Today, while I was reading messages from the KW Crypto&Stock Investors community, I came across a link to an article entitled “Rich Dad Poor Dad’ author Robert Kiyosaki says an epic market crash is coming — and tells investors to buy bitcoin, gold, and silver” that was shared by a community member (published on the Markets Insider website). I clicked on that link to read the article. As I was reading the article, I kept wondering when the market crash will occur.
Although Robert Kiyosaki was quoted in that article, he is not the only financial expert who has warned us about an eventual market crash. Many other respectable experts, such as Michael Burry, have made similar predictions about the stock market for months now. In response to those predictions, I simply wish those financial experts, who are making various predictions about being in a bubble, were able to give us a timeframe for when the market crashes will happen. In fact, we all would agree that any prediction without a timeframe could eventually end up being true one day. For example, I could predict that someone will die without saying when or at what age the person will die. When that person eventually dies, if I am still alive, I could say that I predicted that death was coming.
Nevertheless, while I wish there were a timeframe with those predictions, I am not going to discredit them because I recognize that the stock market has a high PE ratio (price to earnings) which refers to how much is a company’s stock is trading at compared to the company’s earnings. A high PE ratio indicates that a stock is expensive while a low PE ratio indicates a stock is cheap. However, it is important to mention that the PE ratio should not be the only factor to consider when investing in a company because it doesn’t explain anything about the quality of a company.
According to multpl.com (see picture above), the S&P 500, which comprises of the 500 largest U.S. publicly traded companies and represents the index that is viewed as a measure that tracks how well the stock market is performing, has a PE ratio of 45.59 while its means is 15.94 and median is 14.85. This suggests that the price of the stock market is almost three times more expensive than its current value if we use the S&P 500 as the benchmark.
In summary, as I stated earlier, even though I would not discredit the use of a high stock market’s PE ratio to predict the bubble theory that is currently trending, I am still wondering when those financial experts will tell us about a timeframe for that market crash.
Written By: Judith Auguste