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I've been thinking about this for a while. Let's say that the USD is indeed 40% devalued and the market melted up significantly as a result of this -- does this
by khyryk 6y ago
I've been thinking about this for a while. Let's say that the USD is indeed 40% devalued and the market melted up significantly as a result of this -- does this not make "value" stocks a massive bargain? That is, if something was at a PE of 10 before the money printing, has maintained reasonable fundamentals, and remains at a PE of 10, isn't it stunningly undervalued if the same money printing is used to justify "growth" stock rallies?
- christophilus 6y agoIt depends on how inflation affects the business. A lot of value companies don’t really have pricing power, and will likely have to eat some of the inflation. Edit: but yes. If we see inflation coming, it’s better to have a dollar now than a dollar in the future, so I guess that should favor value. Hm. Investing is tricky.
- reducesuffering 6y agoIf we see inflation coming, it's complicated for value vs. growth. On one hand, value benefits because they are usually more debt-laden companies and the debt is debased more over the years, which is generally good for value. On the other hand, if interest rates are the same (basically 0; dollar now is only better if you can immediately gain interest on it), then inflation isn't great for value because the growth companies have most of their dollars to be made in the future where it's inflation-adjusted.
- thephyber 6y agoI used to care more about PE, but I came to realize that stock valuations are largely about near future expectations. To accurately capture this, you can't just look at the velocity of revenue, but the acceleration as well. That said, I currently think "value" stocks are out of fashion because of FOMO of the high-PE stocks.