There’s been a lot of talk lately regarding asset market bubbles with the S&P up about 63% since hitting a low on 666 on March 9 of this year and a recent “debate” between NYU professor and RGE Chairman Nouriel Roubini and legendary trader Jim Rogers highlighted the two schools of thought.

To Roubini’s way of thinking, the Fed, with it’s near-zero interest rates and quantitative easing programs (which essentially means money printing), is creating the “mother of all carry trades,” with cheap borrowed dollars being used to make purchases of foreign and domestic equities and commodities. Some commodities (corn, copper) are up 90% from their lows, gold is at an all-time high (at least in nominal terms) and some Asian equity indexes are up nearly 100% in recent months.

Jim Rogers, on the other hand, made the point that in terms of their all-time highs, most asset classes still remain quite depressed. The S&P 500 is a case in point.

Let’s say you would have taken your Christmas money from 1999 and invested it in the S&P during the first week of the new millennium. From that point, you’re currently down around 27% over that 9 year period in nominal terms and adjusted for inflation, the decline sinks by a pathetic 53%. In fact, any investment made from about November 2003 until October 2008 is still a loser.

Regrettably, even if you had had the genius to get in at the October 2002 market low (at around 800), your 36% gain isn’t exactly what might be termed as a windfall. And heaven forbid if you would have decided that dipping your toe in the water when the S&P made its all-time high in October 2007 was the wise thing to do because from there, you’re still down a very depressing 30%.

So what can you do as an investor to avoid these pitfalls? First, you need to be able to avoid the herding instinct that for most people is just too strong to resist.

People naturally have a very strong interest in buying if they believe prices are going up and nothing makes people believe that prices are going up more than looking at a chart and seeing that the trend is pointing to the upper right hand corner of their screen. Fear works in both ways and the fear of missing out on a gain is a strong motivation.

In order to win at this game, you need to be able to train your mind to work in the exact opposite way which our survival instinct tells us to act. Not surprisingly, Warren Buffett, the world’s greatest trader, sums it up with this simple, down-home thought:

“Be fearful when others are greedy, and be greedy when others are fearful.”

Easier said than done I know but the bottom line is that it’s the only way.