BGR, The lie point was not specific about rates. What happens during a manic bubble, and this one is unprecedented, already zipping past the 1920s in overvaluation, is that bullish apologists look for reasons why the market has gone beyond what any rational person would pay. They scramble around for excuses without examining them. Interest rates are a good example, but not the only one. Yes, interest rates have come down in the past decade and have gone back up recently. They are now at just about the average of postwar levels, and we have never seen this type of pe ratio, especially on low quality eps #s, during other time periods. Weak straw to grasp at. Previous lies used this decade to try to set a smoke screen for excessive credit creation leading to speculation include:
1. Globalization. This was before the crash in Asia.
2. Technology. Always a joke reason. Technological advances were the main reason apologists gave for the 1920s bubble. They are important, but they don't repeal the laws of valuation. Radios and automobiles for the masses were much more important than the Internet, but they didn't save us from The Great Depression. No sane businessman would buy a business with a 2.85% earnings yield growing at less than 10% (the S&P 500 #s). Not when he could get over 6% on T-bonds and over 5% on AAA munis.
3. People invest for retirement ONLY when the market goes up. One crack in this thing and that 401K money will dry up and go back into CDs. If the folks still have jobs. |
