This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Dow Is Up 68 Points in Six Months. You Call That a Bubble?

NEW YORK (TheStreet) -- Bubble, bubble, bubble, there is no bubble!

If you listen to the many media outlets out there, you'd think that we are breaking all-time highs every single day, and that we've had such a runup this year that we're due for a 20% correction.

The term "bubble" has been said so many times, it appears that nobody knows what it means anymore. There truly was a mortgage bubble that led to the housing collapse in 2008-2009. Lenders were pumping out loans to anyone with a pulse on over-valued homes. That bubble lead to a very real market correction.

The problem is that all these market "gurus" who missed that correction now want to be ahead of the next one. You'll hear that we're in the middle of a bubble because of Federal Reserve monetary easing. Sure, Fed money has helped the market and eased much of the turmoil that occurred in 2009. When it completely finishes tapering there could very well be a knee-jerk reaction.

The great part is the Fed is tapering it down slowly to have less of an impact on liquidity and markets as a whole. In addition, it is doing so as the economy improves. Unemployment has gone down to 6.3%, margins are up, and the European crisis is being figured out. These are all good signs.

Yes, the macro and micro economies are far from perfect. The truth is, they will always have issues. They are not automobiles that you can tune perfectly. As soon as you resolve certain issues, others will occur. It is the nature of global economies.

We will hear naysayers point out every single issue they can think of. Housing is nowhere near it was in 2006. Real unemployment is much higher than 6.3%. Businesses aren't hiring at the rate we would have hoped for by now. All but the housing issue is legitimate concerns.

Regarding the housing issue... we don't want to see 2006 housing numbers. They are so quick to forget what got us in the recession to begin with. We don't want to see lending standards dropped to 2006-2008 levels ever again. It's ok to have credit standards! That's called learning from our mistakes.

What people don't realize is the Dow is only up 88 points in the last six months. The Nasdaq is up 53 points and the S&P 500 is up 69 points. Sure, we had a phenomenal 2013 but this is 2014 and we are in the middle of a consolidation, not a bubble.

Is there going to be a 20% correction? It is doubtful at these levels, especially since we've been mostly sideways for six months. This is a healthy thing. Markets appear to be waiting on GDP growth and unemployment before moving up. This is what you want to see if you are a market participant.

Sure, there are and have been pockets of extreme valuations -- but we've also seen "momentum" stocks get humbled in the last few months. Pandora (P), Twitter (TWTR), Plug Power (PLUG), Tesla (TSLA) and the rest of them have come way off their highs. They're valuations aren't reasonable yet, but they aren't running anymore. Just like bank lending in 2006, we're learning from our mistakes.

It's OK to admit that we're not in a bubble. Just saying it over and over doesn't make it so.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $94.19 -1.04%
FB $118.06 0.54%
GOOG $695.81 0.50%
TSLA $234.18 0.80%
YHOO $35.97 -0.11%


Chart of I:DJI
DOW 17,651.26 -99.65 -0.56%
S&P 500 2,051.12 -12.25 -0.59%
NASDAQ 4,725.6390 -37.5850 -0.79%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs