Signs of Bubble

[Hershey]

My assistant just told me that she is reading a book about finance and investing, and she is having a hard time understanding how to trade foreign currencies.  Along with all the commercials on TV for dividend ETFs, this sounds like bubble world to me.  With the risk free rate so low, we may be able to sustain this run for a long time, but this cycle is definitely heating up.  FWIW.

[Cardboard]

Is she hot?

 

Because with that kind of interest that would be a heck of a good partner!  ;D

 

Cardboard

 

[glorysk87]

Hate to break it to you buddy, but we've been in a bubble for the past few years...

[GregS]

Maybe we're in a bubble, maybe not, but I've been hearing this type of shoeshine boy stuff for about 7 straight years.

[longlake95]

No bubble yet, i think... we still haven't seen the euphoria days, where people are quitting their jobs to start day trading. My classic indicator of a bubble is friends talking stocks and flight attendants giving me stock tips...were not there yet. I'll post here when it happens.

 

https://www.google.ca/imgres?imgurl=http%3A%2F%2Fwww.thegoldandoilguy.com%2Farticles%2Fwp-content%2Fuploads%2F2012%2F11%2FStages-for-AAPL.png&imgrefurl=http%3A%2F%2Fwww.mining.com%2Fthe-golden-nugget-that-makes-traders-wealthy-trading-aapl-rimm-and-gold-stocks-89503%2F&docid=ubaeImOOBOxB9M&tbnid=J8SsQwogheoFTM%3A&w=600&h=395&client=safari&bih=672&biw=1024&ved=0ahUKEwjgvs2okfjNAhWG44MKHV4ZD1kQMwgbKAAwAA&iact=mrc&uact=8

[SnarkyPuppy]

I don't think anybody knows.  But referring to your chart, when I saw the words "new paradigm" my brain instantly connected with the idea thats been floating around regarding high multiples/low interest rates/low growth being the "new normal". 

 

[Guest cherzeca]

how can there be a bubble in stocks with a flat return over last year? maybe bonds tho...

[ScottHall]

Is she hot?

 

Because with that kind of interest that would be a heck of a good partner!  ;D

 

Cardboard

 

If she is hot, tell her to invest in new boobs. The ROI is much better than stocks.

 

BeerBaron

 

And people wonder why there is a lack of women on this forum.

[Liberty]

Is she hot?

 

Because with that kind of interest that would be a heck of a good partner!  ;D

 

Cardboard

 

If she is hot, tell her to invest in new boobs. The ROI is much better than stocks.

 

BeerBaron

 

And people wonder why there is a lack of women on this forum.

 

I don't think they wonder anymore.

[LC]

My uncle sent me a link to this website, to "listen and read up with an open mind" (this is the same guy who pitched the Iraqi dinar a few years back, for context)

 

http://www.simtradepro.com/

 

I was immediately skeptical (well just at the name of the website) and then when I found this video linked on there:

 

https://www.youtube.com/watch?v=8Qp_GW2nGQg

 

For a joke, start watching at the 4:20 minute mark in that video. I couldn't roll my eyes hard enough.

 

"we just sit back and let the software do what it does....give me the money!"

 

[TwoCitiesCapital]

How about 18 months of declining earnings/revenues/margins and the S&P is hitting record highs at elevated multiples?

[LC]

financials, autos (?), auto dealerships (?), retailers (?), perhaps some energy cos (?) that are cheap

 

All industries experiencing a bit of upheaval, no? Cheap for a reason?

[tede02]

I work on the sell side.  Over the past year, I've seen a notable increase in return chasing behavior.  Retail investors, having seen no gains since the beggining of 2015, and facing 0% interest rates, seem to be getting antsy. 

 

Further, I speculate that global instability and 0% rates (or negative rates) are a driving factor in moving US stocks up generally.  I just think investors are desperate for any return and the US appears to be the safest place (relatively speaking). 

[Guest cherzeca]

I work on the sell side.  Over the past year, I've seen a notable increase in return chasing behavior.  Retail investors, having seen no gains since the beggining of 2015, and facing 0% interest rates, seem to be getting antsy. 

 

Further, I speculate that global instability and 0% rates (or negative rates) are a driving factor in moving US stocks up generally.  I just think investors are desperate for any return and the US appears to be the safest place (relatively speaking).

