Sensex & Nifty: Punch bowl still full?
While we have had 30% moves in the major Indian indices since their mid-August lows, true ‘irrational exuberance’ hasn’t really kicked in. After all, market breadth is relatively narrow (i.e. not all stocks - including junk - are booming), and financial TV still has the odd talking-head who brings up valuation concerns, interest rates and such.
But already, some party-poopers are arriving on the scene:
The MSCI Emerging Markets index is up 23 per cent since Garner advised investors to pile in back in August, hitting a new all-time high earlier this week. Garner notes: The gains have been so great in such a short period of time that the MSCI EM is now again trading unusually far (19%) above its 200 day moving average.
Valuation is also an area of concern, he adds. Trailing pe ratios have risen to 18.5 times, about 12 per cent above the 15 year average and 10 per cent ahead of where valuations are globally.
- Times of India: Sensex 17,000: Beware of the black swan
Does this mean that all market investments are a pure gamble, sheer luck, good or bad? Certainly not. Taleb has himself very profitably played the markets for over 20 years. His advice? Gather as much publicly available information as you can about an investment before making it. Feed the information into a ‘Monte Carlo machine’ — a complex mathematical model based on the design of an imagined roulette wheel — which will give you the probability (not certainty) of the success of your investment. Never follow so-called ‘hot-tips’ which turn out to be ticking time bombs. Never, ever, invest more than you can afford to lose without ‘blowing up’,
OK, the last two lines make some sense, but otherwise I fail to see the relevance of the Black Swan here. Guess everyone’s getting carried away with the BS 
Anyhow, I think Deepak’s approach to this market is the best - if you truly experienced the Nasdaq bubble (especially the September 1999 - March 2000 phase), you can see why a trailing stop-loss approach makes much more sense than paying attention to valuations, economic data, etc.
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