But doesnt that assume that conditions for growth stay roughly similar? You seem to say theres an objective right price that the market eventually moves toward, and fools chase higher prices.
But what if instead of a 2 trillion stimulus we have a 200 trillion stimulus. Or there is some other shock to the system that recalibrated what earnings might be in number terms[/quote]
The market does not move ‘toward’ the accurate valuation – but about it; sometimes higher, sometimes lower.
There are always shocks to the system that can ‘adjust’ or change the earnings and performance of a company. Volatility occurs almost proportionate to the unknowns. The trick is to figure out how much the shock will actually change the earnings. Nothings constant except change.
When confronted with the unknown, I discount the valuation for by the unknown, trying to bound how much is uncertain. I do take ‘jumps of faith’ on some, however I severely restrict how much I buy.
