Some don`t like it hot: what to do with overvalued stocks?

December 12, 2016

The simplest answer would definitely be – to avoid. But are they really overpriced? What to escape into in case you make a tough decision to flee the stock market? These questions are now bugging the minds of millions all over the world.

There are quite a lot of private and corporate investors who have been particularly calm about the markets lately. Sure thing, it is hard to expect anything with the US FPIs so optimistic: S&P 500 and Nasdaq hitting all-time highs, the US equities are at their least volatile 30-day period in more than 20 years. The economy is far from grinding to a halt with the unemployment rate of 4.9% – a historically low number by any mainstream standard.

Some might think it looks like the long-awaited prosperity. However, the devil is, as always, in the detail: the markets have been bullish for more than 7 years now, and it is high time anybody questioned all that is happening to the stock market. Nobody will know for sure when the music stops, but everyone in this party knows, that it is bound to stop sooner or later. And the next months may seem the perfect final chords – as the market, according to the newly published statistics, is already overvalued somewhere in the range of 52% to 97%.

The stocks that look like the safest way to invest one`s money in today may, on the contrary, be of the most peril – just because they are overhyped. Appetite for assets perceived as risky has surged, fueled by expectations for interest rates to remain lower for longer, leading investors to pile into similar asset classes. That could set the stage for a violent unwinding if volatility picks up again. Some popular positions are now “approaching extreme levels,” experts claim, which makes them vulnerable to a market shock or rising volatility, especially when combined with high valuations.

All this now is similar to what was happening in the markets just before march 2000, when the economists were talking about the ‘new economy’ proving their point with astonishing Nasdaq figures and capital spent on .com , but everybody knows the end – it was in fact a bubble. And, who knows, the today`s economy may also be standing on the brink.

But what if an investor has decided to avoid or at least diversify the risk of hot stocks? This moment might be a little too late to escape into the safe harbor of gold and other precious metals – its market price has already reflected the growing volume of demand, shooting from $1,060 to $1,337 per ounce since 1 Jan 2016. Thus an investor might think that he needs some new instruments, which are expected to be on the rise in the near future. And this is the perfect moment to turn his mind on cybercurrencies.

Today there is a bunch of possibilities to go into cybercurrency. Why one can be motivated to do it? As in every traditional market, profits come first – one can speculate with any cyber coin, as if it were a real one. In the long run, with the propagation of blockchain and Ethereum-based technologies, there is expected stable growth of demand in the cybermarkets, which will affect their exchange rates. Secondly, there is a number of cybercurrencies with no inflation – like ether: a constant volume of coins will exist in the world, there is no central authority, which decides whether to take a chill off the national economy by one more quantitative easing round. The last but not the least is security issue – there is no possibility of fraud in a cybercurrency system, but at the same time cybercoins can be as liquid as cash.

Great variability of cybercurrencies – today there are more than 600 in the world, each with its unique features and useful tweaks to suit any particular case – allows to choose and diversify. However, this number should not be startling – new-comers in the cyberfinance tend to go into well-known instruments first, opting for bitcoin, litecoin, ether.

After all, if the music in the well-known crowded party is about to stop, maybe it is time to play it online?

Latest news