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Price discovery always fixes this problem. The problem is how long price discovery takes is never known. But one is certain, the market can stay irrational lo
by blantonl 6y ago
Price discovery always fixes this problem.
The problem is how long price discovery takes is never known.
But one is certain, the market can stay irrational longer than you can stay solvent trying to await that price discovery to finally happen.
- selectodude 6y agoPrice and value have almost no correlation though. As future cashflows dwindle in number, the cost to buy a chunk of those future cashflows go up, and the people who have the most free money to buy that stuff are the ones getting free cash from the Fed. Not to make the connection, I don't think we're at any risk of hyper inflation, but the Caracas stock exchange went up 200,000 percent in 2018. Had nothing to do with value creation.
- ISL 6y agoAgreed in general on the printing of free money, but there is a phase-lag. The big difference in Caracas is that the price of a cheeseburger may have risen by the same amount when priced in the same currency. That isn't nearly as much the case in the US of 2020.