Market Bubbles

“You never get a bubble until the public, the brokerage community, the financial institutions, the pension funds, and even the universities are all involved.”

“The Street, unfortunately, is fairly well inured to the bursting of bubbles.”

“There is very little value added trying to predict where the market is going or guessing whether it’s overpriced or underpriced.”

“Crooks, crazies, egomaniacs, people full of resentment, people full of self-pity, people who feel like victims, there’s a lot of things that aren’t going to work for you. Figure out what they are and then avoid them like the plague.”

“Hoaxes, frauds, manias, and other large-scale financial irrationalities have been with us from the beginnings of the markets in the seventeenth century, long before the Internet.”

“Euphoria can lift housing and dot-com prices; panic can send sound banks tumbling.”

“Every bubble has two components: an underlying trend that prevails in reality and a misconception relating to that trend.”

“One of the important factors behind the fluctuation between bull and bear markets, between booms and crashes and bubbles, is that investor memory has to fail us – and fail universally – in order for the extremes to be reached.”

“One of the biggest mistakes you can make is to think that overpriced and going down tomorrow are synonymous. Markets that are overpriced often keep going.”

“There’s no asset so good that it can’t be overpriced and become a bad investment, and very few assets are so bad they can’t be underpriced and be a good investment.”

“Bubbles are born from extrapolation.”

“Bubbles are always justified with ‘this time is different.’”

“It is easy enough to burst a bubble. To incise it with a needle so that it subsides gradually is an operation of undoubted delicacy.”

“Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation.”

“I always look for red flags. My major red flag all the time is when long governments yield 600 basis points over the yield on the S&P 500. At that point, stocks have always been overpriced.”

“My stocks sometimes get overpriced, but in the long run this kind of company, if you can find it, will outperform the market and the economy. The worst thing you can do is try to catch the swings, sell out too soon and be afraid to buy back in.”

“At the root of all financial bubbles is a good idea carried to excess.”