Tags: stock market | share prices | bubble | economy

Stock-Market Bubble Talk Adds Up to a Tower of Babble

By    |   Monday, 25 November 2013 12:26 PM

The answer to the hot question of the moment — are U.S. financial markets once again trapped in a destructive asset bubble like the previous dot-com or housing bubbles? — depends on whom you ask.

MarketWatch tallied up some recent notable responses to the question and found there is no definitive answer.

Asked the question by CNBC, Warren Buffet responded stocks are still in a “zone of reasonableness,” and maintained they are still a better investment than either cash or bonds.

Editor’s Note: New Video: Obama Plans to Redistribute Seniors’ Wealth

At her Senate confirmation hearing, Federal Reserve chair-apparent Janet Yellen said,

“Stock prices have risen pretty robustly,” but added she does not see “stock prices in territory that suggest… bubble-like conditions.”

But perma-bear Marc Faber, publisher of the “Boom Gloom and Doom Report,” sees dreaded bubbles under every fiscal bed. “We have a bubble in bonds… We have a bubble in equities. We have a huge debt bubble and it’s only getting bigger. It’s not getting any smaller,” he declared.

New York Times columnist and outspoken QE apologist Paul Krugman said financial bubbles are practically a necessary evil, concluding “we may be an economy that needs bubbles just to achieve something near full employment – that in the absence of bubbles the economy has a negative natural rate of interest.”

Adam Parker, Morgan Stanley’s chief U.S. equity strategist, says the bubble actually resides within the confines of the Federal Reserve itself. “[T]here’s no doubt that the bubble is in the belief that policy makers will execute a soft-landing from higher prices than we are trading at today, and that is certainly a risk.”

CNBC surveyed its audience on whether they think the U.S. is in a bubble. The most popular response, at about 40 percent, was “No, but headed there.”

But according to hedge fund manager and noted short-seller David Einhorn, the financial markets have already arrived at bubble-dom. He issued a stock market warning on CNBC that "certain aspects of the market are very much in a bubble," with investors "dismissing valuation metrics."

Barry Ritholtz, chief investment officer and founder of Ritholtz Wealth Management, says all of the constant bubble talk among pundits and media simply amounts to a “bubble in bubbles.”

“It’s amazing that we have this inability to spot bubbles in real-time, but the same guys that missed dot-com, who missed subprime, who missed derivatives, they’re spotting bubbles everywhere,” he told Yahoo Finance.

Editor’s Note: New Video: Obama Plans to Redistribute Seniors’ Wealth

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The answer to the hot question of the moment - are U.S. financial markets once again trapped in a destructive asset bubble like the previous dot-com or housing bubbles? - depends on whom you ask.
stock market,share prices,bubble,economy
433
2013-26-25
Monday, 25 November 2013 12:26 PM
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