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"...Stocks are now, we believe, in the midst of a one-time-only rise to much higher ground—to the neighborhood of 36,000 for the Dow Jones Industrial Average..."---The Atlantic

Dear exhuberent Fools:

I was undecided whether to post this in the thread 'Insane Speculation', but after a little thought and a few cups of coffee, I realized it deserves a place of its own.

Please take a good hard look at the leadoff quote. Here are a few more snips and the link will follow the post.

"...Market analysts and media pundits have also persistently warned that stocks are extremely risky... ...Although the experts may not be very good at predicting what the market will do, they are brilliant at scaring people—not out of malice but out of a profound misunderstanding of stock prices..."

Currently, there are a lot of very well known, well respected bullish fund managers who will agree with this. Some more:

"...Stocks are now, we believe, in the midst of a one-time-only rise to much higher ground—to the neighborhood of 36,000 for the Dow Jones Industrial Average. After they complete this historic ascent, owning them will still be profitable but the returns will decline. You won't be able to make as much money from them each year. We believe that in the meantime, however, astounding profits will be made...

...Many small investors are already catching on... ...They are rejecting the outdated model that Wall Street has used to assess whether stocks are overvalued—a model based largely on historical price-to-earnings, or P/E, ratios. That rejection reflects not their nuttiness but their sanity..."


I put the word sanity in bold type with respect to my previous post. The article continues with a historical analysis of stock market growth over the long run. And it is correct at that. I will admit it's well worth reading with this one caveat. Pay attention to the confident, upbeat tone and the way the article trashes methods of valuations with confident rationality. P/E ratios in particular.

It's a very long article just chock full of justifications are rationalizations. It concludes this way:

"...To believe that the market is overvalued, you have to believe that the risk premium, once irrationally so large and getting rationally small, will become irrationally large again. It is our strong belief that the risk premium will continue to shrink, and for good reasons... ...Every time an analyst says that P/E ratios are too high today in the light of historical experience, she is implicitly saying that the risk premium is too low. In other words, she expects investors to go back to the days of being irrationally risk-averse."

So if you're saying to yourself, 'oh, there goes Fastmike again, sounding like he's missed out and is mad about it and wasting my productive time making me read this poppycock hogwash about a bubble'.

And to that I say, OH! Deary me! Did I leave out one important snip from this article? Oh my! Indeed I did. Indeed I did! I left out the date of publication. So here it is:

SEPTEMBER 1999

Happy Dow 30,000 everyone. (And seriously, have a safe and happy Thanksgiving)🦃😉

Your pie-dreaming Fool,
FM

https://www.theatlantic.com/magazine/archive/1999/09/dow-36-...

https://www.theatlantic.com/magazine/toc/1999/09/
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