Halls of Shrewd'm / US Policy
No. of Recommendations: 20
There is obviously considerable debate currently around the question - are we in a speculative bubble? Relevant to all of us and certainly relevant to Berkshire and its cash pile and chronic lack of opportunities.
The consensus appears to be:
1. We don’t really know.
2. There are some pockets of potential speculation and fragility.
3. Interest rates are coming down and the music keeps playing for now.
I was wondering about the scale of the various areas of the financial system we hear so much about. How significant would the shockwaves be, if some of these things fell over. Here are some stats from you know where…
For scale perspective the global public equity market shows massive geographic concentration, with the United States leading overwhelmingly at a market capitalization of $58.9 trillion, representing 48.6% of the global total. This dwarfs all other tracked regions. China is the next largest market area with a capitalization of $15.6 trillion (12.6%), followed by Japan at $6.3 trillion (5.0%). The United Kingdom and Germany hold smaller but significant roles, with market capitalizations of $3.3 trillion (2.6%) and $2.1 trillion, respectively.
Private Credit Market -
The regulation lite Private Credit market has undergone exponential expansion, reaching a global valuation between $2.3 trillion and $2.5 trillion in 2025. This asset class has grown roughly 8 times in 15 years, starting from a base of approximately $300 billion in 2010.
ETF Market -
The ETF market has also experienced sustained, rapid growth over the last decade, reaching $17.85 trillion in 2025. This growth trajectory accelerated dramatically, moving from $2 trillion in 2013 to $5 trillion by 2018, and then surpassing $11 trillion in 2023 before achieving its latest peak.
Options Market -
The Options market demonstrates a remarkable increase in trading volume. The number of contracts traded has expanded more than 5 times in 15 years, rising from approximately 2.5 billion contracts in 2010 to between 13 billion and 14 billion contracts in 2025.
Cryptocurrency Market -
The total market capitalization for all cryptocurrencies stands at approximately $4.03 trillion. Within this ecosystem, Bitcoin's market capitalization is estimated to be between $2.2 trillion and $2.3 trillion USD. Furthermore, the total value of crypto held by tracked public "treasury companies" is around US$140 billion, spread across approximately 14 companies.
Individual Stocks -
Focusing on individual technology giants, Nvidia currently holds a massive market capitalization of $4.2 trillion (PE 52x), slightly exceeding the entire crypto market. Tesla also maintains a significant valuation at $1.5 trillion (PE 163).
Mag 7 -
The current market capitalisation of the Mag 7 is $21 Trillion.
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
I don’t know if this list of ‘asset classes to worry about’ is correct or complete, or how much risk they pose to investors. But It will be interesting to see how it all plays out. There certainly seems to be plenty of games to play in this casino. I just have an awful feeling about it all. Maybe that just comes with getting older.
No. of Recommendations: 20
No. of Recommendations: 12
Maybe it´s my stupid hour, after having just finished watching "Django unchained" accompanied by quite some bubbly and also red wine (bad combination), but I don´t understand that:
When I say that if 10-year Treasury yields stay at around 4%, then the market should average a P/E of around 25x over time
Where is the risk premium for stocks in that equation? Why should I risk buying/holding stocks for receiving the same 4% I can get without any risk with Treasuries?
No. of Recommendations: 6
Why should I risk buying/holding stocks for receiving the same 4% I can get without any risk with Treasuries?
The stock earnings will be growing, historically at 4% real rate. Treasury yields will be unchanged till maturity and capital gains if any prior to maturity from lower interest rates would boost stock earnings and P/E too.
No. of Recommendations: 0
Right. Growth (PEG ratio).
No more posting after alcohol.
No. of Recommendations: 20
I'm not sure it's necessary to decide whther there are bubbles bubbling.
Keep it simple, maybe.
Are prices generally high for investment securities? Yes.
Does that mean there aren't a lot of good investments to be found at attractive prices? Yes.
Are the earnings yields of broad market indexes low, meaning low prospective returns? Yes, for any time frame longer than the current bull move.
Jim
No. of Recommendations: 0
Hi,
Thanks for posting the link. Nice article. What is the PE of bond? How is it calculated?
Also the PE for stock at internet bubble was only 26.6?
-Paul
No. of Recommendations: 1
Company
TTM P/E Ratio
Those P/E ratios look wrong, old data? I've found AI sources like to use stock market data that's about 4 months out of date, unless you call them out on it.
No. of Recommendations: 3
The stock earnings will be growing, historically at 4% real rate. Treasury yields will be unchanged till maturity and capital gains if any prior to maturity from lower interest rates would boost stock earnings and P/E too.
If you reinvest payouts then the earnings on your treasuries also grow at 4% (if that is the interest rate you are getting on them).
Stock earnings growing at 4% presumably reflects companies re-investing some of their earnings, just like buying more treasurie with the interest you earned would be.
R:
No. of Recommendations: 15
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)
No. of Recommendations: 2
... after reading the piece and reconsidering this list (posted above):
TTM P/E Ratio
Nvidia (NVDA) 52.47
Microsoft (MSFT) 38.91
.........
A Palantir (Palantir (PLTR) 650) owner might say "Wow, that's so cheap!"
(Disclaimer: I am short Palantir & Nvidia (plus, sorry, Berkshire)).
