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So will this force all the tech companies that have been raising huge amounts of capital in the private markets to finally go public?
by Alex3917 8y ago
So will this force all the tech companies that have been raising huge amounts of capital in the private markets to finally go public?
- dev_dull 8y agoOr, perhaps, go under.
- adventured 8y agoThe question is the point where rates start to cause serious valuation deflation. Is that very near? Is it 3%, 4%, 5%, etc? There is a lot of money sloshing around looking for somewhere to go. There's a rather epic pile of cash sitting on the sidelines at this point. I doubt that breaking point is as high as it was in the late 1990s, both because of the debt load in the economy being higher and markets being a lot more sensitive to rate hikes after nearly a decade of exceptionally low rates. More broadly, mortgage rates just hit a seven year high. That's going to start to slam the brakes on some economic activity as people re-adjust to more expensive borrowing costs. It'll soon climb well over a 5% average for the 30 year fixed at the rate the Fed is hiking. That's cheap vs the 1980s, however consumers have been spoiled. On the affordability upside, it'll start restraining house price increases. Corporations are fairly well loaded up with debt. That's all going to start getting more expensive. The increase in interest costs over time will to a modest degree eat into some of the profitability gains the corporate tax cut delivered. Fortunately for US corporations, their profitability is also at an all-time high, if they're smart about it at all they can trim back debt as it gets more expensive (we'll see, I'd expect a mixed bag of behavior).