Submitted byQTR's Fringe Finance
“This time it’s different” is supposed to be the dumbest phrase in investing.
It’s the phrase people use right before they get obliterated. It was the rallying cry of dot-com lunatics buying companies with no revenue in 1999. It was the intellectual foundation of housing perma-bulls in 2006 who believed home prices could only go up because, apparently, Americans had collectively decided real estate was immune mathematical reality.
It’s typically what people say when they’re trying to justify paying absurd prices for dogshit assets while pretending the laws of valuation have been permanently repealed: “this time it’s different”.
Which is why it’s deeply annoying and borderline humiliating for me to admit that this time,it actually may be different.
As someone who has spent years living in the world of fundamentals, valuation discipline, and the radical idea that cash flows should matter at least a little when valuing businesses, I hate where the evidence keeps leading me. I’ve spent years mocking the market as distorted.
Everyone in Austrian economics circles loves that word: distorted. Markets are distorted by central banks, distorted by artificially low interest rates, distorted by endless intervention. Distorted, distorted, distorted. Fine. But at some point, if a distortion lasts long enough, survives every crisis, and becomes embedded in how markets function, is it still a distortion? Or is it just the market now?
Look at this chart of the NASDAQtriplingoff Covid lows just 5 years ago before you answer. An index. Tripling.
And in ten years, the index (read it again,index)is up 534%.
And now, back to the question: “if a distortion lasts long enough, survives every crisis, and becomes embedded in how markets function, is it still a distortion?”
Source: ZeroHedge News
