The P/E metric _was_ the gold standard back then but it’s based on a growth model.
Markets have been on a growth model since about the 1970s I think, assuming constant progress, constant growth. Projected earnings.
It’s a shame it’s considered Fundamentals because it’s not fundamental. That’s why I think a robustness metric of _some_ kind needs to exist. But I don’t know what that would be.
Let’s say you have old dependable bottle-cap maker. It’s p/e ratio is stable. It’s steady. It’s not growing nor shrinking. But as it stands, that’s not the kind of thing people want to invest in. Market’s geared for growth.
It’s hard to shift our way of thinking but I think we’ll have to.
I think the supply/demand is flawed, sadly as it assumes compliance at all levels. Invisible hand is something I consider religion – an article of naivity even moreso than faith as one only has to look at how organizations function to know that there is no self-correction in the market, even with commodities, which should be the ultimate in self-correcting, as you get political gaming at all levels.
By the time it reaches the consumer, game’s already played.
I think a market model based upon equilibrium-as-choice-investments is the direction markets should go because THAT will be an investment in infrastructure.
But I’m just shooting off the hip here. I’ve been looking at nodes and antinodes, harmonic oscillators, and I’ve got equillibrium in the brain as desired state.
Oh it’s linked. Investing is modeled with physics frequently, and physics is all about the waves, particularly quantum mechanics.
Fascinating thing about equilibrium that I keep forgetting is that it’s not a “resting state”. It’s not 0. It’s not frozen. But it’s a very active and dynamic state. This video with the styrofoam thing. I had to look up what “antinode” was because at the end, that’s where the balls were settling into.
*I* thought it would be the unchanging area inbetween the fast moving top and bottom. But nope: the balls were STUCK INBETWEEN two unchanging areas in the violently changing zone.
They looked static because of the sampling rate — the strobe light on it — but were really violently going back and forth between the two stable nodes.
Reminded me of fight-of-flight. I think that’s what equilibrium really is. It’s far easier to grow or decline but to stay steady requires constant course corrections.
[fight or flight OR FREEZE. The “freeze state” is the violent state.