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Are We in a Stock Market Bubble? | LinkedIn

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As you know, I like to convert my intuitive thinking into indicators that I write down as decision rules (principles) that can be back tested and automated to put together with other principles and bets created the same way to make up a portfolio of alpha bets. I have one of these for bubbles. Having been through many bubbles over my 50+ years of investing, about 10 years ago I described what in my mind makes a bubble, and I use that to identify them in markets—all markets, not just stocks. I define a bubble market as one that has a combination of the following in high degrees: High prices relative to traditional measures of value (e.g., by taking the present value of their cash flows for the duration of the asset and comparing it with their interest rates). Unsustainable conditions (e.g., extrapolating past revenue and earnings growth rates late in the cycle when capacity limits mean that that growth can’t be sustained). Many new and naïve buyers who were attracted in because the mark

What the latest readings from my bubble gauge say about the market. As you know, I like to convert my intuitive thinking into indicators that I write down as decision rules (principles) that can be back tested and automated to put together with other principles and bets created the same way to make up a portfolio of alpha bets. I have one of these for bubbles. Having been through many bubbles over my 50+ years of investing, about 10 years ago I described what in my mind makes a bubble, and I use that to identify them in markets—all markets, not just stocks. I define a bubble market as one that

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