Over the past few weeks, I’ve heard people discuss if this current stock market is in a bubble. Every time I hear this, I want to vomit. Here’s why:
1) The financial media has nothing to talk about right now. Their job is to scare you so you stay glued to the TV. Think about it, when do you watch the Weather Channel? When a big storm is on its way and NOT when it’s 75 and sunny. Keep this in mind when you hear bubble talk (and taper talk too).
2) I spoke to 3 potential clients last week. One was in cash since 2009, the second was “horrified” to jump in now, and the third one told me he’s “going to wait for the crash” before he considers getting back in the market. My point: There is little excitement coming from the average investor. Don’t be easily influenced by the people pounding their chest on Twitter and think that everyone’s bullish. Those are NOT your average investors.
3) The average investor/trader wants to feel like they are buying something “cheap” or “on sale.” I get emails from traders complaining that they don’t know how to trade a market that keeps grinding up, and they prefer to buy pullbacks. It hit me that much of this bubble talk is coming from people who are annoyed with this market because it won’t come down and do what they want it to do. That’s NOT a bubble…that’s frustration! Once again, stressing the importance of being flexible and adjusting to the current environment.
4) Every time anyone says anything, people are in a rush to scream: “This is a top!” A short-only hedge fund closes, Twitter goes public, my dog is reading the Wall Street journal, etc. etc. If everyone is in such a rush to call for the top, perhaps we have more upside left. Oh yeah, but I forgot, this blog post is a top 🙂
My next blog post will be related to this topic, as I will discuss some stories from 1999. After you read them (or if you traded during that period), you will realize that we are NO WHERE close to a bubble. Good luck trading!
I can be reached at: jfahmy@zorcapital.com.
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