Posts filed under “Psychology”
“The term bubble should indicate a price that no reasonable future outcome can justify.”
Fridays are the day I like to wax philosophical about all things market related, with an emphasis on the failings of your wetware. This week is no different.
The motivation for this week’s musings comes from the quote above, courtesy of Clifford Asness, quant analyst and founder of AQR Capital Management. In the Financial Analysts Journal, Asness published a list of his “Top 10 Peeves.”
I often find myself both intrigued by and in disagreement with Mr. Asness, on matters of economics, politics, and central bankers. (See QE = Currency Debasement and Inflation). However, in his list of peeves, I found myself in utter agreement on the question of whether or not current markets are a bubble. Indeed, I especially found compelling his definition of how to define an equity bubble: “A price that no reasonable future outcome can justify.”
Now, before we proceed, allow me to share with you a few words about “Question Framing.” It is something every first year law student learns. In the art of rhetoric, a properly framed question wins the debate before it even begins. Hence, if you accept a definition of a bubble as defined by Asness, the discussion is more or less already over. Such is the power of framing.
These bullet points were from a (much longer) Merrill Lynch research piece last week. “With most of our market indicators flashing green, we address the bear cases below to either debunk them or provide evidence that the risks are priced into stocks.” 1. “The 5-year bull market is long in the tooth” 2. “Everybody’s bullish…Read More
“The intuitive mind is a sacred gift and the rational mind is a faithful servant. We have created a society that honors the servant and has forgotten the gift.” ~ Albert Einstein What is intuition and how might it help or hinder an investor’s decision making process? A good philosopher begins with definitions, otherwise they…Read More
Source: BofA Merrill Lynch & Bureau of Economic Analysis I wanted to point you to a quick chart from Ethan Harris and his global research team at Bank of America Merrill Lynch. It addresses something I have referenced before — the idea that so many folks could be accurately spotting a bubble in…Read More
Source: Barron’s If you have been paying any kind of attention to the mainstream media the past few years, you may have noticed quite a bit of bubble chatter. We have a tech IPO bubble and a stock bubble and of course a bond bubble. This is caused by a global central bank…Read More
Source: BlackRock It seems that everywhere I go over the past few weeks, I bump into some form of bubble chatter. Mom and pop are returning to equities means it’s a bubble, all the new stock and bond issuance is a bubble and, of course, the Twitter initial public offering indicates we are deeply…Read More