 

agreed. rational behavior, not bubble behavior.  there is a difference between being a value investor and lamenting that everything is too expensive, and crying bubble

[Travis Wiedower]

there is a difference between being a value investor and lamenting that everything is too expensive, and crying bubble

 

Well said. Things are no doubt expensive, but I don't feel like we're in a bubble. Just closer to the end of a bull market than the beginning.

[petec]

How are we defining bubble here? ;)

 

I think it depends on whether margins are sustainable.  If not, it's an epic bubble.  If they are, then it's just at the high end of fair.

 

That's for the US.  Plenty of ex-US markets are more reasonable.

[frommi]

How are we defining bubble here? ;)

 

I think it depends on whether margins are sustainable.  If not, it's an epic bubble.  If they are, then it's just at the high end of fair.

 

That's for the US.  Plenty of ex-US markets are more reasonable.

 

+1. But margins are already contracting, so its unreasonable to assume they will widen further from here. Foreign countries are a little cheaper, but its unsure if you will be able to get the returns of the foreign markets without hedging the currency and you have have other risks there, too.

[glorysk87]

agreed. rational behavior, not bubble behavior.  there is a difference between being a value investor and lamenting that everything is too expensive, and crying bubble

 

I'd argue they're not mutually exclusive.

[Eye4Valu]

Didn't Grantham say that he thinks the market formally reaches a bubble at around 2300 on the S&P, or a 2-sigma equity market. Based on his thinking, we're close to a bubble, but not quite there. In other words, stocks are expensive, but not wildly expensive, but getting closer to wildly expensive. If the S&P climbed above 2300, I think we would all agree things would be looking wildly expensive.

[cmlber]

How are we defining bubble here? ;)

 

I think it depends on whether margins are sustainable.  If not, it's an epic bubble.  If they are, then it's just at the high end of fair.

 

That's for the US.  Plenty of ex-US markets are more reasonable.

 

Unless 30 year interest rates are 2.3% for the next decade or two... Your alternative to stocks right now (other than cash) is to guarantee destruction of about 1/3 of your principal in real terms over 30 years if you're in the top tax bracket.  If that doesn't change then even if margins fell this probably wouldn't be a bubble and if margins stay here stocks are way undervalued.

 

Who knows if that changes, although it seems crazy to think it wouldn't.

[gary17]

How are we defining bubble here? ;)

 

I think it depends on whether margins are sustainable.  If not, it's an epic bubble.  If they are, then it's just at the high end of fair.

 

That's for the US.  Plenty of ex-US markets are more reasonable.

 

Unless 30 year interest rates are 2.3% for the next decade or two... Your alternative to stocks right now (other than cash) is to guarantee destruction of about 1/3 of your principal in real terms over 30 years if you're in the top tax bracket.  If that doesn't change then even if margins fell this probably wouldn't be a bubble and if margins stay here stocks are way undervalued.

 

Who knows if that changes, although it seems crazy to think it wouldn't.

Can you please elaborate / clarify what you mean?  30 year bond interest rate?  What alternatives are you referring to?  I can't really understand what you are trying to say.

 

Thanks!

 

[cmlber]

How are we defining bubble here? ;)

 

I think it depends on whether margins are sustainable.  If not, it's an epic bubble.  If they are, then it's just at the high end of fair.

 

That's for the US.  Plenty of ex-US markets are more reasonable.

 

Unless 30 year interest rates are 2.3% for the next decade or two... Your alternative to stocks right now (other than cash) is to guarantee destruction of about 1/3 of your principal in real terms over 30 years if you're in the top tax bracket.  If that doesn't change then even if margins fell this probably wouldn't be a bubble and if margins stay here stocks are way undervalued.

 

Who knows if that changes, although it seems crazy to think it wouldn't.

Can you please elaborate / clarify what you mean?  30 year bond interest rate?  What alternatives are you referring to?  I can't really understand what you are trying to say.

 

Thanks!

 

I'm referring to 30 year treasury rates.  You could get better in riskier bonds obviously, but the point is the same.  Yields on anything safe basically guarantee no returns or worse over long periods of time.  Relative to that alternative, stocks don't look expensive.

[SmallCap]

Could someone explain what the difference is between a bubble and a market top?

[Eye4Valu]

A market top can only be defined in retrospect and doesn't have to be in bubble territory. Grantham defines a bubble as being a two-sigma equity market. You could define it other ways. There is no hard and fast definition, although Grantham found that all markets later defined as bubbles exceeded two-sigma. 

[Eye4Valu]

In other words, the markets were more than two standard deviations from their mean.