The Nasdaq hit an all time high yesterday, ending the day at 5,056. The previous record dated back to March 10th 2000, when the index was at 5,048. As you can guess, the previous record was set shortly before the dotcom crash that sent the Nasdaq down nearly 4,000 points to 1,114 in 2002.
The S&P 500 set an intraday high yesterday, but closed just a few points shy of a new record.
Looking at the Dow, we find an equally bubbly story…
The low in 2009 was 6,626. Today we’re at 18,058. That’s an insane roller coaster that has been climbing aggressively for the last six years.
THIS BUBBLES GOING TO POP!
But guess what. You should probably keep investing in the market anyways. In fact, this is the exact way the market is supposed to work. Although there are peaks and valleys, the market trend has always been in an upwards direction. ALWAYS.
Sure, we have a recession (or depression) every decade or two, but these occasions are always followed by a lengthy period of gains. For every two to four years of losses, we average five to ten years of gains.
The market highs are getting higher, which means the lows get higher too when the crash finally comes. It’s a beautiful thing.
WHY you BUY in a bubble.
In June 2013, I wrote a post titled I might take out a $30,000 401k loan just to piss some of you off. I was thinking of borrowing from my 401k and one of the primary draws was that the market was trading at all time highs (the Dow was at 15,000 for the first time ever). Why wouldn’t I want to lock in the sexy appreciation I had earned?
Fortunately, I was too chicken to take out the loan. Thank goodness considering the market has shot up another 20% since that post.
No one can time the pop.
The problem isn’t with identifying when the market might be in a bubble. It arguably is right now.
Problems come when you try and preempt the bubble’s pop. You could sell today thinking things are crazy overvalued, only to find out this gravy train goes on for another three years before there is a correction.
This is why I need to constantly remind myself that I should think about my investments like I think about my marriage.
To have and to hold from this day forward.
In sickness and in health.
In good times and bad times.
For richer or poorer.
Until death does us part.
I will contribute to my investment accounts.