bubbles
This time it's different
The rule
The four most expensive words in investing are: this time it's different.
Where it flips
Sometimes something truly is different, and calling every change a bubble is its own mistake. The test is simple. Does the difference show up in lasting, real cash flows? Or only in the excuse for the price?
This maxim marks the moment a market stops being priced on real cash, and starts being priced on a story about why the old limits no longer apply. Every late-stage boom carries a 'new era' tale that excuses the high price. The phrase is a warning bell. It is not a rule to bet against anything.
A worked example
A reader hears that a loss-making Indian consumer platform deserves any price, because 'the whole market is going digital, the old maths doesn't apply'. The story is doing the work the numbers cannot. [illustrative]
How to spot it
- ·a 'new era' story used to excuse the price
- ·old yardsticks called out of date
- ·real cash flows replaced by a story
- ·the phrase itself going around
John Templeton · attributed maxim