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Comment by bencollier49 | Hacker News Reader

If the stock market has distorted the price of SolarWinds that badly, as per your analysis, that's probably a sign that the stock market is massively overvaluing everything, and that we're headed for a gigantic crash.

Which by coincidence is exactly what Michael Burry, the guy who predicted the 2008 housing crash, has been saying recently.

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That's not what I've said. I'm not a financial expert by any means but I think the stock market has proved again and again that it is not reliable and can be manipulated easily.

People short-squeezing stocks, shooting their "value" by 30x in 2 hours making them millionaires.

Hedge funds manipulating stocks to meet their portfolios

IPO's in billions of dollars for new, non-profitable startups just because of hype. when you look at the balance sheet it makes no sense.

The market is volatile and inflated, it is as clear as day. Whether there will be a crash? that's beyond my level.

It will crash, predicting when is something else. I was correct in 2001 and 2008 but I was wrong in the past years as the market has been overheated for quite a while (I thought we would've crashed already) and both in stocks and recently in crypto, I have been hearing 'this is the new normal, all is different this time around'. Which is what people always say just before the carpet gets pulled.

> that's probably a sign that the stock market is massively overvaluing everything

No it's not. The performance of stocks was always only weakly linked to actual company performance.

There are countless examples of companies that are hardly profitable and not even a tenth the size of their competition, but are valued at twice the price of some of their competitors. It's mostly made-up prices created entirely on hype that often make less sense than the soccer trading card market.

I've been hearing the "we're headed for a crash" thing with the same logic since at least mid-2019. Either we're not heading for a crash, or the market has become so irrational that it doesn't even matter any more, and we can build castles in the air forever.

Mid-2019?

We can definitely build castles in the air for two years.

I believe the market should in theory rise with inflation. Doesn't seem too crazy all things considered.

In 2005 it was clear to some thay the market was heading for a crash, but it can take years.

Isn't inflation above gains essentially a devaluing of the market? If the stock market goes slightly down and inflation ramps up significantly isn't that the same as a crash?

The most expensive and valued stocks are "essentials" they dann just increase there price with inflation.

I dont understand the problem with inflation..

Yes that’s exactly my point. People look at absolute value of the stock market but what matters is the relative value to the dollar.

Inflation is not a problem; unexpected changes in the rate of inflation are the problem. There are various reasons, but the most important is that a spike in the inflation rate leads to a spike in interest rates, which is generally harmful to businesses (loans are harder to repay, customers are less able to buy, etc.). There is also a second-order effect: rising interest rates reduce the value of long-dated bonds, which reduces the available investment capital (or worse, it can trigger margin calls and create a "contagion" effect).

Correct, and that is why you should always analyze inflation-adjusted returns for any long-term investment.

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