With VXX and VIX approaching their respective all time lows, you have to wonder what Robert Shiller means when he says Fear behind current stock market highs A similar line of thinking can be ascertained here Volatility to Bring Rough Times to U.S. Equities:
So, what in the world are they talking about?
They are talking about the fear of under performing their peers. If you look around the world, a few things become evident. First, quite a few equity markets are booming. Most notably in China and Germany. Second, with most central bankers hell bent on flooding the markets with even more liquidity, it only makes sense to be fully invested. The thinking is, even though valuations are high this liquidity has no place to go but into the stock market. As a result, most investors are forced to chase performance.
Fair enough, but that does not address the primary issue. That we are in a massive speculative bubble that will eventually pop. In might happen today or a few months from now……that doesn’t really matter. What matters is, most investors today are acting as they did in March of 2000. The only difference is, instead of chasing Pets.com they are chasing FED liquidity. Yet, we all know how this ends
