Hysteria in general
While it's hard to parse legitimate bullishness from naïve optimism, it's important to understand the value of skepticism amid big rallies to keep investors honest.
We lack a lot of that skepticism now. Consider the weekly sentiment survey from the American Association of Individual Investors recently showed the biggest spread between bulls and bears since April 2011 — a few months before a roughly 18 percent correction in the market.
Also consider that high short interest is now considered simply an opportunity for a squeeze and not a reflection of legitimate concern. Bears betting against Gamestop (GME)? Definitely not because a brick-and-mortar retailer of physical video games faces huge threats in a digital age … regular 52-week highs, here we come!
As the old saying goes, be greedy when investors are fearful and very fearful when others are greedy.
Multiples are insane
I won't trot out the obvious targets here in tech that trade for 100 times forward earnings because those are easy targets.
Rather, I'd point to the higher relative premiums across the board — particularly for the sleepy stocks that do not typically trade for big multiples to actual profits.
Consider that traditionally defensive stocks are now trading for much higher price-to-earnings multiples than they have historically. As I wrote in a recent column, consider that in 1997, the P/E of defensive sectors characterized by dividend payers was sometimes as much as 40 percent below the relative P/E of the broader market, but in 2013, defensive dividend payers are trading for a 20 percent premium thanks to a frenzy of buyers bidding them up.
Yes, a lack of interest-bearing assets means a push into stable dividend stocks makes sense. But do you think a slow-growth play like Colgate-Palmolive (CL) should really trade at 22 times forward earnings forever?
The flurry of stock and bond issuance is perhaps the biggest danger sign of all. While it's all well and good for start-ups to tap the markets for capital, don't think for a moment it's only about entrepreneurship.
It's also about getting paid before the music stops.
So far this year, there has been $51 billion raised in U.S. stock IPOs according to Dealogic. That's the biggest tally since – you guessed it – the dot-com era, where $63 billion was raised in 2000 right before the tech bubble burst.
It's all well and good for entrepreneurs to access funds in an effort to grow their business. And maybe it's just coincidence that fashionable companies like Twitter and 3D printer like Voxeljet are racing to Wall Street at the same time in 2013.
But color me skeptical. I think there's a better chance that management – and more importantly, VC backers – know that this is the best chance these companies have to raise the most money on the open market.
And just like buying stocks because you expect them to go higher is the sign of a bubble, IPOs rushing to market just because it's a good IPO market is also a serious sign that markets aren't acting rationally anymore.
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VIDEO ON MSN MONEY
The Fed will never stop. Wall street and the bureaucrats endorse and praise it. Have the Fed try to taper a bit and see what happens. Down we go. They can't stop. They have gone too far and will panic when the stock market takes a nose dive, and will print more easy money until we fall off the cliff as a nation. We lost a decade and will lose another with all this madness. When anyone of the Feds say or hint that we will continue the easy money .. the stock market goes up and if anyone says otherwise ... the stock market goes down. Go figure. So many are and will be duped. We should have been done with this QE last September. The economy has not benefited nor improved from it. Mark my words .. it will end badly. The only question is when? “I can calculate the motion of heavenly bodies, but not the madness of people.” -Sir Isaac Newton
1)Facebook valued over $100Billion
2)Twitter valued over $20Billion
3)Dropbox valued over $8Billion
4)Snapchap valued over $4Billion
And I thought benny's policy of printing counterfeit money to the tune of over ONE TRILLION dollars a year was supposed to prevent this?
If you can't afford to lose your money, get out of wall street, get out, take your money and run!! NOW!!!
When this market "corrects" [read crashes], the small investor is going to lose, and LOSE BIG TIME!! If you're a little, small fry investor [under $1,000,000] you're going to lose most of your money people. Know why? Because you CAN'T get in touch with your investment house unless you're plugged in 24/7. Are you plugged in? And how are YOU going to retire in Bahamas [or where ever] if you have LOST your retirement money in wall street?
This is probably the LAST warning the little people are going to get.
6th and final reason................Obama.
