Buttonwood The bright side

摘要

THE LATE 1990s is dismissed as a silly era. People left well-paying jobs to join a gold rush in Silicon Valley. Good money was thrown at sketchy business ideas. It was, though, a time of hope. Talk of new-era economics was a little feverish, but there was a genuine surge in productivity in America. Today is quite a contrast. Optimism is thin on the ground. This is not just a matter of the uncertainties stemming from covid-19. Real long-term interest rates-rough shorthand for GDP-growth prospects-have rarely if ever been lower. Productivity growth has been dismal. There is a commonality between then and now: steep share prices. The cyclically adjusted price-to-earnings (CAPE) ratio, compiled by Robert Shiller of Yale University, stands a shade above 30. That is a little higher than its level before the 1929 crash, although lower than the peak of 2000. In the 1990s optimism about growth was part of the justification for pricey shares. Now we have pessimism and high prices. Paradoxically, there is more sense to the current combination.