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by jfengel
257 days ago
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18 is exactly what he number I mean by overvalued. It corresponds to an interest rate of about 4%. You can do better in zero risk bonds. And that's for 18; 27 is just not reasonable. And the S&P.has been going up much faster than 4%. If there was ever a point where it was properly valued it must be overvalued now. The S&P index isn't the whole story, especially in an expanding tech economy. But still, I'm looking at it as an absolute, rather than a relative number, and it strongly suggests that earnings cannot justify these pricings, even when we're not at the top of a bubble. |
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The only “yes, but…” I would add is that it seems to my retail, unsophisticated eye that:
1) while you could do better nominally in bonds, it seems like investors are pricing in a lot of earnings growth, not just static earnings in PE.
2) the market expects inflation, and blue chips can typically raise prices during inflation which protects shareholders, whereas bonds don’t offer this protection, other than TIPS etc
3) it also seems like (for now…) US equities are still a safe haven for international capital, so demand is still there (i.e. there is no alternative)