The endless chatter of bubbles and crashes continues unabated. Eventually, all bull markets come to an end, and this one must eventually as well. But as I sit down to write this, the Standard & Poor’s 500 Index yesterday hit yet another all-time high. U.S. markets continue to have good internals, strong breadth and broad participation.

Yet each new high generates another call for an imminent top. On Sunday, the New York Times ran a column headlined, “In Some Ways, It’s Looking Like 1999 in the Stock Market.” In it, the claim was made, “It sure looks like a bubble.”

Some of you may not have been around during the 1990s bull market. In its final year — 1999 — Wall Street was a three-ring circus of insanity. The world today is nothing like it was then. The streets weren’t paved with gold, then trading at a pitiful $250 an ounce, but rather cocaine and $2,000 a night escorts. No one obsessed about the top 1 percent, because the top 50 percent saw so much green coming its way. Profits, salary and bonuses flowed madly from Wall Street to much of the country. Bonuses migrated from traders to Ferrari dealers to the Hamptons. Imagine so much cash sloshing through the system that even the now-shrinking middle class enjoyed rising wages and improving standards of living.

The sheer scope and unadulterated madness, the blossoming fireworks of greed at the tail end of the comet that was the 1982-2000 bull market was a wonder to behold. Are stocks the national pastime today? They were in 1999. You could walk into any bar, restaurant or gym and there was BubbleVisionTV (thank you, Bill Fleckenstein!) playing on the big screen like it was ESPN during March Madness.

Do you think stock-market sentiment is excessive today? You should speak to the American people: According to a Gallup poll in the first quarter, half of all Americans think putting money into the stock market today is a bad idea. Half!



In ‘99, a whopping 67 percent thought putting money into the stock market was a great idea. Risk aversion was for cowards and losers, and only 28 percent thought equities were a bad idea. To put that into context, in 1997, about 33 percent of Americans thought stocks were a bad idea.

Fast-forward to today — more Americans think putting money into the stock market is a bad idea (50 percent) than think it’s a good idea (46 percent). In light of the performance of the market over the last five years, I call this Irrational Non-Exuberance.

When we think of important market tops, we think of widespread euphoria and absurd valuations, while even the dumbest ideas having endless venture capital money thrown at them.

There is little of that brand of euphoria today for the market as the above survey makes clear. Valuations are only mildly elevated by historical standards. A profitable company, King Digital Entertainment Plc — maker of hugely profitable Candy Crush video game — just had a disappointing initial public offering. It was the latest IPO to come up short, even though Candy Crush makes a bundle and will soon hit $1 billion in revenue.

That’s the sort of metric the sock puppet from 1999 could only dream about.


Originally published here

Category: Investing, IPOs, Markets, Psychology

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

19 Responses to “Irrational Non-Exuberance”

  1. WickedGreen says:

    Still remember that “Are you rich yet?” magazine cover (never mind the Dow 50k predictions) … correct, sir.

  2. alexanderdelarge says:

    I have yet to have a little old lady, or elderly lady, come in with CD’s and ask for the current version of therefore, imo, not a bubble.

  3. stonedwino says:

    BR says: “U.S. markets continue to have good internals, strong breadth and broad participation.” you’re smoking better shit than I’ve got and that is a tall order bro…

    Broad participation from who? The American populace? Ha!

    Let’s not kid ourselves – Close to 50% of Americans have bubkus invested in the stock market – they can barely afford food and rent. Another 30% have maybe a few grand in the 401K. What’s left is about 20% of the population and of those folks the 1% own over 80% of stocks. You want to re-define “broad participation” in the rigged casino?

    Come on man!?

    • Futuredome says:

      sorry, you need to come on man. The “stock market”(Dow Jones, Nas, S&P ete ete) are global trading posts. That is why they rocketed so much nominally in the late 20th century.

      The way valuations are examined, need to be changed to reflect this.

  4. BennyProfane says:

    “more Americans think putting money into the stock market is a bad idea (50 percent) than think it’s a good idea (46 percent).”

    Most Americans have no money to “invest”, and don’t have the will power to save a substantial amount. The people who do have any sort of savings, other than the top .5%, don’t have very much at all, and are old and scared that they will lose that money to a future market shock not unlike 2000 and 2008. I’m not arguing for that, one way or another, just stating a fact, and it’s not going to get any better for the next twenty years, as the house rich (if it isn’t HELOC’d) and that’s about it Boomers die off with no cash flow to speak of, if they aren’t working until the last breath.

  5. CD4P says:

    The bubble seems to have shifted to major league baseball. Non-Yankee teams such as the Mariners, are spending ridiculously on 10-year contracts at top dollar for 31-yr old players (Robinson Cano). The only logical reasoning is that the Janet Yellen Fed has agreed to take on the contracts (there’s a similar stinker the Tigers just signed Miguel Cabrera to, even though he was still under contract for 2 more years…) in their later years such as to foster ‘economic growth’ in the present. [Bill Fleckenstein ought to go supernova on baseball's arse...]

