Mr. Sensitive

January 17, 2014

No Chance This Is a Bubble

Filed under: Uncategorized — lbej @ 11:29

Here is former Merrill Lynch Chief Investment Strategist Richard Bernstein on the U.S. stock market: no chance this is a bubble.

No chance this is a bubble.

No chance?

That’s what he said: no chance.  And he’s far from the first I’ve heard being dismissive of the notion that this market—underpinned if not inflated by government manipulation of financial markets—could be anything less than fundamentally sound.  What can we glean from that level of arrogance?

  1. If we’re not in a bubble right now, we will definitely get there.
  2. The professionals who are paid to manage risk are blinded by their arrogance to no less an extent than they were in 2007 and 2008.

Does that mean the market can’t go higher from here?  Not at all.  In fact, it can go higher, much higher, and I think it probably will.  Once asset prices detach from the underlying economic fundamentals, there’s no telling how far a market can rocket before it runs out of fuel.  The fuel in question is sentiment, though—not value—so there are two things I can definitely tell you:

  1. If this rocket runs out of fuel, it will fall.
  2. The higher it goes—before it runs out of fuel—the harder it will fall.
  3. It will run out of fuel.

Wait…I gave you three, didn’t I?  Well, that last one is a secret—apparently.


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