by Mish

The answer form had no formatting options. Here is a detailed response, with links.

Have Patience, Avoid Bubbles

The TINA theory (there is no alternative other than stocks and bonds) is a path to poor returns.

Cash and gold are indeed options. I discussed TINA in Median Price-to-Revenue Ratio Higher in All Deciles vs 2007, 90% vs Dot-Com Bubble: THE Choice

I recently discussed gold in How Much Gold Should the Common Man Own?

The latest prolonged rally proves that one cannot time when bubbles burst, but as with the dot-com bubble on 2000 and the housing bubble in 2007, all the excess gains of this bubble will eventually be given back.

Those investing in bubbles eventually become believers in them and will likely ride the bubble all the way down.

Those with adequate patience will eventually get an opportunity to buy shares near bear market lows.

My 38-slide Powerpoint Venture Alliance Presentation on I gave in June of 2017, covers sentiment, valuations, bubbles, and gold.

It’s painful to listen to others brag about paper gains but those gains will eventually be given back. Better buying opportunities are around the corner for those with patience.

Humility and Patience

What I wrote above was my actual full reply. I suppose it can be condensed to four words, but four words hardly do the topic justice.

I forgot all about my reply until yesterday when Vitaliy Katsenelson emailed an article he wrote in June of 2016: Searching for Yield? Better Look for Humility.


His conclusion fits write in with what I stated.

This is a time for humility and patience. Humility, because saying the words “I don’t know” is difficult for us testosterone-laden alpha male money manager types.
Patience, because most assets today are priced for perfection. They are priced for a confluence of two outcomes: low (or negative) interest rates continue to stay where they are (or decline further) and above-average global economic growth. Both happening at once in the future is extremely unlikely. Take one of them away (only one!) and stock market indices are overvalued somewhere between a lot and humongous (we don’t even try to quantify superlatives). Take both away and…

Beyond Perfection

If stocks were priced for perfection then, what are they priced for now? Beyond perfection?

I don’t know, he doesn’t know, and no one else does either, although philosophically it’s impossible for something to be better than perfect.

Meanwhile, as others chase seemingly everything, have patience that better buying opportunities are somewhere down the road, even if no one knows when.

Forever Bubble

Sentiment is now such that Jim Paulsen, chief investment strategist at Leuthold says ‘The bull market could continue forever‘.

Missing the Obvious Bubbles

Greenspan does not even see a bubble in equities. Instead,Greenspan Says “Bond Bubble About to Break”, No Stock Market Bubble

“There is no irrational exuberance that I can see. In fact, it is just the opposite at this stage.”

There is a bond bubble but it isn’t where Greenspan sees one: Tracking the Amazing Junk Bond Bubbles in the US and Europe

No one knows when the bubbles will burst, but they will.

Mike “Mish” Shedlock

Housing Bubble in Norway

Here is a quick post under the theme “Housing Bubbles Around The World”. This one is from Norway, courtesy of reader Espen Johansen.

World’s Biggest Ever Junk Bond Bubble in Pictures: What Hath Draghi Wrought?

In regards to ECB QE bond purchases, inquiring minds may be asking: What hath ECB president Mario Draghi wrought?

Fully Invested Bears ?!

In the latest GMO Insights, James Montier discusses "cynical bubbles" and the concept of the "fully invested bear".

Four Days to Trade Wars: Can Stupidity Be Avoided?

US steel and aluminum tariffs start Friday. Germany's economy minister is in D.C. But Trump has stringent demands.

Bubblicious Debate: Greenspan Says “Bond Bubble About to Break”, No Stock Market Bubble

In 1996 Alan Greenspan, Fed Chair, warned of “irrational exuberance” in the stock market.

Lunch Traffic Lowest in Four Decades.

A pair of articles on the Wall Street Journal ponders an event I long expected would happen: willingness to eat at fast food places where food is steeply priced and of dubious quality.

Reader Asks: Can the Bubbles Last Forever?

Reader Bob wants to know if the Fed can keep various bubbles levitated forever. Here is his specific question followed by my response.

Asymmetrical Unwind of the Credit Bubble

In How Does One Invest For “Muddle Through”? I talked about unwinding of the credit bubble. Here is the pertinent section:

Big Investment Boom Following Trump Tax Cuts? Answer in Four Charts

Many expect a big investment boom thanks to Trump tax cuts. A few charts will show why they are mistaken.