5 ms·

We are de facto not in a bubble. Market growth over the last decade has been steady and healthy. A long term bull market does not define a bubble.

nickysielicki 7y ago
> A long term bull market does not define a bubble. No, but inverted yield curves do.
- rjtavares 7y ago
  The only thing that defines a bubble is the post fact realization that it burst.
  - oDot 7y ago
    A P/E ratio of 94.33 for Amazon is surely a bubble.
    - lazyjones 7y ago
      Why? Has Amazon stopped growing, does it have 100% market share, are competitors closing up?
    - jandrewrogers 7y ago
      P/E ratio is only meaningful for companies with little or no revenue growth. For companies with very strong revenue growth, like Amazon, revenue growth is financed with earnings, which creates a misleadingly high P/E ratio. Investors know this. For these companies, it is more useful to look at metrics like market cap/revenue to determine if they are overpriced, which at 3-4x for Amazon is in a very healthy range. Simple metrics like P/E ratio tell you little about the health of a company when taken out of context; a low P/E ratio is often a sign of a failing company. As more of the largest companies in the market exhibit strong revenue growth, it drives the P/E ratio of the broader market higher without implying anything about the underlying equities.
fbonetti 7y ago
The Fed artificially lowered the interbank rate to zero percent for ~7 years after 2008, bought other treasuries across the yield curve, and bought trillions in mortgage backed securities. This created an environment that disincentivized saving and encouraged borrowing for both individuals and businesses alike. The market growth over the past 10 years was completely fueled by this artificially cheap credit. The economy was already extremely fragile before the coronavirus hit due to how over leveraged everyone was.

nickysielicki 7y ago

> A long term bull market does not define a bubble. No, but inverted yield curves do.

rjtavares 7y ago
The only thing that defines a bubble is the post fact realization that it burst.
- oDot 7y ago
  A P/E ratio of 94.33 for Amazon is surely a bubble.
  - lazyjones 7y ago
    Why? Has Amazon stopped growing, does it have 100% market share, are competitors closing up?
  - jandrewrogers 7y ago
    P/E ratio is only meaningful for companies with little or no revenue growth. For companies with very strong revenue growth, like Amazon, revenue growth is financed with earnings, which creates a misleadingly high P/E ratio. Investors know this. For these companies, it is more useful to look at metrics like market cap/revenue to determine if they are overpriced, which at 3-4x for Amazon is in a very healthy range. Simple metrics like P/E ratio tell you little about the health of a company when taken out of context; a low P/E ratio is often a sign of a failing company. As more of the largest companies in the market exhibit strong revenue growth, it drives the P/E ratio of the broader market higher without implying anything about the underlying equities.

fbonetti 7y ago

The Fed artificially lowered the interbank rate to zero percent for ~7 years after 2008, bought other treasuries across the yield curve, and bought trillions in mortgage backed securities. This created an environment that disincentivized saving and encouraged borrowing for both individuals and businesses alike. The market growth over the past 10 years was completely fueled by this artificially cheap credit. The economy was already extremely fragile before the coronavirus hit due to how over leveraged everyone was.