Valuation is something that many people only focus on the price to earnings ratio, but in fact, it only calculates half of the paper and the other half is the interest rate. How much is a sum of money worth? Simply put, it means converting future cash flows back, and the anchor of the discount rate is the risk-free rate. If the interest rate moves, the denominator of all assets in the world will have to be recalculated, but most people never look at that denominator. This round of September is very lively. On September 16th, the Federal Reserve raised interest rates by 25 basis points, marking the first time in over three years that the federal funds rate has been raised to 3.75-4. The committee unanimously approved it, and it was also said that there may be another increase. The three-month US Treasury yield is 4.08, the two-year yield is 4.7, and the ten-year yield has briefly returned to 5. Europe is also joining in the fun. On September 10th, the European Central Bank raised interest rates and deposit rates to 2.5, which is the second time in three months that they have increased due to eurozone inflation surging to 3.3. Put these numbers together, and the interesting parts come out. You put your money into short-term treasury bond, do nothing, and take 4 points a year, which is equivalent to about 25 times the P/E ratio of assets, and this profit will never grow or lose. The overall forward P/E ratio of US stocks is about 19 times, and the yield is 5.2, which is only 20 basis points more than that of 10-year treasury bond bonds. It is only a little higher than treasury bond, and also bears the risk that the profit is not as expected and the stock price drops sharply. So relying on valuation to continue expanding to make money, the winning rate is already very low, and the next way to make money can only rely on the numerator, that is, the real growth of profits. Compared with treasury bond. The difference is too small and the business is average, so it's not very meaningful. It's much worse and profits can still increase, which is worth taking seriously!