Subject: Re: Bubble Watch
OK - it's a slow night, so what the heck.

There should always be a risk premium to the returns on stocks vs. bonds. The whole point of the Brooklyn Investor's piece is that when the price of stocks implies an over-large premium compared to the return on bonds (specifically 10 year T-note), then the rubber band is over-stretched. Those who compared a 4% bond to an equity would be right that there is no point to owning the stock - but that's not indicative of today's scenario nor any other time I can think of.

Take a look at that "Nifty-50" list of high PE's and then consider how many of those firms are either gone of dramatically less important today (not looking at the list as I type, but Kodak, Sears, Xerox, Polaroid, AT&T and IBM are among them.

The P/E ratio for the S&P 500 is approximately 27.9 to 30.8, depending on the specific calculation and data provider. This figure reflects a valuation that is higher than its historical average, suggesting strong market optimism for future growth.

Forward P/E: The forward 12-month P/E is lower, at about 22.9, which is still above its 5-year and 10-year averages.
Historical comparison: The current P/E is significantly higher than the long-term historical average of around 19.9, though lower than the peak during the dot-com bubble or the financial crisis.

Frankly, I've been edging towards the "hair on fire" crowd and anticipation dumping another major portion of my portfolio after a (hoped for) Santa Clause rally, but after reading the piece and reconsidering this list (posted above):

Company
TTM P/E Ratio
Nvidia (NVDA) 52.47
Microsoft (MSFT) 38.91
Alphabet (GOOGL) 19.70
Amazon (AMZN) 36.30
Apple (AAPL) 32.95
Meta (META) 28.58
Tesla (TSLA) 162.71

Without characterizing reasons, with the exception of a single outlier (Tesla), the prices range from below average (GOOGL) to the rest of these "high fliers" (with the exception of Nvidia being somewhat higher) being between 1 and 1.5 time the average. This is, of course biased by the fact that they make up a substantial part of the total market capitalization, so the "average" is skewed by their weight.

Without saying "this time it's different", in fact saying the opposite, the Brooklyn Investor has made a compelling argument to paus and reevaluate.

Jeff
(A Brooklyn investor, rather than The Brooklyn Investor)