Home prices and consumer confidence — What you need to know on Tuesday

Myles Udland
Markets Reporter

After markets started the post-holiday week with a bit of a sleep session, investors should see a pick-up in the economic and earnings news on Tuesday as the Dow sits at a record high.

Home price data from S&P/Case-Shiller for September along with the November consumer confidence numbers from The Conference Board will be the economic highlights on Tuesday.

On the earnings side, results from AutoDesk (ADSK), Marvell Technology (MRVL), and Nuance Communications (NUAN) will be headliners.

Elsewhere, investors will of course keep their eye on the price of bitcoin, which on Monday was trading near $9,600. Ken Griffin, the billionaire founder of hedge fund Citadel, told CNBC on Monday that, “Bitcoin right now has many of the elements of the tulip bulb mania we saw back hundreds of years ago in Holland.”

The latest check on home prices in the U.S. from S&P/Case-Shiller will be released on Tuesday.

As many critics of bitcoin have also noted, however, Griffin said the blockchain technology that underwrites bitcoin and other cryptocurrencies is “very interesting.”

Another major focus for investors this week is the progress of tax reform in the Senate, which could put its bill up for a vote by as early as Thursday. Senator Ron Johnson, R-Wi., said Monday that he is still a “no” on the current plan, with Senator Steve Daines, R-Mt., also saying Monday he opposes the current plan.

Investors will also keep an eye out for any additional color on Cyber Monday sales, which Reuters reported on Monday were set to rise 17% from last year to a record $6.6 billion.

The b-word

“Bubble” is the dirtiest word in markets.

And so when the word “bubble” gets thrown around in association with bitcoin, almost everyone gets upset — the bitcoin defenders, those who might otherwise have no view on bitcoin, and those who just hate hearing the word “bubble” used in general.

But a look at the price chart of bitcoin and it’s clear that at the very least, this is a mania.

Bitcoin prices have gone bananas this year. (Source: Yahoo Finance)

The price of bitcoin is up over 900% this year.

As Bespoke Investment Group noted on Monday, the currency topped each $1,000 milestone between $2,000 and $9,000 for the first time within the last seven months. Just four weeks ago, bitcoin had never traded above $7,000.

Again, there is clear investor enthusiasm for this asset. Many Wall Street titans, now including Ken Griffin, think this is a bubble, or at least bubble-like.

On Monday, Aron Pinson, CIO at LPS Financial, asked on Twitter if bubbles are “supposed to be” recognizable. Because if a bubble is something going up a lot in price, then one look at bitcoin and it should be obvious.

But can it really be that easy? Can something that goes up a lot in price be called a bubble because it has gone up a lot in price and looks like a bubble? Conor Sen, a portfolio manager at New River Investments, argued that you actually can see bubbles in real time, it’s just impossible to know when they burst, how they burst, and how big they get before they burst.

So yes, you can know when something is a bubble. And it doesn’t take a genius to find one.

It’s just that what happens next, or trying to predict what happens next, is where most people just end up looking silly in the long run. Which is why people largely just hate talking about bubbles. Because alongside so many prognostications that bitcoin is a bubble, or western capitalism is a Ponzi scheme, or the dollar will be debased is a plea to do something else with your money — buy gold, buy land in Kansas, etc. Calls that something is a bubble is often a sales pitch, not an honest observation.

And this sales framework is why Jamie Dimon’s negative attitude toward bitcoin has been argued to be a sign that he is not only misinformed about the asset, but in fact scared about bitcoin chipping away at the global primacy of the U.S. dollar and in turn the fortunes of JP Morgan (JPM); it is, however, more likely that Dimon just thinks bitcoin is silly.

All of which brings us back to why so many in markets hate the word bubble. It’s not that bubbles don’t exist, or that bubbles can’t be seen until after the fact, it’s that many asset price increases are called bubbles when they really aren’t.

So is bitcoin a bubble? Well, it’s price is very bubble-like. What happens next, and what that might mean, is anybody’s guess.

Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland

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