And you could put money there and get nothing. State-owned enterprises in China and Russia, the narrative is: don’t buy these, these are state owned, the state has the right and the power to expropriate your wealth at will.

Anti-bubbles are markets or investments where you would have to make implausibly pessimistic assumptions in order to not earn a decent return. So it’s not quite like the tech bubble of 2000 in that regard. You have to make aggressive assumptions to collectively justify today’s tech weighting in the indexes, but you don’t have to use implausible assumptions. Tech, there’s lots of companies where people use valuation models to justify buying. Tesla - if you buy into the notion that it’s a bubble, as we do - is a micro bubble. Q: How do you define a bubble? What’s a micro bubble? And what’s an anti-bubble?Ī: Firstly, micro-bubbles are single-asset bubbles. And so that qualifies for the definition. How many people use a valuation model to justify buying? Hardly anyone. So when I hear numbers like that, I think, OK, that’s implausible and therefore it’s potentially bubbled territory. So tacitly, she’s assuming, twice Amazon’s growth in half as many years, that’s really aggressive. Amazon, the biggest growth story of a generation, grew 14-fold in the last 10 years. And at the end of the five years, it will be valued at the same multiples as today’s Faang stocks.” And I was thinking at the time, 89% a year for five years, that is 25-fold growth. It’s going to grow 89% a year for the next five years. And I asked her: “What’s your valuation model that would justify a target price of $3,000 on Tesla? And she said, “Well, that’s simple. I debated Cathie Wood about a month ago at a Morningstar conference. When it comes to things like Tesla, and Zillow and Netflix, you have to make very, very, very aggressive assumptions. You just have to make moderately aggressive assumptions and you can easily justify the price. With Apple, you don’t even have to make implausible assumptions. So you can readily scratch that off the list.

But is the marginal buyer an unsophisticated investor who doesn’t care about valuation? Hardly.

There are people who will say, gosh, you’d have to make implausible assumptions about Microsoft to justify its current market cap.

And when it comes to people ignoring valuation models, that is characteristic of bubbles.

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