Why This Isn't a Bubble*
Many are saying the stock market, nearing all-time highs, is back in bubble territory, ready to burst at any time.
The stock market is SUPPOSED to consistently achieve all-time highs. This is the normal course of events. If it didn't we'd always be better off putting our money in CD's.
Say the stock market, instead of gyrating wildly, had stayed flat right around 14000 for the past five years. We were at 14K then, we are at 14K now. Would anyone be calling this a bubble? Wouldn't they be asking, "What's wrong with the stock market?"
In fact, if you take a chart of the S&P 500 and draw a straight line through it's median valuations since 1950, you will find that you end up right at about 14K in 2008. And a lot higher 5 years later.
Maybe it's different this time.
Or maybe we are due to revert to the mean.
Which of the above two theories has the best track record? By far?
Granted, the market could still fall (even a lot) before it reverts to the mean. Or we could be facing the end of civilization as we know it and thus will never revert to the mean. But the safest bet is always reversion.
Granted also, we are still only in about year 12 or 13 of the (approx) 17 year bear cycle (the market tends to oscillate in 17 year cycles) so the next 5 years could be dicey. But there has never been a 17 year cycle that ended at or below where it started, and that's where we still are.
The burden of proof is on those who argue that this time it's different. Maybe it is. I think not.