This Time Isn’t Really Different

When you start to hear people saying “This time is different” or “Markets are at a permanently high plateau” it’s probably time to start worrying. Whenever people start to get this bullish, it seems the bottom is about to fall out of the market.

Noted economist Irving Fisher is well known for his statement that stock markets were at a permanently high level, just before the 1929 crash that ushered in the Great Depression. And the dotcom bubble is famous for spawning Dow 36,000, the book that predicted the Dow Jones to reach that level within 3-5 years.

Instead it took over two decades to reach that level, with two major crashes in between. But it’s almost too easy to beat up on bullish prognosticators.

Anytime you hear someone pronounce with certainty that markets are going to soar, especially if it’s to some super high level, you can sense that the bust is just around the corner. It’s kind of like hearing people talk about how housing prices will never come down again. Haven’t they heard that what goes up must come down?

This attitude of “this time is different” or “we’re in a new era” or “markets will never crash again” is a symptom of the euphoria caused by the boom phase of the business cycle. Right now we’re in that boom phase, but the bust phase could be coming sooner than many people think.

What Drives the Euphoria?

You might be wondering why some people are so overly optimistic about the future of the economy today. And the answer might be surprising: it’s AI.

Artificial intelligence (AI) has become the latest cool trend, much in the same way that cryptocurrencies, social media companies, etc. captured imaginations in recent years. According to AI’s disciples, AI will completely change the face of the economy in the same way that the adoption of the internet did.

If that sounds familiar, it’s because it’s a lot like what people were saying about the internet in the late 1990s. In those heady days, the future of the internet looked incredibly bright, with websites, email, and ecommerce beginning to upend numerous industries.

Everyone and their mother seemed to have a new website or a new business idea, and money flowed into the tech sector without end. But eventually the dotcom bubble burst and that money dried up.

Many companies went under, as their business plans were never going to lead to profitability. Even those that survived the bursting of the bubble experienced significant hardship for a while.

The wheat was separated from the chaff, and the painful lesson was learned that, just because the internet was a transformative technology didn’t mean that every tech company was going to be the next Microsoft.

Fast forward to today and it’s clear that many people don’t remember those days. In fact, some are speculating that because of AI the Dow Jones Industrial Average could reach 100,000 in the next 7-10 years.

Considering that it took over 20 years for the Dow Jones to hit 36,000 after it was predicted, instead of the 3-5 years that were predicted, Dow 100,000 seems a little far-fetched too. While the Dow will likely hit 100,000 at some point, it may take quite a while.

But all this talk brings up comparisons between the present day and the dotcom bubble. Back then it was the internet that was shaking things up. Today it’s AI.

Back then money was flowing into internet startups. Today it’s flowing into AI startups.

Markets have already been tech-heavy in recent years, with stocks like Apples, Alphabet, and NVIDIA being responsible for significant amounts of market growth in recent years. Now AI firms are the latest in thing, and in some cases their valuations are taking off.

It’s hard not to see the similarities between now and then, which is why it’s easy for many of us to scratch our heads and wonder why anyone would put out the call for Dow 100,000. Time will tell how accurate those calls are, but given the track record of grandiose predictions, it’s hard to imagine them being accurate.

Protecting Yourself Against a Crash

If you’re puzzled at the disconnect between the slowing economy and the bullishness of people who predict a new era of unfettered growth, you’re not alone. More and more Americans are realizing that much of the “good” news about the economy is superficial.

There may be a lot of jobs, but many of them are held by people working two or three jobs to make ends meet. And those people may be spending money like they were before, but now they’re running up their credit card debt and increasingly not paying off their bills because they don’t have enough money.

Markets still haven’t fully adjusted to the Federal Reserve’s interest rate hikes, as housing prices remain elevated despite mortgage demand tanking. And the full effects of those rate hikes might not become evident until the economy falls into recession.

If you remember the collapse of the dotcom bubble and its aftermath, and see the parallels between then and now, now is the time to start thinking about how to protect yourself and your financial well-being, if you haven’t already.

While the collapse of the dotcom bubble may not have been as severe as the 2008 crisis, it nonetheless cost many people significant amounts of savings. And it marked the end of an era in which it seemed like investing gains were a sure thing.

The 2008 housing bubble collapse was of course far worse, and eroded confidence in markets. But there was one bright spot amid all the chaos: precious metals.

Both gold and silver rose from the ashes of 2008 to enter a bull market that lasted until 2011, when gold set an all-time high. And many people who saw how gold and silver performed then decided that they would try to protect themselves with gold and silver the next time recession threatened.

We saw a glimpse of that in 2020, as gold set a new all-time high. And we’re seeing inklings of that again today, as safe haven buying pushed gold to another new all-time high last month.

Many Americans understand that this time really isn’t different. They realize that the US economy is facing a recession, and perhaps a severe one. And they’re doing everything they can to protect themselves, including buying gold and silver.

If you haven’t looked into gold and silver as a means of safeguarding your wealth, it’s not too late. There are numerous ways to benefit from owning gold and silver, from buying gold and silver coins that you store at home to opening a gold IRA to protect your tax-advantaged retirement savings.

No matter how you want to buy your gold, Goldco has options available for you. We’ve helped thousands of people just like you benefit from owning precious metals.

With over $2 billion in precious metals placements and over 5,000 5-star reviews, we do our utmost to ensure quality products and stellar customer service. Call Goldco today to learn more about how gold and silver can help you defend against the potential impacts of recession.