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Might inflation due to quantitative easing, for example, be at least partially responsible for the higher valuations we see today?

by epoch1970 10y ago

cloudjacker 10y ago
Partially, Apple's metrics aren't that outlandish though. You could just use the age old price to earnings ratio and see it isn't wildly inflated, they make bank and speculators value it at 11 times said bank right now The higher valuations of private companies IMO has little to do with quantitative easing. Despite any bubble talk, very little funding actually goes into these private companies. The S&P 500 returns nearly 1 trillion a year to shareholders via dividends, VCs put like 50 billion into these high growth startups. Low interest rates from quantitative easing might contribute greatly, but I wouldn't say the inflation targets have much to do with it.
prewett 10y ago
The inflation rate for the last 12 months was 0.9%, and has varied from 0.1% to 3.2% over the past 5 years. [1] So, no, inflation is not responsible for the higher valuations. Higher valuations come partly from businesses having more cash because they are not spending money expanding, and because the low interest rates encourage companies to borrow money to buy back stock, which increases EPS and dividends, which increases share prices. Of course, there has been some legitimate growth over the past years, too. [1] http://www.usinflationcalculator.com/inflation/current-inflation-rates/ http://www.usinflationcalculator.com/inflation/current-infla...
- HappyTypist 10y ago
  Consumer price inflation is not responsible for the increase in equity valuations, but quantitative easing and bond buybacks certainly do. QE reduces the yield of bonds, making stocks look more attractive and hence resulting in more money flowing into stocks. It additionally devalues the dollar, which leads to assets to be worth bigger numbers. QE has been mainly flowing to investors and the financial sector, and ts been staying there, hence not translating to consumer price inflation. So yes QE is responsible and QE caused inflation and inflation is also responsible. This inflation is confined to investment assets.
nerevarthelame 10y ago
Inflation should be considered, but for what it's worth, inflation rates, while still positive, have been decreasing (overall) for several decades now - including the most recent, which featured quantitative easing. See: http://inflationdata.com/Inflation/Inflation/AnnualInflation.asp http://inflationdata.com/Inflation/Inflation/AnnualInflation...

Might inflation due to quantitative easing, for example, be at least partially responsible for the higher valuations we see today?

cloudjacker 10y ago

Partially, Apple's metrics aren't that outlandish though. You could just use the age old price to earnings ratio and see it isn't wildly inflated, they make bank and speculators value it at 11 times said bank right now The higher valuations of private companies IMO has little to do with quantitative easing. Despite any bubble talk, very little funding actually goes into these private companies. The S&P 500 returns nearly 1 trillion a year to shareholders via dividends, VCs put like 50 billion into these high growth startups. Low interest rates from quantitative easing might contribute greatly, but I wouldn't say the inflation targets have much to do with it.

prewett 10y ago

The inflation rate for the last 12 months was 0.9%, and has varied from 0.1% to 3.2% over the past 5 years. [1] So, no, inflation is not responsible for the higher valuations. Higher valuations come partly from businesses having more cash because they are not spending money expanding, and because the low interest rates encourage companies to borrow money to buy back stock, which increases EPS and dividends, which increases share prices. Of course, there has been some legitimate growth over the past years, too. [1] http://www.usinflationcalculator.com/inflation/current-inflation-rates/ http://www.usinflationcalculator.com/inflation/current-infla...

HappyTypist 10y ago
Consumer price inflation is not responsible for the increase in equity valuations, but quantitative easing and bond buybacks certainly do. QE reduces the yield of bonds, making stocks look more attractive and hence resulting in more money flowing into stocks. It additionally devalues the dollar, which leads to assets to be worth bigger numbers. QE has been mainly flowing to investors and the financial sector, and ts been staying there, hence not translating to consumer price inflation. So yes QE is responsible and QE caused inflation and inflation is also responsible. This inflation is confined to investment assets.

nerevarthelame 10y ago

Inflation should be considered, but for what it's worth, inflation rates, while still positive, have been decreasing (overall) for several decades now - including the most recent, which featured quantitative easing. See: http://inflationdata.com/Inflation/Inflation/AnnualInflation.asp http://inflationdata.com/Inflation/Inflation/AnnualInflation...