As a portfolio manager, I start each morning by consuming copious amounts of a heavily caffeinated beverage and a data feed from a litany of web and blog sites. Over the last few days, as asset prices have set new records, there have been numerous articles on whether the market is currently in a bubble. Here are a few I grabbed from a Google search:
Well, you get the idea. First, like a “watched pot never boils,” bubbles occur when no one is looking for them. Bubbles are a function of greed running rampant combined with a mass hypnotic state the current ride will never end. The shear fact that multitudes of articles are being written about “market bubbles” is a sign that we are likely not there…just yet.
However, as a shot of caffeine hits my brain, I read with interest a WSJ article entitled “Tech Is No Bubble, But The Market Might Be” which I have summarized for you:
While these are certainly some interesting arguments, the comparison between now and the turn of the century peak is virtually meaningless. Why? Because no two major market peaks (speculative bubble or otherwise) have ever been the same.
Let me explain.
In late October of 2007, I gave a seminar to about 300 investors discussing why I believed that we were rapidly approaching the end of the bull market and that 2008 would likely be bad…really bad. Part of that discussion focused on market bubbles and what caused them. The following two slides are from that presentation:
