Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
.The word “bubble” is tossed around with abandon. We offer a rigorous definition for the word, and then test the definition against current markets.
.Several bubbles are evident today, most importantly a tech bubble, eerily similar to—albeit narrower than—the “new economy” dogma of the 2000–2001 dot-com bubble. We also see a bubble brewing in cryptocurrencies and micro-bubbles in select stocks such as Tesla.
.Investors can take action to protect their portfolios and potentially benefit from the bubble by reducing exposure to bubble assets; seeking out exposure to anti-bubbles, where assets or markets are irrationally cheap; investing in value-based smart beta strategies especially in European and emerging markets; and avoiding capitalization-weighted index funds, which inherently overweight the bubble assets.
