stock-market-bubble.jpg

Grantham: This isn't a bubble

Whenever markets reach new highs, it is inevitable that people begin to ponder if this is a top or even worse, a bubble. This led the WSJ to ask famed investor Jeremy Grantham point blank, "Is the US market in a bubble or is it different this time?" His response is certainly worth a few minutes of your time.

“It doesn’t have the characteristics of a bubble. I think a simple way of defining a bubble is that it has to have nearly perfect fundamentals which have to be irrationally extrapolated with considerable euphoria around. Remember the style from 2000, Japan in ‘89, or the US housing market (house prices will never decline), or 1929 in the old days was a classic. We have almost none of that euphoria. We also have very imperfect fundamentals.”

I agree that this isn't a repeat of 2000 despite the NASDAQ finally trading above its previous high of 2000. The two periods are vastly different. Back then, the forward PE was 130x and the majority of new tech IPOs had no earnings at all and were only in business for a year or two. Today, the companies that survived the tech bubble have developed into mature and profitable businesses. Furthermore their PEs stand at 29x which is a similar PE for tech for more than 10 years.

NASDAQ-1.png

Watch the full interview here:

become_a_blog_subscriber

 

Share This Story, Choose Your Platform!

About the Author: Chris Wang

Chris Wang

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Runnymede Capital Management, Inc.), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Runnymede Capital Management, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Runnymede Capital Management, Inc. is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of Runnymede Capital Management, Inc.’s current written disclosure statement discussing our advisory services and fees is available for review upon request.