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howard i cannot help but think back to last wednesday the capitol building in washington was being overrun by a mob and the dow jones industrial average was up 400 points is the market behaving rationally well first of all of course in the short term the market certainly can uh depart from irrationality secondly i think you're implying that we're in a bubble and no i'm i'm merely i'm merely floating that as a possibility i don't have an opinion either way well there's no reason you shouldn't float it as a possibility uh and and certainly uh you know the greater question is well why is the market making new highs every day if we have this these problems the the the political division in the country is a terrific one but the greatest one of course is the pandemic that's an excellent question yeah but but i think i really think that it in large part and this doesn't apply uh account for any one day's action i think that the the uh the fed and treasury actions and specifically the reduction of the fed funds rate to zero has had a very coercive effect on the market uh it it it has required people to invest because they don't want to sit around with their with cash money market fund bank deposits all earnings zero they don't want treasuries at less than one or uh higher grade bonds at two and so they've had to push out into risk assets stocks uh non-guilt-edge bonds these are private equity and and so forth these are and venture capital these are risk assets but not all stocks are performing equally we've all seen the charts and and i'd like to put one up if if we have it available uh showing what happened or what happened over the past 10 years if you invested in the russell 1000 growth instead of the russell 100 excuse me 1 000 value if you invested a hundred thousand dollars in the one russell 100 growth you'd have almost five hundred thousand dollars today on a total return basis and if you invested in the russell 1000 value you'd have less than three hundred thousand it was an enormous enormous pardon me what was the starting point a hundred thousand so no five times ten ten years ago so you'd have five times your money over ten years in grow stocks and you'd have something less than three times your money in value stocks and that forms part of the evidence that another legendary value investor jeremy grantham points to to say that we're heading for one of the mother of all crashes well look first of all there's no disputing the fact that growth stocks have outperformed value stocks on the other hand on the other hand i think there's no disputing the fact that what our cold growth stocks have a better future than what are called value stocks well some of them certainly do but not all of them do well no but on balance they probably do and and of course the the the the ones that where the value is questionable have not been heavily represented in the s p uh the ones that are that have been in the s p for the last 10 years are the great tech leaders uh that have been in the s p for the last 10 years have probably been the acknowledged winners uh but look there's no there's when when one group outperforms another group for a long period of time and to the extent you described there's no question that it's possible that they're overvalued however the argument the argument in the memo is it doesn't prove it's overvalued because these are companies that are that have gotten better and better that that improve as they get larger and get stronger as they get larger not bureaucratic and slow moving but larger
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