No more Bubble Talk Please !!

Last week, over the weekend, and even somewhat longer, there has been a recurring theme in the various media outlets. Maybe we are too plugged in, as we try to read everything possible and employ a lot of aggregators to help us decipher the vast amount of information that travels the airwaves these days.

Bubble Versus Frothy or Rich

The “B” word (bubble) is being overused today in our opinion and we wanted to clarify.  Bubble means there is almost no possibility of future gain and a correction is imminent. Frothy means overvalued but not impossible from future gain. Rich is an even lighter term and means slightly over valued.

Our friend the CAPE PE Chart (10 year average earnings)

We would argue that 1987 was more Frothy than Bubble, with 2000 being a true Bubble.

Certainly we can go down 10-20% or even 30% in a Frothy environment, which we believe we are in currently. However we do not think we are in a bubble and have a 50% + correction coming as some are saying.

Ok…I feel much better now ! haha

Have a Great Day!

John Kvale CFA, CFP

PS I will be out of the very vacant office in the afternoon today!