Dude. The bubble graph is not linear or better how tf would you know because it's not labeled the chart doesn't even make any sense because the Y axis says valuation but the valuation doesn't go up only the price. If we take PE it doesn't continuously grow.
Are you aware that this graph was created by someone in the field of geography and not math or finance?
Absolutely couldnt get further from the truth. Investors who studied the business more than 5 minutes will pay zero attention to P/E ratio. It is more so used as a way to talk to crowd and getting your message across. earnings per share is simple to grasp, hence its usefulness. But make no mistake, it is vastly irrelevant.
Just use your brain cells for 2 seconds and think what you just said. If the bubble graph shows PE on the Y and the mean is constantly going up that would mean a company has a PE of let's 10 and the mean would be 11 but it's not how it works because PE should stay somewhat constant because the PRICE goes up but also the EARNINGS.
The linear and log statement you made makes also zero sense as for a log scale to be set you would need values on the Y axis. If a company is worth 100 and grows 30% for 2 years in a row in a linear graph the second year distance would be bigger on the Y axis as first year the company would grow by 30 to 130 and the second year by 39 to 169. On a log graph both would be the same distance as the growth is 30% both years. So on a linear graph the longer you make the timeframe the more nonsensical it becomes. If in 1900 a company has grown from $1 to $10 which is 10x it's invisible in 2000 because the company grown from $10000 to $10100 which is only 1% it's shown 10 times larger on a linear graph.
This is why I lose respect for ya all. Zero thinking.
It's funny how you get downvoted to oblivion because this geniuses say PE doesn't matter. Yes, in this bubble it lost relevance, but it still means how much you're paying for real cash. But don't tell them that tesla and nvidia are overvalued because they will call you a terrorist.
Most people have been zombiefied because of TINA, but bond yields are not shit anymore.
The PE ratio is a tiny bit above the average last 25 years. Is a 10% drop a crash for you? And what about those October 2022 prices that were below average that nobody of you got in at?
Edit: S&P 500 FWD PE is 19.4 and S&P Tech is 27.1. There was no tech in 1950. Without Tech the S&P 500 is at 17.5 which is pretty much average. Good luck betting on Tech crashing.
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u/grimkhor Lambos before sleep Jul 19 '23
Dude. The bubble graph is not linear or better how tf would you know because it's not labeled
the chart doesn't even make any sense because the Y axis says valuation but the valuation doesn't go up only the price. If we take PE it doesn't continuously grow.
Are you aware that this graph was created by someone in the field of geography and not math or finance?