Behold, dear reader, the grand theater of modern finance-a stage where folly dances and greed takes center stage. The players? Seven magnificent stocks whose dazzling ascent has rendered them akin to demigods among mortals. Their average return over five years? A princely 335%. Meanwhile, the humble S&P 500 (^GSPC), that ensemble cast of mediocrity, limps along at a mere 92%. Such is the tale of our age, wherein these seven titans now command fully one-third of the index’s market value.
Act I: The Vanity of Numbers
Enter Lisa Shalett, chief investment officer at Morgan Stanley, armed with warnings as sharp as Molière’s wit. She decries this concentration not merely for its audacity but for the peril it portends. For what are these stocks if not vain peacocks preening before an admiring crowd? Their valuations soar beyond reason, much like Cyrano’s nose-impressive yet absurd. “Such concentration,” she laments, “breeds volatility and invites calamity.” Indeed, history whispers her fears into the ears of those who listen: the dot-com bubble stands ready to bow once more.
Act II: The Illusion of Rationality
And lo, the S&P 500 itself dons the mask of extravagance. Its cyclically adjusted price-to-earnings (CAPE) ratio-a creation of Robert Shiller, economist and sage-reveals the truth behind the masquerade. At 37.8, the index flaunts a figure surpassed only 39 times since 1957. Thus, we find ourselves in rarefied air, where markets breathe greed rather than oxygen. Shall we applaud or tremble?
| Holding Period | S&P 500 Return When CAPE Ratio Exceeds 37 |
|---|---|
| 1 year | (3%) |
| 2 years | (12%) |
| 3 years | (14%) |
Mark well these numbers, for they foretell a grim fate. One year hence, the index falters by 3%; two years, by 12%; three years, by 14%. As surely as Tartuffe duped Orgon, so too does hubris deceive investors.
Act III: The Virtue of Prudence
In such turbulent waters, prudence becomes the lifeboat. Avoid, I beseech you, those shares inflated by vanity and delusion. Build your coffers while others squander theirs; let patience be your guiding star. Even he who entered the market during the dot-com frenzy of December 1999-when the CAPE ratio eclipsed 44-would have seen his wealth compound at 8.1% annually over 25 years. Patience, then, is no mere virtue but a necessity.
Act IV: The Comedy of Errors
Yet, dear audience, do not mistake this cynicism for despair. No, it is but a jest played upon those who mistake speculation for wisdom. The stock market, though capricious, rewards the steadfast. It is a farce, yes-but one with lessons worth learning.
Act V: Curtain Call
Thus concludes our drama, a satire of human folly set against the backdrop of financial excess. Let us exit not with lamentation but with resolve-to observe, to question, and above all, to laugh at the absurdities of the world. For in laughter lies clarity, and perhaps even salvation 😊.
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2025-08-17 11:12