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The adage that "the stock market always goes up" has been true for decades but there's nothing inherently true about that. A Ponzi scheme can also go up for de
by david927 6y ago
The adage that "the stock market always goes up" has been true for decades but there's nothing inherently true about that. A Ponzi scheme can also go up for decades as long as there's growth. It's when there are contractions that it pops.
Anytime someone invests in "the stock market" they're doing this: creating growth without underlying value. And it might work out -- and it has for decades so far -- but that doesn't mean it makes sense or will continue that way forever.
- iams 6y agoThere is something inherently true. The stock market goes up because the world becomes more efficient. What the world was able to do last year, it's able to do again and then some because we are better at doing it.
- david927 6y agoNo, a company's ability to be more efficient (as well as general increasing efficiencies) is priced into its value. That's where P/E ratios come into play. Currently the entire stock market doesn't reflect value, it reflects growth. Shiller P/E (CAPE) is normally between 10 and 15 depending on that efficiency that you're talking about. It's at 35 right now. (https://www.multpl.com/shiller-pe https://www.multpl.com/shiller-pe) That's higher than Black Tuesday and any other time in this market's history outside of the 2000 crash.