READ THE ORIGINAL
Published in full and free by Oaktree Capital Management. This page indexes its arguments; it is not a copy.
THE ARGUMENT
Written on the 25th anniversary of bubble.com, and deliberately short of a verdict. Marks defines a bubble as a state of mind rather than a calculation, runs the Nifty Fifty and the internet through it, then sets what worries him beside what does not. Being a credit investor, he says, he cannot speak authoritatively on whether this is one.
What it actually claims
A bubble is a state of mind rather than a calculation, he argues, and the surest tell is hearing “there’s no price too high.”
Concentration is the fact he leads with, and it now exceeds the peak of the bubble he wrote about 25 years earlier.
- the top seven were 32-33% of S&P 500 capitalization at the end of October
- roughly double the leaders’ share five years earlier
- against a prior 28-year high of roughly 22% in 2000
- US stocks over 70% of the MSCI World Index, the highest since 1970
Newness lets prices escape gravity — no history, nothing to tether them — and a mania usually has a grain of truth taken too far.
- a 200x payoff makes a 1% chance of success mathematically worth funding
- stocks listed down 99% in the aftermath of the TMT bubble
His own baptism supplies the evidence: the best companies in America, bought at any price, lost most of their value in five years.
- well over 90% lost by buying in September 1969 and holding five years
- p/e ratios falling from the range of 60 to 90 to the range of 6 to 9
- the market as a whole down about half in 1973-74
A multiple in the 30s is a bet on persistence, and the churn in his own tables suggests change is more the rule.
- Nvidia at a forward multiple in the low 30s, double the post-war S&P average of roughly 16 but cheap against the Nifty Fifty
- only six of the top twenty S&P companies of early 2000 were still in the top twenty in early 2024
- of today’s Magnificent Seven only Microsoft was in that 2000 top twenty
Starting valuation and the next decade’s returns are strongly related, with minor variations but no serious exceptions.
- J.P. Morgan Asset Management: just short of 324 monthly observations from 1988 through late 2014
- J.P. Morgan Asset Management: buying at a multiple in line with today’s 22 always produced ten-year returns between plus 2% and minus 2%
- today’s p/e well into the top decile of those observations
Two straight 20% years have now happened five times, and three of the earlier four saw declines after — a small sample, he notes.
- the S&P 500 up 26% in 2023 and 25% in 2024, its best two years since 1997-98
- Bitcoin up 465% in the last two years
He then argues against himself: the multiple is high but not insane, and he hears no one saying “there’s no price too high.”
Figures are the author's own, as cited in the memo.