Worst liar since Nixon ad worst president, ever.
I only fear paying more taxes. I was kinda hoping to take some profits in early January. I've had a great year and been balancing for year end. Now this, ohhhh nooo! I have to sell more and start over.
I see so many bubbles, I thought Lawrence Welk was back. I know the correction is coming too, but could we hold off til next year?
It's getting so I don't know what to worry about next. The whores in DC or the whores on Wall Street?
I'm heading for the bar and I will have to think it over.
Every time that we cross a 'mile stone' in record setting market highs, you hear these arguments of correction. What I can say, with much confidence, that we're going to have some profit taking starting this week. Here's why: When the economic environment becomes uncertain, people OFTEN revert to SELF PRESERVATION. With a short Christmas buying season this year, things are going to happen rather quickly- better do your prep work now and get ready to 'pull that trigger"
It's human nature, right / wrong; that's just the way we tick. And with the markets great run up lately, remember you only make a profit in the market WHEN YOU SELL !!
Now the latest news coming out is that the latest unemployment numbers we got were cooked- the source of this news is coming from within the white house administration- WHAT !? ANOTHER LIE? SAY IT ISN'T SO! I knew these numbers were cooked since it didn't add up to what rate businesses were hiring in the 3rd quarter, and now it's being confirmed. So what we're seeing here is not only is there no confidence in our political arena, Obama and his inept administration are jeopardizing our recovery with phony data.
OH- one more item: all those who get their health insurance from employers: you will now lose your policies by the end of the year. This is presented in a DOJ (Dept of Justice) argument during court cases involving employer mandates requiring them to cover contraception and other things vs. various company's culture of religious freedom. OBAMA KNEW, PELOSI KNEW, ALL OF THE SENATE KNEW and sold you a 'bill of goods' just to get Obama elected.
And now the lies are flowing out of the WH like a river. And this is just the beginning- wait till Nov 30 !!
Oh really Senor,
Have you or should I ask CAN you read economics and especially economic HISTORY??? When the market is pumped up by counterfeit, PAPER MONEY that is NOT backed by ANYTHING, IT'S CALLED A BUBBLE AND BUBBLES BURST. ALWAYS.
Have you been listening to your broker or the government shills for wall street?
If YOU believe THEM, you might just as well take your money and burn it. At least you'd warm for a while.
This market is NOT based on a booming economy, but merely benny the counterfeiter PUMPING TRILLIONS into wall street. You think this is sustainable?
1)$500-700Trillion in Scam Derivatives
2)Soaring Global Debt
3)Record Stock Buying on Margin
4)Japan sales tax going from 5% to 8%
5)The massive run so far
6)China Black Hole
7)Euro-zone 12% plus unemployment
8)Growing FED balance sheet
10)Borrowing of Debt to finance Stock Buybacks
This is just a few of the issues we face, most of which will only get worst, not better. So just because some crooked folks at the Feds are printing to infinity, everything is alright. Well it's not. Stocks going higher has never been a warning of what's to come.
Good information to know to look at P/E ratios and IPO levels as market top indicators. I'll add those to my habit of watching the 10 year treasury for indications the Fed has lost control of interest rates. (when interest rates go up, stocks become less attractive).
OPRAH THE FAT BLACK AZZ CAME OUT AND SAID PEOPLE HAVE NO RESPECT FOR OBAMA AND THE OFFICE BECAUSE HE IS BLACK. CORRECTION OPRAH, IF IT WASN'T FOR THE WHITE VOTE, OBAMA WOULD NOT BE IN OFFICE
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[BRIEFING.COM] The stock market ended the Thursday session on an upbeat note with blue chips showing relative strength for the second consecutive day. The Dow Jones Industrial Average (+0.4%) and S&P 500 (+0.3%) settled ahead of the Russell 2000 (+0.2%) and the Nasdaq Composite (+0.1%). It is worth mentioning the benchmark index posted its fourth consecutive gain, registering a new record closing high at 1992.38.
Equity indices climbed out of the gate thanks to early strength among ... More
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