Folks, I’ve lived long enough to know this: when the crowd says “this time is different,” you’d best hold on to your wallet. The stock market is a bit like a church revival—everybody shouting, singing, and fainting in the aisles, but once the music stops, most of the faithful realize the collection plate is empty and the preacher’s gone missing. History may not repeat itself word for word, but it sure does hum the same tune, and right now the fiddler is playing loud.
The Trap We Fall Into
In recent years, investors have been lulled into believing stocks only go up. Easy money, record highs, and new “revolutions” like AI fuel the fantasy. But this isn’t the first rodeo. During the dot-com boom, people said the internet changed everything—and they were right. But even with that truth, fortunes were lost when valuations stretched past reason.
Valuation Always Wins
History is clear: price versus value always matters. Warren Buffett calls the stock market-to-GDP ratio the best long-term indicator—and right now it flashes red. By that measure, the market is more than 100% overvalued. The Shiller P/E ratio tells the same story, nearly double its historical average. When valuations soar, future returns sink.
Even the strongest companies can become bad investments if you overpay. Cisco grew revenue 5x since 2000, yet its stock has never returned to dot-com highs. Amazon quadrupled its revenue while its stock treaded water for years. The lesson? A great story doesn’t guarantee a great return.
Patterns That Repeat
We’ve seen it in tech, in EVs, in cannabis, in real estate—promises of a “new world” always meet the hard wall of valuation. Bubbles begin with a sound idea, but greed takes it to extremes. When bubbles burst, gamblers lose. Investors who focus on fundamentals—cash flow, margins, debt, and fair value—survive and thrive.
What To Do Instead
- Stay invested – Consistency beats timing. Even if you bought at the top of 2000, steady investing in the NASDAQ would’ve rewarded you in the long run.
- Know what you own – Don’t buy just because it’s going up.
- Focus on value – Treat stocks like businesses. You wouldn’t pay triple for a shirt in the store; don’t do it in the market.
The market, like a carnival, will always sell you tickets to the next miracle ride. But remember: the Ferris wheel goes up, it comes down, and some folks pay three times the price for the same seat. The secret ain’t in guessing when the music stops, it’s in knowing what tune you’re dancing to. Valuation is the metronome of investing—ignore it, and sooner or later, you’ll find yourself dancing alone in the dark while the smart money slips out the back door.
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