Large investment firms like Goldman Sachs or JP Morgan will not publicly call a market top, even if their internal analysts believe it's severely overpriced. Their public commentary is a form of risk management to avoid losing clients during a euphoric bull market, creating a dichotomy between internal analysis and external propaganda.

The common advice to avoid trends focuses on market saturation. The less obvious reason is to avoid investor competition, which inflates valuations and erodes returns. A contrarian approach avoids both forms of competition simultaneously.

Jeremy Grantham's value-oriented discipline stems from a deeply ingrained sense of frugality forged during his WWII-era childhood. This non-negotiable aversion to 'wasting money' is not an intellectual exercise but a core part of his character, making it easier to resist market manias and focus on price.

After the dot-com bubble burst, Jeremy Grantham's GMO was vindicated. However, the clients who had fired them for underperforming during the mania did not return. The firm attracted new clients who appreciated their discipline, but the original relationships were permanently severed by the pain of relative underperformance.

A true market bubble isn't defined by high valuations but by collective psychology. The most dangerous bubbles form when skepticism disappears and everyone believes prices will rise indefinitely. Constant debate about a bubble indicates the market hasn't reached that state of universal conviction.

Widespread public debate about whether a market is in a bubble is evidence that it is not. A true financial bubble requires capitulation, where nearly everyone believes the high valuations are justified and the skepticism disappears. As long as there are many vocal doubters, the market has not reached the euphoric peak that precedes a crash.

In a frothy market like the late 1990s, being right about the eventual crash doesn't help if you miss years of upside first, as clients will leave. The key is to find ways to participate with names that have both growth appeal and fundamental value, avoiding the riskiest assets.

Asnes employs a strict framework before using the word "bubble." He will only apply the label after exhaustively attempting—and failing—to construct a set of assumptions, however improbable, that could justify observed market prices. This separates mere overvaluation from true speculative mania disconnected from reality.

This maxim from legendary value investor Jean-Marie Evillard encapsulates the discipline required during a bubble. It prioritizes capital preservation over asset gathering, accepting the painful short-term business risk of client redemptions in order to protect remaining investors from a devastating market crash.