I’m hoping to generate some discussion on if we’re in a bubble, and what kind of data we can look at to help us reach a consensus.
“An asset bubble occurs when the price of a financial asset or commodity rises to levels that are well above either historical norms, the asset’s intrinsic value, or both.”
Now, the P/E ratio of SPY is currently around 27 according to WSJ here. That’s extremely rich, but it’s not entirely accurate. Earnings reports are backward looking, so even before we have Q2 reports showing the full impact of COVID, the market is arguably overvalued.
I looked around today and saw something I’ve never seen in my nearly 10 years in the market (I know I’ve still got lots to learn). Hertz, a company on the verge of bankruptcy, went up over 100% today.
ZM and NKLA are two more examples of stocks that have P/E’s in the thousands, and from the trading activity, it looks like a game of greater fool to me.
So is this what a stock market bubble looks like?