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Assuming the market keep on growing over time as it has done for a very long time, all time highs aren't something spectacular or unusual in the stock market, i

Assuming the market keep on growing over time as it has done for a very long time, all time highs aren't something spectacular or unusual in the stock market, in fact it occurs almost on a daily basis. As an analogy; if you go to a grocery store, all the items on the shelves are at an all time high price, but no one is expecting the price of milk to drop drastically just because it's at an all time high.

empthought 9y ago
The price of milk is not generally subject to speculative bubbles, though. When it is (let's say some kind of shortage rumor or disaster prep) the price indeed crashes after reaching absurd levels.
- YZF 9y ago
  I wouldn't call where we are a speculative bubble. If you look at the P/E or dividend rates of stocks and compare that to other investments you'll see they are still favourable. So a decision to e.g. own MSFT stock that a higher dividend than you'd get in a 10 year bond, while not without risk, isn't pure speculation. MSFT has a business with good prospects and it makes money and pays it back to you. Where else do you put your money?
nandemo 9y ago
That's not a good analogy. When they say S&P 500 stocks are "expensive" than before, that doesn't mean (just) expensive in absolute terms. It's expensive in terms of price/earnings ratio and such metrics. The story is still suspicious for other reasons: what jedberg said.
turk183 9y ago
And yet, inflation is said to be low. I'm not sure it is.
- mywittyname 9y ago
  There are multiple, valid definitions of inflation, thus it can be low and high at the same time. The Treasury Rate and CPI could both be low while real estate or precious metal prices explode. Likewise, real estate prices could be in a freefall while the CPI hits double digits.
  - harryh 9y ago
    This is wrong. Inflation doesn't measure the price of goods, it measures the price of money. "Inflation always and everywhere a monetary phenomenon." -Milton Friedman

empthought 9y ago

The price of milk is not generally subject to speculative bubbles, though. When it is (let's say some kind of shortage rumor or disaster prep) the price indeed crashes after reaching absurd levels.

YZF 9y ago
I wouldn't call where we are a speculative bubble. If you look at the P/E or dividend rates of stocks and compare that to other investments you'll see they are still favourable. So a decision to e.g. own MSFT stock that a higher dividend than you'd get in a 10 year bond, while not without risk, isn't pure speculation. MSFT has a business with good prospects and it makes money and pays it back to you. Where else do you put your money?

nandemo 9y ago

That's not a good analogy. When they say S&P 500 stocks are "expensive" than before, that doesn't mean (just) expensive in absolute terms. It's expensive in terms of price/earnings ratio and such metrics. The story is still suspicious for other reasons: what jedberg said.

turk183 9y ago

And yet, inflation is said to be low. I'm not sure it is.

mywittyname 9y ago
There are multiple, valid definitions of inflation, thus it can be low and high at the same time. The Treasury Rate and CPI could both be low while real estate or precious metal prices explode. Likewise, real estate prices could be in a freefall while the CPI hits double digits.
- harryh 9y ago
  This is wrong. Inflation doesn't measure the price of goods, it measures the price of money. "Inflation always and everywhere a monetary phenomenon." -Milton Friedman