i'm saying the premium you mention is the additional willingness-to-pay for those equities being the best available, not something intrinsic to the underlying business. it's on top of the value of the cash flows.
in a hypothetical market with 2 relatively correlated (similar beta) stocks, one that historically returns 10% and one that returns 2% and an expectation that those returns continue in the near future, you'd put all your money on the first stock, regardless of the price and regardless of systemic conditions.
in that scenario, you'd expect to be making your most rational choice even if you overpay severely. in the case that the market crashes, you'd lose less money than the opposite scenario. the price says nothing about the value of the underlying cash flows (the fundamentals).
in a hypothetical market with 2 relatively correlated (similar beta) stocks, one that historically returns 10% and one that returns 2% and an expectation that those returns continue in the near future, you'd put all your money on the first stock, regardless of the price and regardless of systemic conditions.
in that scenario, you'd expect to be making your most rational choice even if you overpay severely. in the case that the market crashes, you'd lose less money than the opposite scenario. the price says nothing about the value of the underlying cash flows (the fundamentals).
this is one way economic bubbles develop.