Tags: Bubble | talk | self | fulfilling

Market Pros: All the Bubble Talk May Be Self-Fulfilling

By    |   Tuesday, 29 July 2014 06:22 PM

Use of the word "bubble" has exploded in the media recently, and all that talk could turn into reality, market participants tell CNBC.Com.

The media has deployed the term 4,600 times so far this year, according to Lawrence McDonald, co-founder of Morgan Stanley's ConvertBond.com. At that pace the word will appear 7,900 times for the year as a whole, he tweeted.

That compares to 6,850 times in 2007 ahead of the 2008 stock-market crash and 6,800 times in 1999 before the 2000 meltdown.

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"More and more newswires are concentrating on terms like 'bubble,' 'overvalued,' 'overstretched,' 'premium pricing' etc.," Evan Lucas, market strategist at online brokerage IG, told CNBC.Com.

"It almost creates a snowball effect, as bearish commentators take bearish positions and then tell their clients to do the same. Eventually the bulls become exhausted, and the bears take over."

Andrew Su, CEO of currency trading service Compass Global Markets and a trained psychologist, agrees.

"Use of the word 'bubble' in the media can impact people's behavior and if something confirms their belief that there is a bubble, they will fixate on that and ignore any other evidence," he told CNBC.Com. "Once they act on that, then you have the butterfly effect."

The S&P 500 has soared 197 percent from its March 2009 low.

But not everyone thinks stocks are in bubble territory. Richard Bernstein, CEO of money manager Richard Bernstein Advisors, notes that one argument advanced by bubble advocates is that investors have become overly complacent.

However, all the talk about complacency "tells us investors aren’t complacent," he says, according to MarketWatch.

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Use of the word "bubble" has exploded in the media recently, and all that talk could turn into reality, market participants tell CNBC.Com.
Bubble, talk, self, fulfilling
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2014-22-29
Tuesday, 29 July 2014 06:22 PM
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