While the staid, conservative British press like Reuters or the Financial Times newspaper in London have been discussing the possibility of a stock market crash, I've even seen it discussed in unexpected places.
A couple of weeks ago, the rock & roll magazine Rolling Stone even ran an in-depth story about the market being overvalued.
Since I like to use quotes from academic sources, here's a good one:
"Once everyone comes to believe in and act on Always Hold Stocks, that tactic will self-destruct in the way that the Tokyo Equity bubble self-destructed after New Year's Day 1990... If you adhere to the dogma that stocks must beat bonds in the long-enough run, there is no P/E level that the market averages out to at which you will take in sail. A Ponzi bubble is ever possible, and given past psychologies of boom and bust, ever-higher P/E ratios become a self-fulfilling prophecy."
That quote is from Nobel prize winning economist Paul Samuelson, and appears in "The Long-Term Case for Equities (and how it can be oversold)", and appears in the Journal of Portfolio Management (1994?). The paper is a devastating analysis of conventional stock investing foibles, including dollar cost averaging. It can also be found in The Investments Reader, 2nd edition, Robert Kolb, editor, Blackwell Publishers, 1995.
Paul McGinnis |
