{"id":334659,"date":"2021-09-04T05:04:00","date_gmt":"2021-09-04T02:04:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/brett-arendss-roi-this-chart-says-were-partying-like-its-1999\/"},"modified":"2021-09-04T05:04:00","modified_gmt":"2021-09-04T02:04:00","slug":"brett-arendss-roi-this-chart-says-were-partying-like-its-1999","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/brett-arendss-roi-this-chart-says-were-partying-like-its-1999\/","title":{"rendered":"#Brett Arends&#039;s ROI: This chart says we\u2019re partying like it\u2019s 1999"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3f8f66eb47e\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3f8f66eb47e\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/brett-arendss-roi-this-chart-says-were-partying-like-its-1999\/#There_is_undeniable_euphoria_when_it_comes_to_the_sexy_%E2%80%98growth_area_of_the_market\" >There is undeniable euphoria when it comes to the sexy \u2018growth\u2019 area of the market<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/brett-arendss-roi-this-chart-says-were-partying-like-its-1999\/#Brett_Arends\" >Brett Arends<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong>#Brett Arends&#039;s ROI: This chart says we\u2019re partying like it\u2019s 1999<\/strong>&#8221;<\/p>\n<h2 class=\"article__subhead\" itemprop=\"alternativeHeadline\"><span class=\"ez-toc-section\" id=\"There_is_undeniable_euphoria_when_it_comes_to_the_sexy_%E2%80%98growth_area_of_the_market\"><\/span>\n  There is undeniable euphoria when it comes to the sexy \u2018growth\u2019 area of the market<br \/>\n<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><\/p>\n<div class=\"column column--full article__content\" role=\"region\" aria-label=\"article body\">\n<div class=\"article__side\">\n<div class=\"container--sticky not-active\">\n<div id=\"cx-next\" data-nosnippet>\n              <\/div>\n<\/p><\/div>\n<\/p><\/div>\n<div id=\"js-article__body\" class=\"article__body article-wrap at16-col16 barrons-article-wrap\" itemprop=\"articleBody\" data-sbid=\"WP-MKTW-0000396396\" role=\"document\">\n<div class=\"barrons-article-ad-wrapper\">\n<div data-track=\"barrons-article-ad-wrap\" class=\"barrons-article-ad sticky_item\">\n<div class=\"barrons-main-article-ad-target sticky_target body_ad\" aria-hidden=\"true\"><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<div data-layout=\"\n                inline\" data-layout-mobile=\"\" class=\"\n          media-object\n          type-InsetArticleReader\n              \n              inline\n  article__inset\n          article__inset--type-InsetArticleReader\n              article__inset--inline\n  \"><\/p>\n<div class=\"media-object-article-reader\">\n<div class=\"audioplayer\" data-sbid=\"WP-MKTW-0000396396\" role=\"region\" aria-label=\"Listen to Article\" tabindex=\"-1\" id=\"articlereader\" data-show-title=\"false\" data-theme=\"wsj-article-reader\" data-show-header=\"false\" data-show-subscribe=\"false\" data-ads-enabled=\"true\" data-save-publication=\"false\">\n        <\/div>\n<\/p><\/div>\n<\/p><\/div>\n<p>       We Americans invest more of our 401(k) plans in stocks than in any other asset class. In <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.ici.org\/faqs\/faq\/401k\/faqs_401k\" class=\"icon none\">total<\/a> we hold 39% of the money in stock funds, and another 26% in \u201ctarget-date funds\u201d that, depending on your age, allocate smaller or larger amounts to the stock market as well. Most of that is in the U.S. stock market and most of it in the large-company stocks in the S&amp;P 500<br \/>\n        SPY,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/209901640\/composite\" class=\"negative\">-0.02%<\/bg-quote><span>.<\/span><br \/>\n       So arguably nothing matters as much for the retirement prospects of tens of millions of workers than the current level of the S&amp;P 500, and its likely future returns.<\/p>\n<div class=\"paywall\">\n       Before anyone gets complacent, and dismisses talk of a stock market bubble, take a look at this killer chart, which comes courtesy of money managers GMO in Boston.<\/p>\n<p> It shows that today fully one quarter of U.S. stocks are selling for more than 10 times annual sales \u2014 a <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/general\/\" data-internallinksmanager029f6b8e52c=\"3\" title=\"General\" target=\"_blank\" rel=\"noopener\">general<\/a>ly ridiculous level of overvaluation. It\u2019s not just that this is the highest percentage of stocks selling for silly prices since the infamous tech bubble 20 years ago. It\u2019s that historically we have never seen anything like it other than during those two episodes: 1999-2001 and today.<\/p>\n<p>This doesn\u2019t mean that the entire U.S. stock market is in a bubble. It means that there is undeniable euphoria when it comes to the sexy \u2018growth\u2019 area of the market.<br \/>Ben Inker, the head of asset allocation at GMO and the author of the report, reminds us of just what \u201c10 times sales\u201d really means.<\/p>\n<p>He quotes Scott McNealey, the CEO of Sun Microsystems, and his famous comments about it nearly 20 years ago, after the last tech bubble burst.<\/p>\n<p>\u201cTwo years ago we were selling at 10 times revenues,\u201d McNealey said in 2002. He talked through the impossible financial feats Sun would have had to perform to justify that stock price. \u201cDo you realize how ridiculous those basic assumptions are?,\u201d he asked investors. \u201cWhat\u00a0were\u00a0you thinking?