How to spot a market bubble

Investors can get burned when the air rushes out of a hot investment. Here is a guide to spotting bubbles, what to do when you find one, and a few that may be inflating now.

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25Comments
Apr 26, 2014 1:25AM
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You can always tell there's a bubble forming when cab drivers, barbers, and half the people at a party are all talking about how they're buying tech, flipping houses, etc.--anything that doesn't relate to their area of expertise. Note that the "half" isn't exact, but you'll know. Also, anything that has a 3-digit P/E ratio. Or real restate where an equivalent could be rented for less. Or nearly worthless stuff with high prices, like tulips or bitcoins (my apologies to tulips, at least they're beautiful) .
Apr 26, 2014 9:55AM
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"The bursting of two major asset bubbles -- in home prices in recent years and Internet stocks at the turn of the century -- has trained investors to scan the horizon for signs of where the next one might form."

Not really, most so-called investors are just as ignorant now as they were then.

"the "bubble" label sometimes gets slapped on assets too quickly, experts say. Investors should try to distinguish between markets that are overinflated and ones that are merely overpriced."Prices can be both 'not cheap' and 'not in a bubble,'" says Vikram Mansharaman"

What's not mentioned, we are in uncharted territory concerning the way this Current, and yes no Doubt Bubble was created. Nor does anyone have to look that hard most times to find legit reason to label it as such.  Global Debt has increased 40% since the Great Recession while the problem which caused the Great Recession, Scam Derivatives was never solved, only delayed.

Bottom line is this, when a company like Tesla, which I love by the way, can get under 2% yield payouts on their Bond deals, it's a freaking Bubble. When a bankrupt  Puerto Rico last month can sale $3.5 billion of junk-rated bonds at an tax-free interest rate under 9 percent, yet investor demand outstripped supply despite their dire cash position and ability to repay, you know we are in a freaking Bubble.

When the Wall Street talking heads fixate on projected future earnings while ignoring the non-earnings of today, you know we are in a freaking Bubble. When economist tell everyone the future looks bright when out National Debt has gone from $10Trillion to well over $17Trillion, you know we are in a bubble. Bubbles aren't hard to spot, they are just hard for some folks to admit to.
Apr 26, 2014 6:39PM
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The next bubble..... tech companies like Google with a PE rating of around 70-80 to one instead of the typical of around 10-12.  These companies are getting HUGE capital numbers with no corresponding earnings.  When these companies drop like a stone there will be a LOT of people hurting!
Apr 25, 2014 9:48PM
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If it floats like a bubble and wobbles like a bubble then its going to pop like a bubble. But say just continue with the mind set of continuing the commissions until its popped. LOL then it will just be gosh who would have ever guessed.
Apr 26, 2014 8:03PM
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Anytime the federal reserve is involved in purposely inflating asset prices because they decided the prices were too low (mainly for the benefit of their big banks), then you have a bubble. (see entire greenspan, bernanke, yellen era)
Apr 26, 2014 3:54PM
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Bubbles are easy to spot, they hard to profit from. If you spot a bubble too soon, you lose money. If you spot a bubble too late, you lose money. Timing is everything.
Apr 26, 2014 7:00PM
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When you see certain stocks being touted to the general public, watch out. The profit takers are ready to pounce!
Apr 27, 2014 12:37AM
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Ok, the US dollar is on its last leg as the World Reserve Currency. We're picking fights all over the world to get little countries to trade in dollars only. The Yuan has won in most of Africa, Syria, Iran, and number of Asian countries. We need a war to hide the currency devaluation. The central bankers don't want the blame.


Our US economy collapsed years ago and being propped up by the Fed printing currency so that the Federal Government can send those dollars to the 'permanently unemployed underclass'. It's only a matter of time before the collapse enables our out-of-control homeland security department to enslave us under martial law.


The good news is that people are still concerned with celebrity news, reality TV, sports and other non important issues so that they'll be completely surprised when the welfare credit card doesn't work.

Apr 26, 2014 5:07PM
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You can spot them the exact same way we all said on this exact same story when ms(nbc) ran it a couple days ago.
Apr 26, 2014 4:21PM
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Well in 50 years petroleum will be depleted and fresh water scarce, invest wisely.
Apr 27, 2014 1:14AM
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Amazon is the only company long term that I know of that from the very beginning has thrived strictly on sales and never earnings. This company makes everything that Benjamin Graham teaches about value investing or Peter Lynch teaching about stock price appreciation following earnings look like a complete sham. I respect Graham and Lynch and I'm not saying they are wrong at all but Amazon is an anomaly that somehow has existed for 20 years without ever producing a meaningful profit during it's entire lifespan yet at the same time has become one of the best investments to have owned during that time. As for as basic fundamentals I think this is one of the only companies where you could you have thrown them out the window in 1997 and could quote the famous financial line used to describe bubbles and follies, "It is different this time," and it actually would be different in their case. I don't own shares of Amazon, I'm just saying.
Apr 27, 2014 1:14AM
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Bubbles, bubbles, bubbly bubbles! Don't you just love today's uber-Capitalism?
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