Are you ready for this bubble?

So you guys remember when I used to write articles like this:

Bernanke says “Let’s inflate the biggest stock market bubble in history”
3:03 p.m. July 13, 2011 | By Cody Willard


Shut up and buy the tech bubble
4:39 a.m. May 26, 2011 | By Cody Willard


Why you must fight the Fed and get ready for a new stock market bubble
10:33 a.m. Dec. 31, 2010 | By Cody Willard

Now let’s fast-forward to today. And guess who’s in the headlines for stoking stocks again? Yup. Your favorite bank crony and mine, Ben Bernanke. Some of today’s headlines, include:

Bernanke Sticks to Low-Rate Policy
Bernanke said low interest rate policies were needed to confront deep, continuing problems in the labor market and cautioned that job market conditions remain “far from normal.”  8:46 AM

Stocks Gain on Bernanke Comments
U.S. stocks rose, rebounding from the year’s biggest weekly declines, after Bernanke said additional accommodative policies are necessary to create jobs. 21 min ago

Buying into Bernanke rally
U.S. stocks rise sharply Monday, rebounding from last week’s losses, after Fed chairman Ben Bernanke signals the central bank is committed to a monetary policy that’s helped buoy stocks for several years.

No Quit in This Market
MAR 26, 2012 | 10:48 AM EDT  | 14 COMMENTS
With the words ‘quantitative easing’ in the air, who knows how much higher the market can go.

Cody back again in real-time. Look, this isn’t your grandfather’s or your father’s stock market. Basing our savings allocation and balancing our portfolios is not supposed to be an endless exercise in gaming the Federal Reserve. But as I’ve pointed out to you guys for a long time now, that’s the reality of our domestic and political economies and we have to learn how to invest in this marketplace that has been revolutionized by these changes in the underlying principles of what used to be our “markets”. This isn’t how you and I are supposed to be trading and investing.

Let’s interpret what Bernanke said to the various elements of our markets:

  • Fast Money traders heard: “Ben’s got our back. Buy stocks.”
  • Bloomberg economists heard: “The Federal Reserve Chairman is pushing the risk-trade again.”
  • Investors heard: “Stick with stocks.”
  • Grandma and Grandpa heard: “You will probably never find any safe interest-bearing account in your life again. Deplete your savings or find somewhere to risk your money and hope you get some gains.”
  • Long-time unemployed and frustrated middle American heard: “You can forget about getting a job but Goldman Sachs needs 0% interest loans and balance sheet guarantees or things will get even worse for you.”

You see the common outcome of all those interpretations? That we’re likely to continue seeing the stock market bubble right before our eyes because traders, investors, economists, grandparents, Goldman Sachs and even the unemployed and broke know that money is likely to chase stocks — tech stocks and other growth stocks in particular, because where else can you hope to catch the kind of gains that you’re likely to need to overcome the loss of value of your money as Bernanke continues to pump new money into the pockets of the worst banks.

Ultimately, it’s a vicious cycle, but it’s been a very virtuous cycle for you and me as we’ve been prepared for these economic and political realities ahead of time and we’ve been able to profit instead of chase and panic as these bubbles have developed.

The question of course now is — when does the tech stock bubble pop?  And I’ll remind you guys that the bubble will probably pop when these bubble-inducing policies finally reverse themselves — which will be too late to help mitigate the ultimate damage and losses to the economy that all bubbles have. But that’s probably not today’s worry. I do expect we’ll get a 5-10% pullback in the stock markets (probably a sell-the-news reaction to earnings season which kicks off in two weeks?) but from a broader perspective, it sure looks like the tech stock bubble that we’ve been investing for continues on track.

Blame Bernanke. Speaking of which, here’s a pretty funny little video that I got in trouble for at Fox Business back in the day because they really had wanted me to go to the Real Auto Show.

As I point out in the video to the guys complaining about having to pay double for a used Pontiac Trans-Am mirror — “you can blame Bernanke for that.”

Anyway guys, the point is that nothing changed for us today and we’ve got a lot of continued upside in our portfolios if these bubbles continue inflating in front of us. Stick to the game plan, but be careful and be vigilant.