03-25-2021, 11:46 AM
(03-25-2021, 11:21 AM)vbin Wrote:We can cherry pick examples in the longest bull market ever, using one of the finest companies to ever exist. We can also find some blue chips with little hope of growing 3% for the foreseeable future and a PE that should cause more than a little alarm. All of you could list one in an instant if you actually look at research. In the end we are all going to grab a thesis and convince ourselves it is valid. I enjoy the chat in any event.(03-25-2021, 11:06 AM)Otter Wrote: A P/E of 15 representing a benchmark for value was formulated when the Federal funds rate was 6%. Even then, investors would traditionally pay 20 or more for "blue chips" or "aristocrats."Oh Grantham had something to say on this on the lines of just becouse one thing is bad we are to go for something utterly ludicrous?(worth listening to his interview with bloomberg) What you are saying makes sense but the pe of 35-60 is still not justifiable. What stops feds to realize they have been wrong all along and raise interest rates to 3% and let's the zombies die out in short term.
When interest rates crater 75% and stay near historical lows for more than a decade, asset competition comes into play. Money ends up invested somewhere. It tends to go where the largest potential returns are, which can re-set traditional valuations that were measured against the expectation of treasuries yielding 6%.
I'm not saying everyone should go out and load up their portfolios with junk-rated equities with no revenues to speak of, but TINA is a real phenomenon, and I am not too keen on fighting the Fed. I sold my SPY puts last year pretty damn quick after the Fed opened the money floodgates. There are absolutely zero signals from the Fed of a near-term tightening of monetary policy. All market-directed statements from Powell and Yellen signal exactly the opposite.
Apple just 2-3 years ago was reading below 20 pe when people were hating it for not innovating suddenly it's the best on the street( mostly after buffet bought)
BTW TINA is Very real. You all read my comments as I accumulated $100K in put option sell premiums for my Age 60-61 Account (in case I decide my pensions aren't enough to live comfortaby). It's been there awhile now. I can buy some nice stuff over 2 years with $100K if I choose too. $100K is a big deal to me. Collecting 2% as I accumulated and now it earns only 1/2%. I might as well grab a couple twenties every week and light a match to it as it loses buying power a few years from now. It does bother me but not enough to buy some extra NKE shares today.