  6. dctodd27 says:

    Looks like only about half of Americans thought putting money to work in the stock market was a good idea in 2006/2007 too. As far as valuations go, if you like forward P/E ratios, on the S&P we’re about where we were in 2007. If you like trailing earnings, the Russell 2000 P/E is in the low 80′s. No exuberance there?

  7. CD4P says:

    And by the way, this is all in the wake of Alex Rodriguez’ massive, lengthy deal & subsequent complete meltdown.

  8. mpetrosian says:

    I was an intern at PaineWebber in 1999. Good times even for an intern. We didn’t have HFT, QE, TBTF, etc. What are the effects of changes related to those forces/issues? Is retail investor sentiment still a relevant barometer? Looking back on my short time in this biz, the three bull markets I’ve witnessed are the 90′s cocaine tech boom, 2002-2007 Bush years kill em all let god sort it out boom, and our current QE punchbowl the world isn’t ending after all rally. The first two coincided with good times on Main St and we could look around us and see in our own lives a reason for excitement on Wall St. Not so much today. Main St is watching wondering what the fuck we are so excited about.

  9. Concerned Neighbour says:

    Measured exclusively in terms of euphoria, we can all agree today is nothing like the tech bubble. That said, anyone expecting the teeming masses to flood into stocks and thereby signal a top will, in my estimation, be waiting a good long while. The reasons should be obvious (LIBOR/metals/FX/HFT rigging/corruption, no punishment of financial crimes, central bank pumping, main street has no money, etc.).

    If a typical bubble collapses when the last (and therefore greatest) fool piles in, what happens when the greatest fools have the ability to print infinite chips and are seemingly oblivious to valuation? (e.g. see the last two bubbles they fueled) Can “markets” (quotation marks because these clearly are no longer true markets) ever go down again in these circumstances?

    • Futuredome says:

      whats ‘true markets’? pure intellectual term.

      Your problem is not understanding the nature of change the economy when in the late 20th century and the massive transfer of wealth to the rentier via globalism. This is reflected in the changes of stock market indicators.

  10. mllange says:

    With yesterday’s volume yesterday’s record high feels like a Spring ball home run; this ain’t the playoffs to be sure.

  11. constantnormal says:

    … the fact that broad market indices continue to make new highs amid all this (somewhat justifiable) fear and distrust speaks volumes about the money flow pressures from a massive over-investment in bonds as rate went lower and lower and lower (sending bond prices higher and higher) … how much higher can stocks go?

    In the absence of any fraudulent mischief from Wall Street (oops! too late for that!), stocks can continue to rise so long as bond rates continue to rise, punctuated with mild corrections as stock prices get ahead of rates, with the relative amounts of the rise being proportional to the amounts of money in each of these asset classes — something that we are unlikely to learn until some academic or market data research firm writes a paper on this monetary migration, long after it has ended.  

    At some point well down the road, when money sits at comfortable levels in both stocks and bonds, if bond rates then rise to the point that they begin to choke off economic activity … well, that’s another story. But it is not a story that we need to concern ourselves with for quite some time.

  12. MaxMax says:

    Barry, I click through to this page and then I have to click through to yet another, the Bloomberg view. Love ya man, but you’re turning into a click whore.

  13. JROR says:

    Barry, thanks for this post. As an investment manager who worked through the tail end of the 90′s boom I thank you for articulating a good deal of what I have been thinking about our present bull market. There may be pockets of excess but it is hardly like the 90′s as the recessionistas claim. Bubblevision was one thing, Ameritrade commercials (let’s light this candle) were another..

    I tried to stay on topic and not reframe your argument. In further violation of your comment policy I will identify myself as John Rosenberg and you can find me on Bloomberg.

    Thanks again.

  14. rww says:

    You write persuasively about a generation of investors scarred by 2008/2009, causing every dip to look like a crash. But this column suggests you have a reciprocal problem: if it isnt as extreme as 1999, it can’t be a bubble.

    I have no idea whether the current market is a bubble but I dont think that assessment can fairly be made by comparing current levels of exuberance to 1999. There are plenty of real world, income and asset-based reasons for the current lower level of public participation in the market.

  15. sailorman says:

    Is this a bubble fueled by QE and low interest rates instead of irrational exuberance?

  16. RobertKerr says:

    Oh, the crash is a coming. Deep down, I think we all know it. Getting out before it happens and back in after can mean doubling your money. Riding it down and back up can mean losing a decade. We each make our own calls. We each pick our own stragies and timeframe. I’m looking forward to doubling my money.