29 Nov

Spotting bubbles

This post recaps the guru investors who got it wrong in the mid nineties. Basically, they were warning about bubble valuations five years before the Dot Com crash. Being early is the same as being wrong. In the long run we are all right.

The issue is what to do about it. The article argues that value stocks are the way to play the bubble-in-waiting situation. It worked in 2000. I am not sure it worked in 2008. I am not sure it will work now, but a stock that is strongly asset backed and has good non-finance related cashflow probably ticks the boxes.