I don’t want to suggest Wall Street strategists are engaged in an effort to “explain away” or otherwise justify what might be viewed, with the benefit of hindsight, as an “obvious” bubble, but… well, let’s just say that’s the conclusion you might be inclined to draw in early 2024 if you’re predisposed to sarcastic derision.

Let’s be clear: It’s notoriously difficult to spot a bubble when you’re inside of one. Bears and self-declared “contrarians” will tell you successfully identifying speculative manias is as simple as keeping one’s wits and being bold enough to challenge consensus. But that simply isn’t true. Show me someone who claims they can reliably separate manias from rallies — which is to say identify, in real time, the threshold beyond which savvy investors should bail on an upswing lest they should forfeit their paper gains imminently — and I’ll show you a liar. Almost as a rule, bubble-spotters and contrarians are wrong far more often than they’re right, particularly considering the extent to which “early” and “wrong” can by synonymous.

All of that said, you don’t want to be oblivious. And my God. Just read this:

Pepe, a frog-themed coin, and dogwifhat — a dog pictured wearing a hat — continued racking up fresh highs in the past week. The total market value of the memecoin sector has reached more than $60 billion on Wednesday.

That’s from a Bloomberg piece published a couple of days ago. Admittedly, I hadn’t considered an allocation to “dogwifhat” for 2024. My mistake. Each one was worth nearly three genuine US dollars as of Friday. If you backed up the truck a few months ago, you’d be sitting on a tidy gain. The token traded below 10 cents as recently as January 8.

As The Block noted in a short March 15 article, “the purported owner of the dog behind the ‘dogwifhat’ memecoin is selling a photograph of her as an NFT.” As of this writing, the highest bid was nearly 7 ETH — so, around $25,000. You can’t knock the hustle I suppose. Cue Mary J. Blige.

Of course, it’d be ridiculous to suggest investors sell their Nvidia or their Meta or their Amazon just because animal spirits are barking up the crazy tree in the cryptosphere again. But what about the charge that today’s mega-caps, semi heavyweights and tech highfliers are vulnerable to the same dynamic that felled tall trees during the dot-com bubble? Namely that it all hinges on growth expectations that may not pan out. Isn’t that a viable argument?

In a new note, Goldman addressed that question. As ever, the bank was careful not to rule out a de-rating, even as they suggested the worst fears are probably overdone.

“Some investors are concerned about the increase in analyst estimates of ‘long-term’ EPS growth,” strategists including Ryan Hammond wrote. The emphasis (the italics) was in the original. The problem, Hammond said, is that those estimates can be skewed. He used Nvidia to illustrate. Currently, the company’s LTG estimate is more than 30%, but a lot of that’s in FY1, where growth’s seen at 93%. That’s distorting the LTG rate estimate.

Instead, Goldman uses a market-implied measure of expectations, shown below.

Don’t worry about the details of how that estimate’s constructed. It’s an academic exercise. You won’t be interested. Especially on a Friday evening. The point is just that although market-implied long-term growth expectations are higher than average, they’re nowhere near dot-com levels, nor 2021 “everything bubble” heights.

Feel better? No? That probably means you weren’t amenable to being convinced. And I won’t blame you. I harbor many of the same reservations as the most ardent contrarians, but unlike that crowd, I’m open to the possibility that the largest and most successful companies on the planet don’t currently constitute an uninvestable bubble.

With that in mind, Goldman went on to note that even as analyst estimates are indeed optimistic for the largest stocks over the medium-term, they’re not comparable to dot-com exuberance, and the median’s lower versus 2021 too.

“Among the largest 10 TMT stocks, the typical company is forecast to deliver FY3 EPS growth of 15%, above the S&P 500 median of 11%,” Hammond went on, calling attention to the distribution, which is “anchored even lower, with AMD and AMZN the outliers.”

As the figure shows, the typical TMT stock was seen growing the bottom line by nearly 25% in early 2000, and by 18% in late 2021, when Bitcoin was last trading near $70,000.

Still, and as noted above, Goldman isn’t oblivious to the risk. Not at all. “History demonstrates the challenges of maintaining rapid sales growth and extremely high margins,” Hammond remarked, noting that over the past four decades, just 121 unique S&P companies managed to grow the top-line by 20% for five consecutive years. Just four succeeded in keeping EBIT margins above 50% for half a decade straight.

“In addition to realized fundamentals, the experience from the Tech Bubble shows that failure to meet elevated expectations can be sufficient to lead to a sharp valuation de-rating among the largest stocks,” Hammond said, citing David Kostin. “On average, companies with high valuations often struggle to grow into their multiples regardless of realized growth rates.”

In a notable omission, Goldman didn’t weigh in on the outlook for “dogwifhat.”