Blocking Out the Bubble Talk

The bubble talk won’t go away.

Everywhere you look, you’ll find articles and analysis telling you about why we’re seeing mania in the stock market. Sure, stocks are much higher this year. But is the recent action in stocks really a bubble? Does one exceptional year for equities somehow cancel out the hundreds of billions ripped from stock funds since investors began fleeing more than five years ago?

Price keeps us on the right side of the coin — which is why we’ve remained bullish on stocks all year.

Unfortunately, many investors missed this rally. The bubble talk resonates with this audience. “We’re in a bubble” has become code for “I need to justify not participating in this market” or “See? I missed out on the rally because I was practical, not wrong”.

This short note from Dan Greenhaus of BTIG (via Business Insider) sums up the confusion of many investors:

“Several people this weekend at non-work related functions asked some form of the question, ‘How does this market keep going up?’ We understand the infatuation; after all, S&P 500 is up (10%) in nine of the last eleven weeks while its year to date gain is more than 26% even as the economy plods along at a sub-attractive rate and the unemployment rate remains annoyingly elevated.”

The economy ain’t the market, of course. That’s an insanely frustrating fact to many investors — especially when they are hell-bent on selling after reading every over-the-top financial headline…

All of this bubble prognostications and new highs have sparked plenty of discussions with our own Peter Coyne here at The Daily Reckoning. Of course, the clarity of hindsight has been a hot topic over on the pages of the DR as stocks trend higher…

“As for getting into the market right now, we have no clue whether it’s a good decision or not.” Peter mused yesterday afternoon. “But if you’re willing to come back to us one year from now, we’d be happy to tell you with 100% certainty what could’ve made you a lot of money in November of 2013, free of charge.”

Fortunately for trend followers like us, price acts as a suitable guide. Price keeps us on the right side of the coin — which is why we’ve remained bullish on stocks all year. You don’t need to predict the future. You just need to know how to react to the information the market gives you. Right now, it’s telling us that staying long is the right move…

Regards,

Greg Guenthner
for The Daily Reckoning

Ed. Note: As Greg points out, predicting the future is pointless. Merely study the present and follow the trends. That will help you to better manage your investments. And that’s what Greg Guenthner does every single morning, and relays his analysis to his Rude Awakening email readers. That way, they’re more prepared for the day’s moves than the average investor. If you’re not getting the Rude Awakening email, you’re missing out on a wealth of free analysis every single day. Don’t let another day go by without it. Sign up for FREE, right here.