: April 09, 2021, 07:42:07 PM »
I agree that if interest rates go up, a lot of people buying right now may find themselves underwater on their mortgages. But I don't think that necessarily turns into a mortgage crisis until/unless people are actually struggling to make their payments, which shouldn't be as big an issue if people are sticking with fixed rate mortgages instead of the adjustable rate/teaser rate mortgages from the last crisis.

tooqk4u22

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Re: What are your bubble indicators?
« Reply #196 on: April 10, 2021, 06:39:35 AM »
Mortgage standards are still pretty good so I don't think there will be a mortgage crisis per se.  But as rates rise, and already have a bit, sales will slow down.  Also part of the problem has been inventory along with demand, so as vaccines continue people (older ones especially who didn't want people in their house) will start listing more and hopefully normalize market.   That said if rates do rise and inventory picks up then I could see a slide back some in values.

As for WFH, a lot of financial and tech companies have ready said back in the office is coming for most.

If one has $2000/mo to spend, one can afford a $480k house at 3% per bankrate's calculator. If rates rise to 5%, then one can only afford $320k, a 33% decrease.

Expand this math across all price points and it becomes obvious prices would have to drop if rates increase. After all, most people buy all the house they can possibly afford, based on the monthly payment. And people are only willing to trade down to a certain extent (i.e. everyone in the market can't switch to buying the cheapest house in the market and the high end runs out of customers who can afford it and must lower prices to move anything).

And we have people buying houses because they say it's an inflation hedge! Um, if we get even a fart of inflation that will raise mortgage rates and trigger another mortgage crisis. It's just the math.

Mathematically correct and yes most first and second (first trade up) time buyers go for the max.   but ignores that most of mortgages are fixed rate and 40% of market is owned outright.   Sure rates will impact prices negatively but then supply slows down and qualified buyers still bit up the low inventory.   The supply imbalance is a greater driver of pricing and of course incomes matter, supply nationally is less than half it was a year ago and is even more constrained in hotter markets, when supply comes back and it will, that will be what softens pricing.   

Anyway it shouldn't lead to a crisis bc existing owners will just stay in place and pay their fixed rate mortgage butbhave lost equity or may be a bit under water.  New buyers will get a better deal when prices go down and those mortgages will be issued at the new levels.   Back in financial crisis there were liar loans (no doc), 1 -5 year ARMS at 100% financing, pick a payment, etc and all that was being sliced and diced in multiple tranches of tranches of tranches of CDOs and such.   All that doesn't exist now, at least in any scale. And banks were not as well capitalized as they are now.

But I agree that priced will come down as a result of one of these things but that means the stock market will to

Roland of Gilead

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Re: What are your bubble indicators?
« Reply #197 on: April 10, 2021, 07:48:17 AM »
CDX plywood $78 a sheet....there is your bubble indicator right there.

bacchi

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Re: What are your bubble indicators?
« Reply #198 on: April 10, 2021, 08:40:42 AM »
CDX plywood $78 a sheet....there is your bubble indicator right there.

Is that from Covid shortages, and we should see it drop through the summer, or is that straight up inflation?

tooqk4u22

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Re: What are your bubble indicators?
« Reply #199 on: April 10, 2021, 09:51:20 AM »
CDX plywood $78 a sheet....there is your bubble indicator right there.

Is that from Covid shortages, and we should see it drop through the summer, or is that straight up inflation?

Mostly covid but there is probably some real inflation in there too.  Lumber more than doubled from previous covid and is still going up.   Perfect storm of no supply bc mills were shut down and import routes were disrupted combined with excessive demand bc only thing people could really spend money on was build decks, additions, or new homes.   

Note that this is an aspect of the Fed's transitory inflation and a technicality.   Inflation is an overall trend so if all prices go up 100% this year and stay at that level for the years after the Fed doesn’t consider it inflation even though we all are paying 100% more.