Gauging the half-life of today’s global stock bubble

This clip offers a good overview on today’s global stock market bubble. The multitrillion dollar question of course, is not if, but when, this bubble will burst once more. Since precise timing is always illusive, each person much bet according to their own rules, risk appetite and conscience. Here is a direct video link.

To hedge his bets and appease the requirements of his company GMO’s now “long always” equity mandate, Jeremy Grantham has said the S&P could rise for perhaps a further 15% before it implodes again. He may be right, but it is a total guess.(Grantham learned the pains of moving away from bubbles early in 1998 when he pulled out of stocks 2 years before the 2000 collapse and was punished with a 50% redemption of assets under management, before attracting billions of inflows again after others lost money and their clients in the 2000-2003  -50% bear market.)

Or possibly this stock bubble burst is already in process as tech, momentum and small cap leaders are in the midst of a significant price correction year to date. Twitter, as an example, is now down more than 50% from its December peak.

Whatever the precise timing turns out to be, the most important question to grasp here is not when will stocks correct by 5 or 10%, but rather when will stocks next fulfill their half-life destiny for the third time since the secular bear began in 2000. Half-life, because fulfilling the secular bear destiny would mean wiping out all of the price gains seen since 1997 and possibly longer. Believe it or not.

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