In late stage bull market cycles, the inevitable bashing of long term valuation metrics comes to full fruition. In the late 90’s if you were buying shares of Berkshire Hathaway stock it was mocked as “driving Dad’s old Pontiac.” In 2007, valuation metrics were being dismissed because the markets were flush with liquidity and interest rates were low. Today, we once again see repeated arguments as to why “this time is different.”
For now, the “bullish case” remains alive and well. The media will go on berating those heretics who dare to point out the risks that prevail. However, the one simple truth is”this time is indeed different.” When the crash ultimately comes the reasons will be different than they were in the past – only the outcome will remain same.
The market has had a rough start of the year flipping between positive and negative year-to-date returns. However, despite all of the recent turmoil from an emerging markets scare, concerns over how soon the Fed will start to hike interest rates and signs of deterioration in the underlying technical foundations of the market, investors remain extremely optimistic about their investments.