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Comment by mullingitover | Hacker News Reader

This is when you switch to the other age-old strategy: selling ovepriced shares.

Yes, that’s the easy and obvious answer. The hard question: where do you park that money? People are investing in tech stocks because everything else is so uncertain right now.

I've been selling off tech funds partially and investing the proceeds in total market funds (which are still ~20% tech), just as a way to rebalance.

It's hard to predict the next "winner", maybe it remains tech, maybe it becomes something else.

I paid off my 25 years remaining mortgage after selling some long-held TSLA, because I really didn't know where else to put it, especially with the election uncertainty coming up. I feel a little bit cowardly doing this, but I'm in tech and aapl/amzn/goog is a fair chunk of my portfolio and don't want to put even more of my eggs in one basket.

Better cowardly than broke and homeless.

I really recommend rethinking that. TSLA is the future of the market. Hold it forever.

You first have to define "overpriced".

The textbook answer would be when the p/e ratio is over 25 no? Tesla is at 1,151.43.

That seems to be a value that would be valid for a different era. I am not sure whether we can go by those same numbers for the current market environment (especially after the QE starting from 2008/09).

Would you agree that over 1k seems a bit high?

I'm not actually sure it is. 1000 is two orders of magnitude. One for the 2008/9 interventions and shift and one for the current.

1000 could even be low.

I think QE maybe explains some of the decoupling of market cap from real-world value, but I'm not sure it justifies it.

P/E is still relevant, but you also got to consider future growth.

Would you rather buy a 20 P/E company that is growing by 1% a year; or would you rather buy a 200 P/E company that is growing by 30% a year?

I absolutely search and buy the former... there is only so much growth Tesla can realistically sustain... and currently it's "not any more". Same for all of the Big Tech. Give me Rio Tinto and I buy it any day.

Future growth will already be mostly priced in if you buy it at 200 P/E

No, not really. A high PE ratio just means investors are expecting the company to grow. I probably wouldn't buy TSLA, but 25 isn't some magic number which means the stock is overpriced otherwise people who "know what they are doing" would short anything with a PE ratio higher than 25.

The textbook answer would be to divide PE by current treasury yield. Which is close to zero, so the textbook share price should be close to infinity.

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