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Can anybody explain this sentence? >> More worryingly, it comes at a time of unprecedented stock market valuations worldwide. So people are putting their mone
by ramzyo 9y ago
Can anybody explain this sentence?
>> More worryingly, it comes at a time of unprecedented stock market valuations worldwide.
So people are putting their money into stocks because interest rates are low and there’s nowhere else to put it? It’s worrying to startup investment because...there aren’t many good opportunities to invest instead of the stock market? Not sure I’m understanding this correctly..
- Alex3917 9y agoWhen interest rates are low and/or stocks are overvalued, interest in alternative asset classes like venture is supposed to increase. Think of it like a BATNA in negotiations.
- ramzyo 9y agoRight, so what are possible explanations for interest in alternative asset classes not increasing, and why is that worrisome?
- ghaff 9y agoI'm not sure it's worrisome but putting your money in asset classes with low appreciation potential is still an improvement over setting it on fire.
- clay_to_n 9y agoI think it's worrisome because it means people are keeping their money in stocks - they aren't acting as if the market as overvalued, even when everyone's talking about it (which could contribute to a bubble pop).
- skgoa 9y agoEssentially: 1) Stocks are super expensive, so future yields from stocks are expected to be low. (Since price increases will be low and dividend per invested dollar will be low.) 2) Bonds yields are super low, because interest rates are super low. This means that logically you should put your money into other investments. Which just isn't happening that much . Uncertainty has led to a "flight to safety" into US stocks and cash. Investors currently seem to prefer buying big, expensive companies instead of gambling on higher yield/risk investments.