Joseph Carlson: We’re Now In an Everything Bubble
With markets moving back towards a bull stance, a few bears remain. There have always been a small number of investors who have gone against the grain. Since stocks tend to rise more than they fall, that group is often bearish. They’re even called “permabears.”
But permabears can be right at times. And the reasons for their bearishness can be valid. Understanding that can ensure that investors avoid the worst speculations.
By heeding the bearish voices, investors won’t lose money during a bull rally on a bum stock or idea. The latest warning comes from billionaire investor Seth Klarman.
He notes that we’re in an “everything bubble.” That means all assets are overvalued, not just one sector, like housing in the mid-2000s. Klarman sees the cause stemming from the ultra-low interest rates that started in the late 2000s as housing crashed.
As a billionaire investor, who has profited in part from short-selling, Klarman’s warning carries some weight. Especially given the wild market performance of the past few years, it’s a warning that seems timely.
Klarman’s views are that while things are in a bubble, portfolios should still be structured for long-term returns. That means avoiding short-term moves in the market and getting sucked into a quick move. Earnings and growth power will still matter over time, and drive a stock’s value over time.