Sunday, October 03, 2010


There is talk now of bubbles in bonds, gold, emerging markets, and high yield debt. The data would only suggest that these investments are going up. So-called bubbles get their name early. The trick is determining when they pop. For the most part they are just normal financial markets events which eventually go across the chalk line.

In 1996 there was a major media and pop analyst discussion about the bubble in tech stocks. In a meeting then with a hedge fund investor, clouded by the incredible inepititude of the head of technology at my own company who couldn't figure out how to log on the internet in the meeting, the simple fact was stated - at least buy Cisco, they are the tracks. At that time the tech bubble had four years to go and lots, lots, of money was made in those four years. Same with real estate in a way as we, the Long Island folks, traded up in our home buildings in 1997, saw surreal values attached to the roof over our heads by 2007, but have settled into some unknowable netherworld now but easily above our basis.

THE POINT IS - what may be seen as a bubble may last a long time. It's certainly difficult, just basic math, to see much upside in bonds, but gold, emerging markets, and well researched high yield debt could have a run for a few years. At some point, yeah, they'll retrace somewhat or even pop, but for now they are the place to be. That's with a base of dividend paying U.S. stock and technology leaders as a foundation.

Of course, some safe money is always a good idea, but that's what gold is all about.


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