beware the bubble, page-22

Hi Gurubob,

I hope no one who read my earlier comments took what I had to say literally (or seriously for that matter)...that is it's all good, close your eyes and don't worry. Rather, I think that investors today should have their bulldust detectors set to absolute max and be careful not to get caught up in a lot of the "get in or you'll miss out" hype that's out here.

I don't know whether the markets are in a bubble or not. Who really knows in this market? There's definitely lots of euphoria and excitement out there but in reality it will only ever be knowable in retrospect if we're in a bubble or not.

My earlier comments where meant to allude to the opinion that I do think that global asset markets are behaving more and more like an addict. In this case the markets' addiction being to a very large, continuous and ultra-cheap (manipulated to be cheap) supply of credit from global central banks. And as we got a hint of earlier this year, good luck if you try to withdraw or 'taper' supply to the addict. Talking about a party pooper.

This addiction is creating a situation where assets seem to be increasingly priced on, and dependent upon, what central banks will do next rather than on the individual risks and opportunities that each asset class involves. And this in my opinion is very risky.

There are always going to be opportunities in any market. The Australian stock market today is no exception. But as a small investor I find it increasingly difficult to find good value out there (like finch2 perhaps??) given the risks that I think are involved. Maybe I'm not looking hard enough.

Ultimately the question I keep asking myself is not whether the market is in a bubble or not, but rather, do I trust a junkie with my money?

The answer, for what it's worth, is that I moved to almost all cash last week (from a medium term average of about 40% cash 60% equities). I've had a reasonable run of late so I've taken my profits and feel that I'd rather be sitting on the sidelines for now.

Good luck and cheers