By Vern Gowdie – The Gowdie Letter (Australia) –
Those famous four words…‘this time is different’
‘It’s like most trends – at the beginning it’s driven by fundamentals; in the end, by speculation. It’s just like the old adage: “What the wise man does in the beginning, the fool does in the end.”’
Actually, when people say ‘this time is different’ it proves it’s not different…because that’s what they always say to rationalise away the irrational behaviour of the mob.
The speculative end of the trend is evident in a recent article titled: ‘BAML Survey Of Asset Managers Says “Boom” Best Describes Market’.
Here’s an extract:
‘Major asset managers have been deploying cash. The BAML [Bank of America Merrill Lynch] Fund Manager Survey (FMS), released February 14 , is a monthly survey of 200-250 primarily long-only investors. The report showed that major asset managers have been deploying their dry powder, as cash holdings dipped to 4.9% from 5.1%.
‘The stock market is a buy, the BAML report noted, as cutting in cash holdings is supported by strong investor sentiment.’
The ‘boom’ is supported by ‘strong investor sentiment’.
The following chart depicts the four stages of a bubble: