Anatomy of a Bubble

John Hussman, a very bright fundamentally driven investor, offers views on bubbles.



Is this time different? No one knows and trying to figure it out may be fruitless. Why not just follow whichever way it does go…

8 thoughts on “Anatomy of a Bubble

  1. Part of being a trader is deciding what market(s) to trade. It’s hard for even the best trend follower to make money in sideways markets and I’ve seen estimates that on average, markets are only in a trend 30% of the time. Fundamentals can be useful in choosing markets for further attention where unstable conditions may provide the foundation for a trend. This is not the same as trading on fundamentals. You shouldn’t pick the trend and take a position ahead of time. But it can be helpful to have some idea of what to watch.

  2. If you want to miss out on the biggest money making opportunities (which often occur during bubbles/crashes) then yeah, choose markets based on fundamentals.

  3. Ditto Trader Ken…George Soros called gold the ultimate bubble, and then proceeded to buy it. He was blasted for his “contradition.” But there is no contradiction: Soros understands that a bubble is an opportunity to MAKE money, NOT to step aside.

  4. Still fairly new to the game, I find browsing some of the brighter “fundamental” thoughts just relieves my old, indocrinated drives to “learn” about markets.
    I can even watch Jim Cramer (I think – haven’t in a couple years) for the entertainment fun, or some of the lovely & bright ladies for their male/inspirational effects on my psyche.
    Leaves me freer of subliminal distractions while getting my system figured out & adjusted, objectively, going forward.
    So far, bubbles seem totally cool, though maybe especially hazardous to new guys without enough capital for broad diversification.

  5. By the way, didn’t Jim Rogers (in his “Hot Commodities,” some years back) talk about commodity vs. stock cycles alternating approx. every 17 yrs.?
    Does every rise & fall of a price group = a “bubble?”
    The beautiful thing is that, as Mike & others remind us, it’s a label, semantics…

  6. @Larry
    You’re absolutely right, in theory. In practice, I don’t have infinite capital, so I m forced to make choices.

  7. Quote: “… I’ve seen estimates that on average, markets are only in a trend 30% of the time.”

    all these estimates 30%, 15%, etc. are just nonsense. It all depends on your choice of time-frame.

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