One of my personal pet peeves about market pundits these days is the preponderance of bubbles being sighted. Nary a day goes by where you don’t see an article on the major financial sites about a bubble in this or a bubble in that. The problem is that almost by definition, when a bubble is forming, nobody sees it.
Think back to the heady days of early 2000. Do you recall an uproar about the new metrics analysts were devising to tell us that valuations in dot.com stocks (price-to-eyeballs was a thing) weren’t a problem? Lest we forget, Mr. Jim Cramer was busy telling anyone that would listen to buy baskets of technology stocks – that way you wouldn’t miss out when one exploded to the upside!
Then there was the housing bubble. Yes, John Paulson did indeed get that one right. But if you will remember, he was VERY early and nearly went bankrupt trying to play the short side of the housing game. (Thank goodness Goldman Sachs came to his rescue and built all those securities designed to fail for him!) And here’s a question, did you or anyone you know raise a stink about the value of your homes persistently rising over that 3-4 year period?
In case it isn’t obvious, the point is that there weren’t websites filled with warnings during either of those bubbles. Yes fans, THOSE were indeed bubbles and by now, everybody on the planet knows how things turned out. Heck with a little luck and/or the help of a few algo-induced buy programs, the NASDAQ might actually get back to the high it hit 15 years ago soon!
What About Today?
My apologies for the digression into what will likely be perceived as ancient history. Getting back to the present, the question of the day is if there are bubbles forming in today’s markets.
The argument raging currently is that central bank intervention, which many argue now borders on manipulation, is either creating, or will create, “unintended consequences” (analyst speak for “bubble”) in many areas.
David Moenning is Mr. Moenning is President of Heritage Capital Research, a privately owned, investment research firm. Heritage focuses on active risk management and an “own the best and ignore the rest” equity selection strategy.
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Positions in stocks mentioned: none
The opinions and forecasts expressed are those of David Moenning, President of Heritage Capital Management (HCM) and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security or Heritage Capital program. No part of this material is intended as an investment recommendation. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any of HCM’s programs. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that investment objectives outlined will actually come to pass. Investors should consult an Investment Professional before investing in any investment program. Neither Mr. Moenning or Heritage Capital Management nor any of their employees shall have any liability for any loss sustained by anyone who has relied on the information contained herein. Mr. Moenning and employees of HCM may at times have positions in the securities referred to and may make purchases or sales of these securities while this publication is in circulation. The analysis contained is based on both technical and fundamental research. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.