Irrational Exuberance

[CoffeeR]

So, CNBC reports: "Billionaire Sam Zell sees 'irrational exuberance' in the stock market and holds mostly cash". When I saw this headline, I was reminded of Alan Greenspan who (though he did not coin the phrase) did make it famous on Dec 5, 1996 when commenting on the US stock market. The Dow closed at 6,437.10 on that day. The Dow immediately dropped upon these comments and recovered over the next couple of months. If I am reading the charts right, after April 11, 1997 the Dow *never* closed below 6,437.10 again. Not during the tech crash, not during the great recession (it came close).

So then, why am I nervous about the stock market?

[tooqk4u22]

I saw that too.  He is probably more right than wrong but there is no way to tell so its not actionable.   Comments as it relates to S&P 500 doing only so so when excluding FANGs is probably true - good in that it means whole market is not overvalued but bad that only a few stocks could drive down the market.

Comment on Amazon (which he said sometime before too) about his view that to justify its valuations today that amazon would have to grow to be 25% of the US economy in five years.....(1) if you believe that then it means Amazon is horrifically overvalued (it is) and (2) if you think Amazon will ever ever ever be 25% of the economy your nuts as the government will shut that shit down real quick. 

[partgypsy]

If you watched the movie the Big Short, the people who shorted the real estate REIT and junk bonds, were right. But- they almost became bankrupt while waiting for the implosion to happen. The stock market will go down. But we don't know if it will be this month, next year, 4 years from now.

[dude]

yep, the old saw "market can remain irrational longer than you can stay solvent."

[marty998]

Meanwhile the Dow approaches 26,000

[FI4good]

If the market drops i might have to tighten the budget and drop the emergency stash down a bit to snap up some of those great firms going cheap, try and squeeze another 5% to invest with .