The farm is divided up into millions of pieces (shares) and at current prices your cut is small. At 25 times earnings the earnings yield is a flat 4%, which barely better than the 3.9% on the 2 year bond yield. Now stocks unlike bonds have growth potential. However the growth is in the share price, and is not supported by any prospective earnings growth. Predicting CBA's earnings is quite easy, the bank analysts are very good at determining the net profit. CBA are so consistent that you can you pin their earnings within a 3-4% margin of error give or take. Next years earnings are set to be flat at best
Its truly remarkable. This is a phenomena we are witnessing in term of an asset bubble blowing bigger before our eyes. The Dot Com bubble blew for two years before the party was over. Predicting
Im telling you know, the people buying at current prices are holding some very heavy bags. Will they have the chance to hand it off to someone else? Who knows, but there are going to be plentiful bag holders when the music stops, because the valuation is absolutely extreme
Investopedia:
An asset bubble occurs when the price of an asset, such as stocks, bonds, real estate, or commodities, rises rapidly without underlying fundamentals to justify the price spike.
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