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What explains the bull market’s ability to take off despite valuations that overshadow anything other than the dot-com bubble? Everything from passive investing to buyouts is hinted at to explain it, but the real reason is the bizarre predictability of the corporate profit machine in America.
Patience is rewarded like no other time. With profits rising as steadily as they are steep, nosebleed valuations are proving to be very reasonable compared to earnings a year or two later. Call it a retrospective P / E – the price divided by the profits that eventually materialize.
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