Bubble calling is easy but gives no perspective
Yes, prices are high in some areas, but that rarely means what some pundits are warning about. They just want to make a name for themselves -- not to help people.
There's something about bubble calling that's irresistible to grownup pundits in search of getting their names around. They are always calling "bubble!" It's the bubble in junk credit, the bubble in housing, the bubble in Treasurys, the bubble in higher-yield stocks. It never stops. This is yet another kind of binary thinking, like the not-lamented-at-all passing of "risk on, risk off" (see TheStreet).
I totally understand the desire of someone who has something to sell, or of someone who wants to create a big name for himself, to call a bubble. What could be better than calling a bubble in housing after a 10% increase in the price of a home? Think about how wise that is. If the bubble "bursts" and suddenly housing prices come crashing down, you are a genius! If housing goes up in price, that might be even better, because then it's an even bigger bubble. How much smarter can you sound?
More important, what do you have to lose? Is someone going to call you out on Twitter for being too bearish? Every now and then that happens. For instance, I had been saying that Tesla (TSLA) is too hard to evaluate because it is a cult stock -- and then someone on Twitter said I'd kept him out of Tesla. But that's become more and more the way of Twitter, which has developed into one of those "Man Who Shot Liberty Valance" things where someone only feels big if they can throw you off his game -- if they can take you down.
Bubble calling is just the cheapest way of getting known -- and if the bubble "bursts," hallelujah.
Me? I think things are different. Instead of seeing bubbles, I think sometimes things get too high. Take Hershey (HSY). Take Coca-Cola (KO). The latter is one of the greatest companies in the world: consistent cash flow, a decent dividend and a terrific record of raising it. But shares trade at 2.3 times Coca-Cola's growth rate, something that's just too expensive for me to recommend, no matter how good the company is.
Does that mean there is a bubble in Coca-Cola? How about we just say it has gotten too expensive?
Or how about housing? Housing is a totally regional business. Yet we have decided to take the number released last week -- a 10% increase in housing prices -- and declare that the nation, once again, is in a housing bubble. Some areas have indeed gone up, but a lot others haven't. The overall actual home is worth less now than it had been in 2006. We have had so few homes built that we can't tell what the market really is like. But we know it isn't overheating nationwide.
Now, regarding bond funds, it is true that they have become dangerous places. Interest rates could rally, and that would cause these funds to fall, and fall hard, like we saw many junk bond funds do last week and Monday. But they aren't "bubbles" that will knock our whole nation off its stride if they burst. They are just potentially a place for large losses.
Once you put the "bubble popping" in perspective -- once you recognize that all that could happen is that something overvalued could down in price, sometimes swiftly -- you can stop scaring people and actually help them. But that's not the goal of the bubble callers. Their goal is to become known, to be heralded, to get on television, to be interviewed on the Web and to sell books and to get subscribers and contracts to perform. Too bad -- they could actually be of help if they weren't so busy bring grandiose and inflammatory for the sake of being recognizable figures at all costs.
Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and has no positions in stocks mentioned.
More from TheStreet.com
Inflation and printed money is a tax on consumer purchasing power. It dose not create jobs. Only supply and demand create jobs. We must increase purchasing power to increase demand and increase jobs. The fed needs to keep real inflation between a deflationary 1% and 0% inflation giving the consumer more purchasing power. No more real inflation. We have got to have real and honest inflation numbers not this crap their feeding us now. And it must include gas and food.
The next jobs numbers and what the fed dose is going to tell a big story.
You wanna know why so many economists and financial managers call them 'bubbles' in the financial sectors? Because if it looks like a duck, quacks like a duck and walks like a duck......guess what it's a duck, Jim. Real easy, it's not quantum mechanics or the Pythagorean theorem. They are exactly that...bubbles. I will make a wager with you. You stick to your non-bubble theory and I will stick to my Fed induced bubble theory, lets wait 5-7 years and see who comes out on top. Deal?
Gee Cramer -- things are way way over priced -- Families on average (taking out top 10 percent wage earners) about $38K a year not the average $68K with the super rich distorting the wages.
Yet you claim it's good that house prices are now averaging $300,000 plus way way out of the range most average people can afford. Didn't you get the memo that earlier this year the Fed Reserve loaned billions to housing investors to get the housing market jump started??? OK house were not affordable before and now they are way over priced. HOW DID THAT HELP??
As far as stock prices a lot like Wholefoods have P/E of 37 -- normally a stock is over priced when the P/E is over 10 and a great bargin at P/E of 5 unless it is going bankrupt.
The stock market is headed towards a collapse bigger than the Great Depression collapse as 10,000,000 baby boomers retire and suck on average $40,000 a year out of the stock market and not put anything in.
already Bernanke has to pump $45 billion a month into the stock market to keep it afloat.
WHAT IS THE SITUATION GOING TO BE A YEAR FROM NOW??
The guy makes no sense. He's inarticulate, smeared in his own saliva, doesn't finish his words...
How is this guy still in the public eye? He's the Kardashian of the financial world.
Please, make him go away.
And if you listen to any of his incoherent gabble, you deserve everything you get.
Copyright © 2014 Microsoft. All rights reserved.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.