 Good day, fellow investors. Is the stock market in a bubble? And if so, when will it implode? If we take a look at the SAP 500 for a March 2009, it is up 242%. So it was a straight line up. So when you see that, you immediately get fears of, oh, this is a bubble. In order to determine whether this is a bubble or not, let's first see the definition of a bubble. So a stock market bubble is when stock prices are irrational in relation to their actual business fundamentals. So when stock prices diverge from business fundamentals, we can call it a bubble. The best measure of business fundamentals is earnings. So let's see how the stock market performed in relation to earnings. If I take a look at SAP 500 earnings in the last 12 months that I have available data, they have been going up. Earnings, reported earnings, have increased 14% in the last 12 months. And the SAP 500 has increased exactly 13.5% in the same period. So earnings are in line with the increases of the SAP 500. Thus, we shouldn't call this a bubble. Is it so? One of my favorite financial economists, behavioral finance guru is Robert Schiller. He also won the Nobel Prize. And I always like to go to his point of view. One of his main quotes is that economists adhere to rational expectations of the world. But a lot of what happens in markets is driven by pure stupidity or rather inattention, misinformation about fundamentals and exaggerated focus on currently circulating stories. So what we have seen is that currently SAP 500 earnings are going up. Second quote from Robert Schiller. It amazes me how people are often more willing to act based on little or no data than to use data that is a challenge to assemble. So if we take one year SAP 500 earnings, that's definitely little or no data. Let's take a look at earnings in the past 20, 10, 20 years and see how that reflects the SAP 500. Here we have SAP 500 earnings in the last 20 years from 1997. This red line here on the chart shows that SAP 500 earnings have been flat for the last 10 years. The stock market is significantly up, earnings have been flat. You might get influenced by the small run up in earnings in the last year and a half, but come on, look at this chart and you can see that it's not that. So we are clearly in a bubble. If I adjust this by inflation, these are not adjusted inflation earnings, then from 2007 earnings are not flat, they are down 15%. If I compare 1997 earnings that were around 60 points for the SAP 500, now we are at 100 points and adjust that for inflation, then I get earnings growth of 6% over the last 20 years. That's not 6% per year, that's 6% over 20 years. So this clearly shows that corporate SAP 500 management is incapable. They have been destroying shareholder value for the last 20 years. However, nobody cares and now we'll see why is that. The main factor that create this stock market bubble, the rational distortion between fundamentals and stock prices are interest rates and central banks. That's clear. If we take a look at the top 26 central banks, we can see that two central banks, the Swedish one and the Swiss one, has interest rates negative, negative interest rate. That's also that's already irrational and crazy. Then other nine central banks have interest rates below 1% and the US has an interest rate of 1.25, which is still below inflation. That's also unsustainable and irrational in the long term and very accommodative to business development and markets it. What we know is that these low interest rates, they don't help the economy much, but they certainly do push asset prices higher because there is high liquidity and nobody invests, they just like to buy back shares. We know we are in a bubble, we know what triggers the bubble, central banks, just another interesting example to get away from the Fed, ECB and Bank of Japan. The Swiss central bank has 750 billion in stocks, bonds and cash, with 20% of it being in stocks. Around 150 billion of stocks around the world are owned by the Swiss central bank that got that money by printing francs and distributing them around the world. So no economic creation just printing money. They own almost 3 billion of Apple, almost 2 billion of Google, 2 billion of Microsoft, 1.4 billion of Amazon. So when you have an entity that simply prints money and then buys stocks with that money, it's clearly that the stock market is in a bubble. Now the main question is how should we behave? We know the stock market is in a bubble, we know who is creating that bubble and now what to do? The SAP 500 is just going up, central banks are buying stocks, assets, Bank of Japan, all that liquidity in the world is easily going from country to country, pushing all asset prices higher, especially the ones that central banks are allowed to buy. Large companies, high risk, low reward, smart as always. Now what we have to do? Okay, I want to be part of that trend. So I want to be invested, that's clear. You cannot know when they will stop. I don't think they will stop. They started with providing liquidity. If they stop, there will be a disaster in the world. So they will never stop providing liquidity. This means only one thing for me. There will be at some point inflation and when that inflation hits us, then central banks will be in trouble and we have to be ready. So we have to be invested into assets that take advantage of what central banks are doing and also are protected from inflation. So we limit our downside risks and highly increase our upside. Now not to get into the discussion, what kind of assets are that here now? We'll be doing special videos for that. So please subscribe if you haven't already. Thank you for watching. Leave your comments below, ideas. Do you agree with me? Do you disagree with me? I always love to learn from your comments. Click like if you like the content and I'll see you in the next video.