We see patterns everywhere. That's not always helpful.

Where are we? The same place as last time.

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Well, there's been a bit going on this week… and it's only Wednesday.

We've had an interest rate decision, a new 'largest company' in the US, and the unveiling of a new energy policy from the federal Coalition.

No, I'm not going to wade into the climate/energy wars. At least not here and now (though I have a fascinating episode of our podcast, The Good Oil, coming out on that… Subscribe to the podcast feed here so you don't miss it!).

But I do want to address the other two. Let's do it in reverse order.

Computer chip company, Nvidia, became the new king: the largest US company, measured by market capitalisation (the total value of all of its shares). Its value hit $5 trillion overnight, now leading Microsoft and Apple.

If you haven't been following the story, Nvidia's chips are in hot, hot, demand as the chip du jour to power artificial intelligence. Sales and profits are going through the roof.

So… is the company's share price.

In fact, get this: in the last 5 years, the share price has gone from US$3.79 to US$135.58 – that's a 35-fold increase in half a decade.

But also, get this: America's most valuable company has a price-earnings ratio of… 80 times.

Now, the average across the market usually runs between 15 and 20 times. So 80 is… a lot. A lot of future growth from a company that's already the largest one in the US!

Which doesn't mean, for a second, that it can't happen. People said Amazon was overpriced at 1% of the current share price (I own shares, for the record, but I bought much later than that!). People said Apple's run was done more than 50% ago.

So, I'm not writing off Nvidia's chances. Just… flagging that a lot is expected of a company whose shares are already at the top of the heap.

And so to interest rates.

Well, not the rates themselves – we know they've been kept on hold. But the commentary that came with it. Foremost was the strongest words yet from a Reserve Bank Governor, to the effect that Federal and State Treasurers are adding stimulus to the economy at the very time the RBA is desperately trying to cool it down.

And, as we all know, there are income tax cuts and energy rebates to come, federally, Queensland's government is throwing an extraordinary amount of money around, and NSW has announced new spending.

Which… makes for a very difficult environment for the Australian economy, with plenty of people doing it very tough, and a lot who are doing very nicely.

No, I don't have a magic wand, or a simple answer. But I do know that when the RBA has its foot on the brake while governments have theirs on the accelerator, something isn't working.

And, ideology aside, I think it's likely that electoral temptations are overwhelming the better advice for governments to do more to cool the economy, using the scores of tools at their disposal. They should do the right thing… not the popular thing.

Why, you ask, am I mentioning all of this?

Well, in part because the more things change, the more they stay the same: there's always something to worry about, some clouds on the horizon, and some company that's supposed to be the next big thing (or already is, and is going to get bigger).

But in part because there are false positives (apparent correlations that really aren't) and false negatives (the reverse) all the time. Is Nvida going to prove the doubters wrong, a la Amazon, or be more like Cisco, the dot.com darling that is still 40% below its all-time high, set back in early 2000? Will rates keep rising? Fall? Will we have or avoid a recession?

I've lost track of the number of times people tell me that 'It's just like back in…', or 'This is just like [Company X]'.

Sometimes, of course, it is. But sometimes it's not.

As investors, we need to be very, very careful of noticing an historical similarity, and assuming it'll be instructive… or that it won't.

Which you know is logically true. And yet… we humans are pattern-seeking machines. It's an enormous evolutionary advantage, but it can mislead us when it comes to our portfolios.

What happens next, for Nvidia, and for rates?

I have no idea. Nor do you. (And if you think you know for sure, can I suggest you allow for a little more uncertainty?)

What I do know is that long term compound returns have been earned through, and in, all sorts of markets, with all sorts of headlines and all sorts of fears. There have been all sorts of companies at the top of the market-cap pops.

And I'll make one fearless prediction – that reality will be with us for as long as there are sharemarkets!

We might as well make our peace with it, invest regularly, prepare for volatility, and keep our eyes on the long term.

Fool on!

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Scott Phillips has positions in Amazon and Microsoft. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon, Apple, Cisco Systems, Microsoft, and Nvidia. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Amazon, Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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