No. of Recommendations: 3
I disagree with this. As Dr. B says repeatedly in TFPI, you can only determine a bubble in highsight.

Actually, Dr. B talks about the various "bubbles" that have occurred for last several hundred years in Chapter 5. He ends the chapter stating,

"These stories of financial excess, from the diving company bubble to the dot-com mania, are not just entertaining yarns, they are also a mortal warning to all investors. There will always be speculative markets in which the old rules seem to go out the window. Learn to recognize the signs: technological or financial displacement, excessive use of credit, amnesia for the last bubble, and the flood of new investors who swallow plausible stories in place of doing the hard math. When these happens, keep a close hold on your wallet and remember John Templeton's famous warning: The four most expensive words in the English language are, 'This time, it's different.'"

(Emphasis mine)

He admits that it is VERY VERY hard to not get caught up in a bubble, and he's certainly not a proponent of market timing.

But there were old timers (people who had been through the Nifty-Fifty craziness in the 60s and who had experience a bear market before) who saw the Internet bubble for what it was and told us all to get out.

Yes, EVERYONE looks back now and sees it, but it IS possible to see it before hand if you know what to look for... Don't you think when this happens again in 30 years WE will recognize it? We'll be the old-timers that won't accept P/E ratios of 100 and companies with ZERO earnings being valued at billions of dollars.

We'll know better... Or maybe we'll forget and get caught up in the moment. Maybe we'll even think "This time, it's different." But we'll be wrong.
Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.