Tags: Roberts | markets | stocks | financial

STA Wealth Management's Roberts: Irrational Exuberance Is Baaack

By    |   Thursday, 10 July 2014 12:45 PM

Investors who do not see signs of too much exuberance in financial markets should open their eyes, according to Lance Roberts, chief portfolio strategist at STA Wealth Management and Texas radio show host.

Roberts noted that in spite bad news, including separate crises in Iraq and Ukraine, vanished GDP growth and surging energy prices, markets keep powering upward.

He said it brought to mind a famous observation from Samuel Lloyd-Jones, a 19th century British banker and politician: "No warning can save people determined to suddenly grow rich."

Editor’s Note:
Dow Predicted Will Hit 60,000 — Buy These 4 Stocks Now


"The more the markets rise in the face of negative news, the more confident that individual investors become in their own abilities," Roberts wrote on his StreetTalk Live blog. "The lure of becoming rich overwhelms logical thinking, creating a wilful blindness to rising investment risks."

According to Roberts, new casinos often loosen the odds at slot machines to give players artificial confidence, only to reset them later when consumers are unsuspecting.

"This analogy is what we see in the stock market today. The actions by the Federal Reserve to suppress interest rates and inject liquidity into the system have most definitely tilted the current odds of winning into the player's favor," he noted.

"Of course, this has always been the psychological cycle of investors over time and the reason why individuals always wind up buying high and selling low."

Roberts cited a number of recent observations about uneasy signs in financial markets.

For instance, economist Ed Yardeni, chief investment strategist at Yardeni Research, wrote this week on his blog: "Where are we now in the current bull market? In my opinion, we are moving from the third to the fourth phase for the S&P 500.

"The third phase has had no corrections and is probably coming to an end now. It may be setting the stage for what can also be called the 'melt-up' phase," Yardeni predicted.

Another observer cited by Roberts, MarketWatch columnist Irwin Kellner, wrote, "Dow is now a whopping 155% above its low back in March 2009. there are a number of warning signs out there that suggest the party may soon be over. . . . For one thing the economy has not grown anywhere near as much as stocks over the past 5 1/3 years; neither have corporate profits."

At the Financial Times, journalist Camilla Hall warned, "U.S. lending to businesses is reaching record levels but banks are privately warning that the activity should not be seen as evidence of an economic recovery.

"Much of the corporate lending is going to fund payouts to shareholders, finance acquisitions and fuel the domestic energy boom, bankers say, rather than to support companies' organic growth," Hall wrote.

"If you do not seeing signs of exuberance in the markets, it is only because you are not looking closely enough," Roberts concluded.

Editor’s Note: Dow Predicted Will Hit 60,000 — Buy These 4 Stocks Now

Related Stories:

© 2020 Newsmax Finance. All rights reserved.


   
1Like our page
2Share
InvestingAnalysis
Investors who do not see signs of too much exuberance in financial markets should open their eyes, according to Lance Roberts, chief portfolio strategist at STA Wealth Management and Texas radio show host.
Roberts, markets, stocks, financial
512
2014-45-10
Thursday, 10 July 2014 12:45 PM
Newsmax Media, Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved