Ann: Market Update, page-39

"This is a question I have grappled with in the past (and asked elsewhere too). Do our mindsets, and consequently, the prices we are willing to pay, have to adjust to what seems to be a long-dated, if not permanent, change in the rates environment, with the powers that be determined to keep it that way?"

This is the single most influential driver of the stellar equity market performance over the past decade, I am increasingly convinced.

You could have been the best stock picker alive, but if you didn't adjust to this powerful dynamic, you would have under-performed your way into oblivion.

(For more than just one reason, ARB would sure as hell not be a $3.5bn company today if interest rates were still 5% or 6%)

I'm loathe to ever start telling myself that "This time its different", but when its been like this for 10 years, then I can't help believing that it is now different [*].

So short answer to your question of, "Do our mindsets, and consequently, the prices we are willing to pay, have to adjust,...":

YES.

12 times P/E is the new 8 times
20 times P/E is the new 14 times,
25 times P/E is the new 18 times
etc


[*] Evidently, "financial repression" is the label the savants are giving it:
https://themarket.ch/interview/russell-napier-we-are-entering-a-time-of-financial-repression-ld.4628

Apparently, when governments start to legislate that institutional investors must buy more bonds, that's the time to sell all your stocks and to run for the hills. But until then, its a case of:


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