“Large-cap US stocks, for example, tend to trade between 10 times earnings and 20 times earnings. Occasionally, they are more expensive. Sometimes they are less.  When they are more than 20 times earnings, buyers typically have a hypothesis that justifies the higher prices. ‘This time it is different,’ the sentence begins, followed by ‘because…’  We can never know that this hypothesis is true. We may know from experience that similar hypotheses have been proven false. But we can’t be sure that this one will be disproven too.  But as the price of stocks rise, the potential reward for betting against the extraordinary new hypothesis goes up.”

http://bonnerandpartners.com/can-simple-trading-system-beat-market/

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