Stock Market Bubble: Embrace Sharp Corrections

Stock Market Bubble

Stock Market Bubble Not In Sight As Trend is UP

Buffett’s latest views on corrections and the coronavirus

‘It wasn’t October 1987, but it was an imitation… [and the financial crisis] was much more scary, by far, than anything that happened [on Monday].’

“If you stick around long enough, you’ll see everything in markets,” he said from his Omaha headquarters. “And it may have taken me to 89 years of age to throw this one into the experience, but the markets, if you have to be open second by second, they react to news in a big-time way.

The astute investor now has a front-row seat to witness in real-time that the best time to buy stocks is when the masses are in a state of disarray.  They are now throwing the bathwater with the baby, grandpa, grandma and the family pet out. It is in such moments that the astute investors find real bargains. One needs to be patient for these opportunities and more importantly act when they present themselves. As usual, the crowd will panic and fee for the hills, when less than two weeks ago, they were begging for a chance to get into the very stocks they are now running from.

Nothing changes and that is why the masses are destined to lose. If you examine every single bubble in history, the storyline is the same.

Stock Market Bubble Not In The Offing’s Yet


These readings were tabulated before yesterday’s pullback (July 31st), so a few more days of selling, could propel bearish readings. It is incredibly surprising that at this very late stage of the game, to see such a small number of individuals in the bullish camp. Once again, we have to reiterate no matter how strongly you might feel that this market should crash and burn, don’t act on those sentiments.  No market in history has ever crashed until the masses have embraced it, and we don’t think this Bull market is not going to change that equation.   Market Update July 31, 2019

And viola one week later, the outlook has changed, which proves that the masses are so fickle it’s going to take a lot of effort for them to embrace this bull with a gusto. That’s excellent news, for it means this bull could soar even higher than we have


If the market pulls back, it’s a bonus, and this is why we also adopt the stance that when the trend is up; the stronger the deviation, the better the opportunity.  Strong pullbacks should be viewed as early Christmas bonuses as the trend is firmly up. Sharp pullbacks can be used to open or add to one’s current positions.  Market Update July 24, 2019

If yesterday’s pullback gains traction, then embrace, for it will prove to be a buying opportunity.  The best time to buy is when the trend is up, and one feels uncertainty creeping in and vice versa.  When one is sure that everything is fine and the markets are destined to trend higher, then it is more likely that the opposite will come to pass. Market Update July 31, 2019

Hindsight is fantastic, for it gives you all sorts of wonderful ideas that most fail to ever put into action when presented with the same situation again.

Random Notes; Buffett’s view on Stock Market Bubbles

“You, as shareholders of Berkshire, unless you own your shares on borrowed money or are going to sell them in a very short period of time, are better off if stocks get cheaper, because it means that we can be doing more intelligent things on your behalf than would be the case otherwise,”

“The real question is: ‘Has the 10-year or 20-year outlook for American businesses changed in the last 24 or 48 hours?’” the billionaire investor said on CNBC.

“You’ll notice many of the businesses we partially own, American Express AXP, +0.86% , Coca-Cola KO, those are businesses and you don’t buy or sell your business based on today’s headlines. If it gives you a chance to buy something you like and you can buy it even cheaper then it’s your good luck,” the chairman and CEO of Berkshire Hathaway BRK.B, added.

In his annual investor letter over the weekend, Buffett said equities would outperform bonds for years to come due to low tax rates.

“If something close to current rates should prevail over the coming decades and if corporate tax rates also remain near the low-level businesses now enjoy, it is almost certain that equities will over time perform far better than long-term, fixed-rate debt instruments,” he said. Full Story

Stock Market Bubble Outlook Update July 2020

At 26% of the S&P 500, tech’s footprint is almost double the next biggest industry, health-care.

“Relative valuations matter and tech is extremely stretched relative to other sectors,” said Dennis DeBusschere, head of portfolio strategy at Evercore ISI. “It’s tough to expect the market to hold up when tech is getting pummeled.”

“There are more pockets of the tech sector that are priced for perfection if not sainthood,” said David Sowerby, a portfolio manager at Ancora Advisors. “The bar has gotten meaningfully higher.”

Simply beating estimates is not enough to sustain the momentum. Earlier this week, Microsoft reported earnings that exceeded analyst forecasts, and its stock sank 4.4%. Such a pattern has played out across the industry. Among tech firms that reported, all exceeded profit forecasts, but their shares fell an average 1.1% on the first day, the second-worst reaction among the 11 main industries, data compiled by Bloomberg show.

“People have taken a ruler, and with tech companies, growth companies, they put the ruler down and drew a straight line up. We think that’s wrong,” Wells Fargo & Co.’s strategist Chris Harvey said in an interview on Bloomberg Television. “We want people to start taking profits from your uber-caps and from your momentum names, and cycle back in some economic sensitive names because that’s what we think the real mispricings are.” yahoo Finance

Stock Market Bubble 2020 conclusion

Now, these wise guys that felt so smart by blasting the hell out of us during the market meltdown will weep tears of blood shortly if they are not already doing so.  They made the same mistake before, promising never to fall for the fake news/hysteria that made them dump their shares at the bottom. But like mentally deranged individuals, they did precisely the same thing at the worst possible time, and what was their excuse; “it’s different this time”.  Well, it’s always going to be different, and that’s the excuse the masses will use forever to justify the fact that they let emotion overrule logic and sold when they should have been buying. In the end, this story will be repeated again and again, because the mass mindset knows no better. Hence the saying misery loves company and stupidity simply demands it. Success is based on taking an approach that is bound to draw shouts of criticism from the masses. The only saying that comes to mind is the truth hurts and boy does it.

To succeed in the markets, you need to have control over your emotions. However, this is not achieved via force, for that never works in the long run. One has to come to the self-realisation that emotions are useless when it comes to investing. How is this achieved? Primarily, via self-observation and the secondary factor, is via reading the right books. We have provided a list of books in the passcoded section of the website. One way to fast track the enlightenment process is to view the stock market as one giant video game.

The masses are far from happy, hence every steep correction should be embraced like a lost love.

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