Hi Chuzz,..Re:.I have no answer to proper market valuation or at what precise level the market becomes a bubble, but, like pornography, I do know a bubble when I see one.
Valuations aside, where else can one put money to work and expect decent returns? Don't you think some of the exorbitant premium is due to increasing demand for a decreasing supply of quality tech growth stocks? Is it not also possible that the tech stocks we love are also contributing to global GDP growth? And doesn't this increase already healthy demand for these assets? As well as secure future earnings?
Finally, given the growth rate of the internet and the race for capital to be deployed in the most efficient manner, would you not consider this more a race to efficient and significant growth of profits rather than expanding hot air?<g> Besides, we're running a budget surplus for the first time in years and our pensions are funded and safe and our banks have to set aside loan loss reserves, all of which are significantly different from the Japan of the late eighties or even now. We only have few isolated pockets of real estate inflation, otherwise the country is not seeing any significant inflation, also unlike Japan.
Rates are rising, but it's primarily because the bond market is sooo worried about possible future inflation due to wage pressures because we're finally running out of bodies to fill jobs. But this is sort of like a speed governor, output will be limited, therefore domestic spending will slow somewhat.<g> (probably wishful thinking, imports might grow more!) And productivity will still keep a lid on prices!
I don't think the average Japanese invested in their market in the '80s because the government is now living off their savings. <g>
The new technology is compelling too, who wouldn't want to be part of the growth of global GDP?
Just some cheery, optimistic, Thursday morning views,
Lee
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