I googled the term "financial bubble" today, and not surprisingly got 500,000 hits (the search was confined to the last six months). The word has become so commonly used that any asset that appreciates three or four months in a row is suspect. This ridiculous mindset leads me to believe that the only bubble in existence today is the word itself.
Does anyone believe that stocks are a bubble? After 10 years of 0% returns, it's hard to believe. S&P 500 earnings have now surpassed where they were before 2008, and many stocks are selling at reasonable P/E levels.
Bonds are a more popular target for bubble hunters. But with inflation expectations in the short-term so low, current yields are reasonable. The municipal market is also suspected of recent frothiness, but it's hard to compare the muni debt level of California (around 5%) to the total debt of Ireland (133%).
How about REITs? Vacancies are shrinking, leading to higher yields, so that's doubtful. Commodities? Maybe. I've never figured out the recent predilection for gold, but as a satellite holding for many, it's hard to believe a gold price decline would put anyone in the poor house.
Financial bubbles are like eating bad oysters – you always find out after the fact, and by then it's too late. And with so many folks inspecting the bushels, I don't think we'll see a bubble burst any time soon.
You can also follow Ben Warwick on Twitter at @QESAlpha.
