By Rob Bennett
Most articles that discuss the problem of stock overvaluation refer to "bubbles." Investors are warned that bubbles pop. They are informed of the risks of price bubbles but also told that it is hard to identify price bubbles.
Bubbles are clearly perceived as a negative. The term is a pejorative; nobody says "I just love to invest in bubbles!" But the sense that is usually conveyed is that bubbles are something that investors just need to accept.
Bubbles show up from time to time. But no one can say for sure whether a particular price jump has sent the market into bubble territory or not. It doesn't make sense to avoid stocks altogether. So the smart stock investor needs to learn how to live with bubbles. They are an annoyance, not a deal-breaker.
This is the wrong way to think about bubbles, in my view.
A bubble… Read More …