Stocks are within 2% of their all-time highs. The front page of USA Today just touted the bull run's solid footing, and new analysis shows a huge uptick in the word ''bubble'' appearing on Twitter. It has to mean we're doomed, right?
Wrong, says economist, author, actor and dog lover Ben Stein.
"This is not a bubble," Stein declares in the attached video. "There could be a substantial correction if the Federal Reserve purposely tries to raise interest rates. But bubble is defined by the ratio of price-to-earnings, and by that ratio, this is not a bubble."
In fact, he argues that stocks aren't even at all-time highs by most metrics, including price-to-earnings, price-to-book and inflation-adjusted.
"They are high, to be sure, and they could easily correct, but it's not a bubble in the classic sense," he maintains. "This is a stock market that is very well priced, very fully priced, but bubble doesn't really apply to it."
As for those who are looking for hints in social media or the ill-timed headlines of major publications, Stein contends short-term predictions are just too hard to make. "If you believe sincerely that you will learn how to get rich by reading USA Today, you need to have a very long rest out of the sun."
As he sees it, the market is "a happy market" right now, and it is holding up remarkably well given all the legitimate concerns about when the Fed will begin to taper its bond purchases — or end its program of "force-feeding" the market and economy, as he likes to think of it.
If the Fed were to stop supporting the markets through its easy monetary stance, or if rates were to skyrocket once again, or if we were to slip back into recession again, he says it would "change the whole dynamic of securities ownership quite tremendously."
But the good news is that "none of these things seems to be happening," says Stein. "I don't know if it's the right time to get in. I know that it's 2013. In 2023 you'll be very glad if you bought in 2013."
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