5 ms·
I'm not sure what you mean when you say If you define all panics as asset bubbles, then pretty soon you need a new term to mean what "asset bubble" used to mean
by bd_at_rivenhill 16y ago
I'm not sure what you mean when you say If you define all panics as asset bubbles, then pretty soon you need a new term to mean what "asset bubble" used to mean. "Asset bubble" must always be followed by "panic" by definition, otherwise you're actually seeing an increase that could be called "fairly priced" instead of "inflated." Look at the five year chart on AAPL, is it experiencing a bubble at a P/E of around 21, or is the stock somewhere close to a fair valuation? What about AMZN trading at a P/E of around 63? As far as I'm concerned, there's no way to be certain of the answer to this question until the future happens: if the stock crashes, then it was a bubble, otherwise it was fairly priced. If you have a better answer to this question than that, then you are either a wealthy (or soon to be wealthy) portfolio manager, or you should seriously consider that as an occupation if making a lot of money is your goal.
- lkrubner 16y agoYes, but not every panic is caused by an asset bubble. The panics that are caused by asset bubbles are a subset of the of panics. There are other panics that have other causes - both supply side shocks and demand side shocks can lead to a panic. Thus, I left out a lot of panics, which were not caused by asset bubbles.
- lkrubner 16y agoWhat if AMZN had a P/E of 630? What if it had a P/E of 6300? What if it had a P/E of 63,000? What if had an infinite P/E, by which I mean large losses and a sky high price? You need to be careful about what examples you choose. If you only choose reasonable examples, then you are really not making a strong case.