Bubble trouble

This presentation of bubble conditions by Bridgewater is making the rounds, and for good reason, as it's an interesting read. The main point is that based on a handful of criteria, the U.S. stock market is in the danger zone of being in a minor bubble. One of the components is well off an extreme, which has subdued the entire model.

Still, below we can see their overall estimate of bubble conditions with the Dow Industrials. The arrows show those times when the model first approached its current level after several years. It's inexact, but at least it gives us a sense for whether to be worried or not. It only indicated the beginning of the final run in the 1920s and 1990s, but otherwise was pretty close to the end game for stocks.