Everyone Says Bubble!

Well, I think the most overused word in 2021 is officially the word Bubble. So, I took it upon myself to read some articles over the past 10 years of people calling the market a bubble based on FOMC policy, which obviously has not worked out in their favor.. let us take a look at a few articles:


2014 Bubble:

https://money.cnn.com/2014/08/19/investing/market-bubble-warnings/


The above article written by Matt Egan writes that the bubble warnings grow louder, well, they must be very loud 7 years later! Of course, the first sentence basically has to do with the Schiller PE Ratio, which people are touting is expensive right now. Personally, I like to invest in individual equities so I value a company not based on the market as a whole. Then we have Carl Icahn, who also believed it was a bubble in 2014 as well saying "we can no longer simply depend on the Federal Reserve to keep filling punch bowl". The article says bunch, but I think they meant punch? Quality. Then we have ex-treasury Robert Rubin saying low rates could spark another financial crisis..well..given rates are even lower now I guess we will find out.


I am pointing this out because in the market, there are always people yelling and calling for a bubble, overvalued, stay away from stocks, etc. I find this to be comical sometimes, as someone with a long-term mindset on my portfolio I would LOVE for a pullback to add to my names and trim / shave where I see value to add. I consider those opportunities. My $.02 is to never try to time the market, time in the markets beat timing the market.


2014 Bubble Continued:

https://www.marketwatch.com/story/is-the-stock-market-bubble-of-2014-ready-to-burst-2014-09-25


"The answer is yes, absolutely, you bet it is". Well is that conviction or what! Wonder if they shorted the market. FOMC has been inflating asset prices since 1913 I guess, when will this bubble pop? Look, a broken clock is right twice a day. I really do not know when you claim victory over a bubble pop. If the market pulled back 20% in February I am sure people will claim victory "oh saw this coming". No you did not. Cause if you did perfectly time it, I would assume you made a ton of money on the downside. This guy pounded the table in 2007, so he must be right this time right? No.

 

Why are people so fixated on calling bubbles? Sure, FOMC policy has boosted risk assets, but, they have been doing that since 1913. I am not sure if this is an ego thing, or what, but I find being upwardly bias in the markets has paid off more than trying to call market tops and bubbles. Could just be me. The Fed acted quick and swiftly to the economic damage the virus has shown. Per Howard Marks memo "Coming into Focus" I want to focus on a few key points in here over the next few blog posts I make. https://www.oaktreecapital.com/insights/howard-marks-memos I highly recommend reading this and taking notes, Marks dives deep into the stimulative effects of low rates and the impact on financial models. PLEASE read. No, I do not think we are in a full blown bubble. Maybe some areas of the market are hot, but doesn't mean they will not get hotter.


Happy Investing,

Fiducia B



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