Bubbles, Bubbles, and More Bubbles

Source: Market Ticker. Note: To enlarge the chart, double-click inside of it.

All financial bubbles, such as the dot.com bubble of 2000, real estate bubble of 2007, and the current stock market bubble, are in fact credit bubbles at their core. That is just another way of saying induced by credit expansion by the Federal Reserve System, which is what the above chart depicts. And, that is exactly what the Fed has done since 2008 in its attempt to re-inflate the bubble. Notice the parabolic rise in debt, which can not be sustained. Something has to give, and it will not be pretty. History tells us that all credit-induced bubbles fail. This time will be no different.

Ok, what is an equity investor suppose to do in such a bubble environment? My recommendation is to follow my exponential moving average strategy. See my post from Monday, March 22, 2010, entitled, "S&P 500 Weekly Update."