The stock market’s plunge is NOT the sound of a bubble bursting

Marketwatch ^ | 02/06/2018 | Mark Hulbert

[SeekAndFind]

Whatever it is that’s bringing the stock market down sharply, it’s not the bursting of a bubble. That’s because the recent market — overheated and overvalued as it has been — doesn’t even come close to past market bubbles.

And the stock market’s plunge over the last week — more than 2,000 points on the Dow Jones Industrial Average DJIA, +0.07% on an intra-day basis — also doesn’t compare to the carnage of a bubble bursting.

That at least is what I conclude from academic research into the precursors of past market bubbles.

Consider first a study that was published in 2006 by Malcolm Baker, a finance professor at Harvard Business School, and Jeffrey Wurgler, a finance professor at NYU. They devised a number of objective indicators of irrational exuberance that, in backtesting, were highly correlated with bubbles such as the 1929 stock market crash and the bursting of the Internet bubble in early 2000.

Here are several of those indicators:

• Number of IPOs: One measure of irrational exuberance is lots of companies going public, and the current market is far colder. In 1999, for example, the last full year before the internet bubble burst, there were 477 IPOs, according to Jay Ritter, a finance professor at the University of Florida. In 2017, there were 108.

• IPOs’ first-day return: A related indicator is the average amount by which IPOs jump in their first day of trading. In 1999, according to Ritter, that average was 57%; in 2017, in contrast, it was 15%.

• Dividend premium: This is the valuation differential between speculative newer firms (as indicated by whether or not they pay a dividend) and the more established dividend payers. When exuberance is high,

[Neidermeyer]

I have to give credit to this market as it seems to be unstoppable, so I would never bet against it. By rights when the Fed raised rates it should have crashed the market. Americans are still living on low interest rates and still barely making mortgage payments. Rate rises should kill a bubble like this.
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It was unstoppable when the fed was backstopping Obama to the tune of $80Billion a month... with that withdrawn bond prices will sink (rates will go up) and there will be blood in the streets ... things always overshoot and if you ask me 10 years of pumping up balance sheets with cheap borrowed money is going to lead to a huge crash... probably 10% of all listed companies will crash and burn without free money to buy back shares and artificially inflate EPS.

[M-cubed]

If you can get 10% on you cd at an insured bank watch this balloon deflate and fly all over the room.<<<

“IF”.....lol...”if “ I could be a unicorn....I'd shit skittles too..

[Sam Gamgee]

I thought they said they officially ended the stock market support system?