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Was Reagan a bubble?

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Reagan was a business-friendly President when a stock market growth spurt began, a growth explosion which has not reverted to anything that would be called a Carter norm. I was too young to vote before 1980, and certainly did not have formal training in economic history by 1983, but it was in 1983 that I understood the U.S. stock market was very undervalued and should be much higher, even though I had no money to invest in it. I understood then that government would relent it’s suppression of capitalist animal spirits. Now look at today. Government has again released the capitalist animal spirits and the stock market is doing what it does, which is to find the value of the American people. For this to be a bubble, America has to be peopled with too few talented people. I just don’t see a lack of talent in this country. If we have a reversion, what is the norm? Perhaps we are reverting to the norm by increasing so rapidly.

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Posted on 12/23/2017 1:02 AM
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A bubble means valuations are extremely overstretched relative to what the future discounted stream of cash flows of the underlying security you’re buying will provide AND there is a group herding FOMO effect. Otherwise, it is just one or the other.

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Answered on 12/27/2017 2:14 AM
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1990-2000 was the bubble. P/E ratios never really dropped much after the 1987 crash, so it was a new normal. Although now we know P/E is just too simplistic to be useful.

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Posted by (Questions: 36, Responses: 635)
Answered on 12/27/2017 2:15 AM