I noted the five phases of a bubble in the last post.
Let's take a brief look at a few classic signs that a stock market bubble is about to burst:
i) Few Advancers: the phenomena of a rising stock market led by very few stocks, meaning most of the market is actually flat or declining; and,
ii) Smart Money: the spectacle of the "smart money" getting out - the essence of the fourth or "Crisis" phase of a bubble.
Regarding the first phenomena, this is easy.
Last year six companies - Yahoo, Microsoft, Netflix, Amazon, Apple and Facebook - accounted for 99% of the net gain in US stock markets. Don't look for this to happen - we are already there. The market is only being kept up by corporate buy-backs aided and abetted by the US Fed.
Regarding the second phenomena, watch for any sign that the Buffets and Dimons of the world are selling shares. No matter what reason they give for selling, when they start selling then you need to be selling too.
And when they start selling, you will be hit with a bombardment of idiotic propaganda telling you to stay in no matter what! For example, see many articles and commentaries on CNBC now!
Aside - if "you can't time the market"...then why has the smart money done precisely that, again and again throughout history? Answer - Because you can, that's why!
Consider that in 1929, most of the smart money got out just before the crash...Joseph Kennedy literally a few weeks before it happened.
If you see the big players selling, we will be very close. Ignore the propaganda this time....
"The Swindle Continues..."
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