Anyone with thoughts on Bubbles, them busting and how to see it coming?

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Bubbles are hard to define, even in retrospect, and I think we haven’t seen the classic mania we saw in 2000, when everything internet was overvalued, so I’m not sure I’d call this a bubble, but it certainly seems most assets are overpriced, driven up by 10 years of QE, austerity, zero interest rates, and most recently massive corporate tax cuts in the US.

Arguably we’ve already had our first bubble since 2008 - bitcoin rose and fell a year or so ago, and a lot of ordinary consumers lost a lot of money on it. I suspect this second wave of loss-making unicorns will also be seen as something of a bubble in retrospect, but that’s stretching the definition somewhat. I stayed away from the recent IPOs listed on freetrade for this reason - none of them appeal and none of them look to me like future global companies as implied by their valuations.

In answer to your question I don’t think we have a true bubble to burst (I see a bubble as a collective mania driving ordinary retail investors to invest everything they have in what everyone agrees is the next great thing), we just have overpriced assets with nowhere else for investors to put money. Bonds and Cash have no return right now, property is seen as suspect still due to the last bubble, so stocks are all that is left. I personally expect the market to see a significant correction from this point in the next year or two, particularly if the trade wars continue.

There are so many possible outcomes and possible levers for policy makers (e.g. restarting QE) that it is very hard to predict these things. Perhaps better not to try too hard?

If I find myself worried, I just start building up cash instead of investing at that moment, that’s my coping mechanism. The important thing to my mind is not to sell if you are worried, unless you have made significant gains, as humans tend to get that very wrong and sell at the worst possible moment.


Nice post. I’ve already started retreating or completely pulling out of minor profitable positions and given it’s likely there will be at least one more bull run before things turn sour I will probably let my tech stocks recover then dump. Bonds won’t have the yield of course, but you never know what might happen; QE and negative interest rates have somewhat screwed the rules of the game. In any case I will likely dip into the inflation-backed gilts on Freetrade and leave the rest in cash.