Cramer: Beware the Bubble

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Cramer's hearing a lot of talk about a bubble. And he finds it concerning.

It's not that the Mad Money host is particularly worried about a bubble per se, – rather he questions the agenda of prognosticators who are tossing around the term.

"There's something about bubble calling that grown-up pundit seekers in search of getting their names around just can't resist," he said.

The term bubble is fairly binary. That is a bubble – a real bubble like those made out of bath soap or bubble gum – always pop. And they can smack you in the face when they do.

Assigning the term to a trend in thefinancial markets or the economy can do investors a terrible disservice. It suggests investor should run in the other direction when nothing could be further from the case.

Therefore, whenever he hears the term bubble, Cramer immediately asks himself -- is there a serious circumstance in which the asset could decline precipitously? Or, is the asset class simply ahead of itself -- too expensive on a relative basis?

businessman gum
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The term has quickly resurfaced in the housing market after new data showed home prices in 20 cities increased a whopping 10% year over year. Immediately some pundits declared the next housing bubble.

The commentary had become pervasive that in a separate report, CNBC real estate expert Diana Olick noted that "some in the housing market (are) murmuring the dreaded "B" word."

Again Cramer asked himself whether the asset class had gotten too expensive.

In this case Cramer thinks the answer is a resounding no. "On average a home is worth less than it was in 2006. Therefore, I don't think housing is overheating, nationwide," Cramer said. "I believe the renaissance in housing remains an investable thesis for the long-term."

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Now, that's not to say the term is never appropriate. Looking back historically, there was a bubble in technology stocks back in 2000, and there was a bubble in housing back in 2007.

But lately, Cramer feels that the term has been thrown around far too casually.

"There's always somebody calling a bubble!" Cramer said. "Usually they're doing it to look smart." Unfortunately, those kinds of forecasts can be more harmful, than anything else.

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