03 January 2018
We can be as certain as we ever get in stock market analysis that the current price of the market is exceptionally high. However, classic examples of the great bubbles of the past are not just characterized by higher-than-average prices. Price alone seems to me now to be by no means a sufficient sign of an impending bubble break. Among other factors, indicators of extremes of euphoria seem much more important than price. Interestingly, we are currently showing signs of entering the blow-off or melt-up phase of this very long bull market. My judgment on the melt-up is based on a mish-mash of statistical and psychological factors based on previous eras, each one very different, so that much of the information available is not easily comparable. Yet, strangely, I find the less statistical data more compelling in this bubble context than the simple fact of overpricing. Whether you will also, dear reader, remains to be seen. In any case, my task in this note is to present the evidence, both statistical and touchy-feely, as clearly as I can.
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