{"id":29939,"date":"2018-01-20T13:02:11","date_gmt":"2018-01-20T18:02:11","guid":{"rendered":"http:\/\/olduvai.ca\/?p=29939"},"modified":"2018-01-20T13:02:11","modified_gmt":"2018-01-20T18:02:11","slug":"believing-the-impossible","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=29939","title":{"rendered":"Believing The Impossible"},"content":{"rendered":"
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silenceofmind.com<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n

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Believing The Impossible<\/a><\/h3>\n
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Is necessary to rationalize today’s bubble markets<\/strong><\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n
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“Alice laughed: “There’s no use trying,” she said; “one can’t believe impossible things.”<\/em><\/p>\n

“I daresay you haven’t had much practice,” said the Queen. “When I was younger, I always did it for half an hour a day. Why, sometimes I’ve believed as many as six impossible things before breakfast.”<\/em><\/p>\n

~ Lewis Carroll, Through The Looking Glass<\/em><\/p><\/blockquote>\n

To borrow from Lewis Carroll: To have confidence in today’s central bank-created bubble markets, we have to believe in six impossible things.<\/p>\n

Thing 1: Fundamentals Don\u2019t Matter.<\/em><\/strong><\/p>\n

In our brave new world of money printing to infinity, we’re supposed to buy into a \u201cnew paradigm\u201d story. You know, that It\u2019s different this time<\/em>.<\/p>\n

Spoiler alert: It never is.<\/em><\/p>\n

Companies either make money or they don\u2019t. They’re either good investments or they aren’t. They’ll\u00a0either return risk-adjusted cash to you over time, or they won’t.<\/p>\n

Here\u2019s a simple exercise. Using a publicly available stock screener at Finviz.com<\/a>, a favorite site of mine, I set two filter parameters to obtain a list of companies that have::<\/p>\n

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  1. A market cap of over $2B<\/li>\n
  2. A P\/E ratio in excess of 50x<\/li>\n<\/ol>\n

    These are the biggest companies that, in theory at least, require investors to wait 50 years (or more) to be paid back in profits for each dollar invested.<\/p>\n

    236 companies fit this description right now. 236!<\/p>\n

    Here\u2019s a screenshot of page 11 of the results. Every company listed here has a P\/E multiple of over 190(!).<\/p>\n

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    (Source \u2013 here\u2019s the exact screen I used, so you can troll the results for yourself<\/a>)<\/p>\n

    Again, these sky-high ratios mean that investors are willing to wait more than 190 years for these companies to earn back their principal at current stock earnings prices.<\/p>\n

    …click on the above link to read the rest of the article…<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

    silenceofmind.com Believing The Impossible Is necessary to rationalize today’s bubble markets “Alice laughed: “There’s no use trying,” she said; “one can’t believe impossible things.” “I daresay you haven’t had much practice,” said the Queen. “When I was younger, I always did it for half an hour a day. Why, sometimes I’ve believed as many as […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[18028,9958,18030,18029,7220,2218,3329,690,1138],"class_list":["post-29939","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bubble-markets","tag-chris-martens","tag-earning","tag-fundamentals","tag-pe-ratio","tag-peak-prosperity","tag-profits","tag-risk","tag-stock-market"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/29939","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=29939"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/29939\/revisions"}],"predecessor-version":[{"id":29940,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/29939\/revisions\/29940"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=29939"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=29939"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=29939"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}