[TheAlchemist]

That's exactly what I'm saying below - PE is still very high, hence projecting the past growth into the future. But the scale changed a bit. A 37 PE ratio is extremely high by historical standards - this was reserved for very promising, small startups. Not for 2T companies. I know this got distorted in the past 15 years by abnormally low interest rates, but sooner or later it will come back to something that makes sense.

Buying long-term put options on Nvidia now is extremely expensive - the stock was so volatile that the price you pay for those options almost annihilate any gains you could expect, even if the stock losses 50% in 12 months.

You got me curious about those 5-7 trillions. Where these numbers come from ?

[solumunus]

People need to stop focusing on “historical standards”. For better or worse, retail entering the market en masse (often with options trading) has created a new standard. The market over the last 10 years is the new normal, the smart people have worked this out and are making huge returns. TSLA at its peak had a WAY higher PE than NVDA does now, and NVDA is just as popular, with even stronger fundamentals.

[TheAlchemist]

For better or worse, human psychology doesn't change that much - those historical standards very much apply today.

For us, older folks, we've seen this 'new normal' several times already - it will end up as usual. There are no free lunches and as it appears to me that have not entered any permanently high plateau.

It's even quite funny that ~100 years ago, we've had the previous big pandemic, and the biggest stock market crash. Epidemic of this century is done, now waiting for the second part !

[solumunus]

No, that’s objectively wrong. You simply haven’t seen retail involvement in the market on this level before, not even close. It’s a new precedent, the market has changed.

To clarify, I’m not saying NVDA won’t crash from here or bear markets no longer exist. I’m simply saying that historic PE valuations are a poor metric for assessing the potential of a stock in todays market conditions.

[TheAlchemist]

Well, if you use the word "objectively", I would expect some numbers to back it up.

Yes, it's probably the first time that retail is allowed to trade options. But it's not the first time that retail is all in in stocks. I've tried to find a funny number to back it up - just check the Wiki on 1929 crash - https://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929 - there was more money lent to 'small investors' so they can buy on margin ... than the entire amount of currency circulating at the time.

On average, all those retail guys will loose money - that's the sad truth. In the long term, the stocks simply follow the earnings - all other movements around this trends are pretty much a zero sum game - and most skilled operators are not loosing money in that game.

Price to earning ratio is just the number of years the company 'pays for itself' if you buy it. PER at 40s for big chunks of main indexes mean that either there will be tremendous progress in the economy that will boost the earnings or people are hoping to resell to a bigger fool.

Note: I work in finance, and I very much see the retail involvement in stocks. Hedge Funds and banks, are making a ton of money out of them, that's for sure.

[rytill]

Then be the options seller. You can sell cash secured puts, or a put credit spread, or a call credit spread. Calls are even more expensive than puts right now.

[TheAlchemist]

Selling options is an even worse idea.

Frankly, I don't understand why we made it possible for individuals to gamble by selling options. As Charlie Munger used to say, Wall Street will sell shit as long as shit can be sold.

[rytill]

You would be right about selling naked options. But call/put credit spreads have bounded downside, just like buying options.

Selling cash secured puts or selling covered calls would be less risky than just holding stock.