Posted on 23 May 2014 with no comments from readers

The Rolling Stones last hit song was called Gloom and Doom and that about sums up the mood of the past five years among many investors, most of whom have missed out on the surge in the S&P 500 from its devils bottom of 666 in March 2009.

However, the problem is that most of them also failed to listen to the doom-and-gloom commentators in 2007-8 and charged like lemmings over the top of the cliff as first US housing and then US stocks crashed into the abyss.

Avoiding the bust

My business partners just before that time used to ask me why I was so pessimistic and fearful. We sold out just in time as it happens. Most investors in Dubai went through a particularly horrible experience in one of the worlds worst real estate crashes, there were many personal insolvencies and the epic Dubai World default that started the sovereign debt crisis of 2009-11.

The trouble is that markets are almost by definition at their most buoyant and confident at absolutely the wrong time. Typically they are just about to run out of new buyers and those in the market have racked up massive debts. Then one person sells, there is no buyer and everybody on credit panics.

We saw this again in Dubai this week with a 13 per cent slump on the local stock market in a matter of days. Remember we warned about that in a gloom-and-doom article right here this time last week (click here ), and we did not half get some abusive comment.

Of course, stock market commentators can never get the timing right. Its impossible how come we just did it then? We have not previously called time on the Dubai Financial Market since 2005, and three or even four years ago told our paid-for newsletter readers it was going to be a great buy-and-hold (subscribe here ). Does this record bring us a flood of new subscribers? Oddly not.

So why listen to doom-and-gloomers? Well for one thing they might just be right occasionally. Sitting back and questioning your own boundless self-confidence could save you a great deal of money. Why do investors make the same errors again, and again, and again? Human nature? What else could it be?

Wall Street crash?

Now where else do we see bubbles to worry about? US stocks? True the doom-and-gloomers have been wrongly calling that one for some years, including us, but a five-year bull market is just plain old, US stocks are not worth twice European shares and the money printing ends in October.

Where we would question the doom-and-gloom is over the price of gold and silver. Goldman Sachs record on calling precious metal prices is nothing like as good as its equity predictions. And if equities go south then gold and silver will most likely go north.

Then again the biggest bubble of all is no secret. Bond prices are ludicrously overstretched at the end of a 30-year plus bull market. A huge mean reversion just has to be coming, and if bonds and equities are on the floor then real assets like gold and oil will be the only game in town. All we see is gloom and doom, blame the Rolling Stones!