\u201d<\/p>\n<p>It was a good question. It still is.<\/p>\n<p>GMO shows that, going back to 1980, stocks purchased at more than 10 times annual sales have overall been terrible investments, earning half the annual return of the overall S&amp;P 500.<\/p>\n<p>The late, great investment manager Peter Bennett used to say that a knowledge of financial history was even more important than a knowledge of financial theory. One reason: Stock market fashions go in cycles, they always have, and during each period investors insist the current fashion is permanent. (If they didn\u2019t they wouldn\u2019t buy the shares, after all).<\/p>\n<p>Stocks generally fall into two categories, \u2018growth\u2019 and \u2018value.\u2019 (I sometimes think of them as \u2018future\u2019 stocks and \u2018present\u2019 stocks). So-called growth stocks are generally more expensive in relation to current sales, earnings and so forth because investors are betting on big things in the future. As with anything, you can pay too much. Everything has a price.<\/p>\n<div id=\"cx-membership-tile\"><\/div>\n<p>Right now we\u2019re in a growth stock mania. The valuation gap between growth stocks and \u2018value\u2019 stocks is at near record levels, GMO data show. We\u2019re not quite at the 1999-2000 levels, but we\u2019re close.<\/p>\n<p>Growth stocks have beaten value stocks by a wide margin over the past 15 years. But GMO analysis, <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.aqr.com\/Insights\/Perspectives\/The-Long-Run-Is-Lying-to-You\" class=\"icon none\">echoing that of hedge-fund manager Cliff Asness<\/a>, finds that this outperformance is entirely due to changes in valuation. Growth stocks have simply become much more expensive. To extrapolate that into the future is to engage in double counting, or circular reasoning.<\/p>\n<p>Incidentally I should give a shout-out here to GMO co-founder Jeremy Grantham, who is too often dismissed as a \u201cperma-bear.\u201d In 2007, when \u2018value\u2019 stocks were booming and \u2018growth\u2019 was still in the doghouse from the dot-com bust, I met Grantham at an industry dinner. He told me then, presciently, that growth stocks that looked cheap. A terrific call.<\/p>\n<p>It\u2019s worth remembering at this point that the stock market is a giant, ongoing experiment in crowd psychology. Fashions and fads come and go. Human beings, after all, are merely <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.amazon.com\/Third-Chimpanzee-Evolution-Future-Animal\/dp\/0060845503\" class=\"icon none\">the third branch of the chimpanzee family<\/a>, and chimps are pack animals. To gamble that growth stocks will continue to outperform is, as Ben Inker argues, to gamble on multiple implausible mathematical assumptions. But it\u2019s also to argue that human beings have stopped being subject to fashion and pack behavior on the stock market \u2014 a very long odds bet, I\u2019d have thought.<\/p>\n<p>We never know when the pendulum will swing back the other way. The past, of course, is no guarantee of future performance. But as a long-term investor here I\u2019d rather own \u201cvalue\u201d stock funds than \u201cgrowth\u201d funds in my retirement accounts. I prefer the odds.<\/p><\/div>\n<\/div><\/div>\n<p><\/p>\n<div class=\"byline article__byline\">\n<p>    <span>By<\/span><\/p>\n<div class=\"author mobile-scrim hasMenu\" data-scrim='{\"type\":\"author\",\"header\":\"Brett Arends\",\"subhead\":\"The Wall Street Journal\",\"list\":[{\"type\":\"link\",\"icon\":\"bio\",\"url\":\"https:\/\/www.marketwatch.com\/topics\/journalists\/brett-arends\",\"text\":\"Biography\"},{\"type\":\"link\",\"icon\":\"twitter\",\"url\":\"https:\/\/twitter.com\/BrettArends\",\"text\":\"@BrettArends\"},{\"type\":\"link\",\"icon\":\"email\",\"url\":\"http:\/\/www.marketwatch.com\/news\/mailto:barends@marketwatch.com\",\"text\":\"barends@marketwatch.com\"}]}' itemscope itemprop=\"author\" itemtype=\"http:\/\/schema.org\/Person\">\n<h4 itemprop=\"name\" aria-label=\"links to  author page\"><span class=\"ez-toc-section\" id=\"Brett_Arends\"><\/span>Brett Arends<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/p><\/div>\n<\/div>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/news\/\" target=\"_blank\" rel=\"noopener\">News category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"http:\/\/www.marketwatch.com\/news\/story.asp?guid=%7B20C05575-04D4-B545-760C-6C1C653B7568%7D&#038;siteid=rss&#038;rss=1\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;#Brett Arends&#039;s ROI: This chart says we\u2019re partying like it\u2019s 1999&#8221; There is undeniable euphoria when it comes to the sexy \u2018growth\u2019 area of the market We Americans invest more of our 401(k) plans in stocks than in any other asset class. In total we hold 39% of the money in stock funds, and another&#8230;<\/p>\n","protected":false},"author":1,"featured_media":334660,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[70897],"tags":[],"class_list":["post-334659","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/334659","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=334659"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/334659\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/334660"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=334659"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=334659"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=334659"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}