Tuesday, October 21, 2014

Do We Have A Stock Market Bubble And Will It Burst?

Most people on the market say that the American stock market is overvalued and they use the Shiller-Cape-Ratio in order to justify their comments.
Well, I say it's hard to say whether we are in a stock market bubble but we see definitely low yields in terms of free cash flow and high premiums on book value. It it’s a real bubble; it is a question about how fast the future growth can develop.
For the time being, the economy is recovering at a slow pace and the inflation seems to be flat. This is a good environment for the FED to keep the interest rates low which give the market more fuel.
Below are two interesting info-graphics which I have found by stumbling the economic theme space of the internet. 
The first picture shows that it doesn't matter if you buy in a bubble. If you buy and hold stocks for the long period, you will make money in the end. The only difference is that your return will be smaller or over a long period negative.
What do you think? Would you buy stocks for bigger amounts of money? I personally keep around 15 net cash but that's in my view not an optimum when the yields for fixed income are so low.
My thoughts go into foreign stock markets. China and Europe stocks seem to be more fairly valuated but if you look what's going on in Europe and China, you would think about your investment a second time.
How do you place your money? Please let me know if you still buy stocks. Best Tom.



The Next Bubble



Source: BizBrain.org Demystifying the Tech Startup Bubble



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