Bubble Talk: Does It Ever Coincide With StocksTopping?
Chris Ciovacco | Nov 20, 2013 12:21AM ET
If you work around or trade the financial markets, it is impossible to insulate yourself from the never-ending use of the term bubble. Bloomberg :
In any historical asset bubble, we do not get bubble magazine covers in major news media at the height of the bubble. If anything, it’s the precise opposite. A positive story on gold on the cover on New York Times Magazine in 2011 — and GLD passing SPY as the biggest ETF — marked the top. Perhaps the most infamous was the June 2005 Time Magazine cover on “Why We Love Housing.”
The Death of Equities
As this video clip.
Investment Implications – Markets Will Guide Us
Using the magazine covers as a contrary and bullish indicator, should we calmly remain fully invested in stocks? No, we should continue to monitor the message being delivered by the market’s pricing mechanism with a flexible and open mind. Mr. Ritholtz summarizes the significance of all the talk of bubbles via Bloomberg:
I am hard-pressed to recall when any sort of bubble was accurately identified in real time on the cover of a major media publication. If anything, the opposite is true. All of the skeptical bubble talk — and there has been lots — seems to be a contrarian indicator that this long-in-the-tooth, overpriced market might still have a ways to go.
Gains For Six Weeks
As of Tuesday, the message from the market’s pricing mechanism continues to support a “risk-on” investment stance. Consequently, we will continue to hold our stake in U.S. stocks (SPY), technology (QQQ), financials (XLF), energy (XLE), foreign stocks (VEU), and emerging markets (EEM). Stocks have posted gains for six weeks, which means we have to be open to a period of healthy consolidation even under bullish scenarios.
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