SeanShot Thesis Value investors, this one's for you: The S&P 500 PE multiple at fair value has been trending upward since the Fed and other major central banks have made the decision to continuously monetize excessive debt in the system, since the GFC. This fair value multiple expansion may be partially, but significantly, explained by such currency debasement, and/or the global liquidity catalyzed by debt monetization, which makes its way into scarce assets. Coincidentally mega cap tech stocks whose hyper growth is based on the network effect, built on, or around the rails of the internet, and thusly driven in a relatively frictionless fashion.
.. Zhang, Xing-Zhou; Liu, Jing-Jie; Xu, Zhi-Wei (2015).
"Tencent and Facebook Data Validate Metcalfe's Law". Journal of Computer Science and Technology. 30 (2): 246-251.
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compared to more traditional S&P 500 companies, have come to dominate the index on a weighted basis: January 2024 top weighted S&P companies (Finhacker.cz) The top 10 S&P 500 holdings by weight represent about 32.5% of the index, much higher than 17.
8% in 2015, and also ahead of the 27% at the peak of the dotcom bubble in 2000. The concentration of the top 10 stocks within the S&P 500 index has reached the highest level in decades, stoking fears of overconcentration risks and the necessity for diversification away from these top 10 holdings - Forbes, May 2024 These companies command much larger PE's, based on either massive earnings growth..
. Earnings growth conditi.