Market may be in the ‘biggest bubble of my career:’ Rich Bernstein

An Institutional Investor Hall of Famer sees an urgent need for investors to diversify into some of the most popular trades.

Rich Bernstein, who spent decades on Wall Street, is waving the red flag on long-term assets that range from big tech to bitcoin to Reddit rebel stocks and long-term bonds.

“We are in the middle of what may be the biggest bubble of my career,” said Bernstein, CEO and CIO of Richard Bernstein Advisors, to CNBC’s “Trading Nation” on Monday.

His warning implies that the extent is greater than the dotcom and real estate bubbles.

‘Kryptonite for this bubble’

“The Fed has skewed the long end of the curve so that we see a natural reaction in long-term assets that takes on a life of its own,” said Bernstein. “Anyone out there with these long-term assets needs to have a firm belief that long-term rates are not going to rise because that is the kryptonite for this bubble.”

Bernstein believes the background is more dangerous than in June when he warned on Trading Nation that Bitcoin was a bubble. The cryptocurrency has since bounced back, but is still down about 20% over the past three months.

“When you get into a bubble, people get very myopic. They are only looking at a very small investment universe,” he said. “People always tell me, ‘Okay. Well you are so smart. When will the bubble burst? ‘ And the answer is nobody knows. “

Bernstein, also known for his strategy at Merrill Lynch, recommends diversifying into groups that have pricing power in an inflationary environment.

“That would lead you most to raw materials, materials, energy and the like,” he said. “I find it very interesting that the energy has been in a big bull market for the past six or 12 months and everyone is saying it’s not sustainable. Bitcoin has been in a big bear market and everyone is waiting for it to come back. “

Despite his epic bubble warning, Bernstein is not predicting a general collapse in the market. He sees the market as a seesaw.

“We are balancing between these long-term assets, which are very overvalued, and a bubble relative to the rest of the world,” said Bernstein. “If liquidity doesn’t run dry very quickly, which seems unlikely, the likelihood of a big bear market is probably much less than people think.”

At the close of trading on Monday, the S&P 500, Dow and Nasdaq were all a fraction of a percent below their all-time highs.

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