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These valuations are crazy - meaning one of two things are going to happen in the mid-term. Either we see inflation outside of asset prices (wage rises, increas

These valuations are crazy - meaning one of two things are going to happen in the mid-term. Either we see inflation outside of asset prices (wage rises, increased consumer spending) and the revenue of these companies rise to justify the valuations, or we don't see that inflation and these stock prices slide since they can't justify their values. Now I'm not an economist - so maybe someone can help me out here. If the market slides because of lack of already priced in inflation, is that deflationary? And therefore could it bethat the asset price inflation we've seen recently could be reversed simply by a lack of retail inflation causing stock prices to drop therefore destroying asset price inflation?

randomsearch 5y ago
only know a little about economics but it seems very unlikely inflationary would drive up stocks more than it's driving up prices across the board. even if it were, the (subjective) large over-valuation of stocks wouldn't really be explain by an increase in money supply. When the stock market collapses, it probably won't move inflation directly rather the collapse in demand across the economy will. second order effects as credit is no longer available due to banks panicking and govts intervening...
Clewza313 5y ago
Didi is the Chinese Uber, and Uber's market cap as I write this is $90B, so on the face of it $70B for a fast-growing market on track to be several times larger than the US doesn't seem crazy. Of course, that's assuming Uber's valuation is sane, which is not a bet I'd personally be willing to take.
pram 5y ago
1) A market correction is deflationary pretty much by definition 2) Inflation is a lagging indicator. The obvious expectation months ago would have been economic activity increasing after COVID 3) Valuation is often disconnected from revenue or anything else you'd consider rational, and it has nothing to do with inflation. An equity is its own thing, not a perfect indicator of economic reality
quickthrowman 5y ago
> These valuations are crazy To whom? 0% interest and the Fed put have a massive impact on valuations, particularly growth stocks.
- Traster 5y ago
  To people who existed in 2020. Let's take the example someone else mentioned of Uber. Uber is worth close to 50% more than it was worth at the beginning of 2020. This is what I mean by talking about the macro effects, as we get back to relative normal, what happens to these valuations? Is it a real reflection of inflation? Maybe, seems unlikely.

randomsearch 5y ago

only know a little about economics but it seems very unlikely inflationary would drive up stocks more than it's driving up prices across the board. even if it were, the (subjective) large over-valuation of stocks wouldn't really be explain by an increase in money supply. When the stock market collapses, it probably won't move inflation directly rather the collapse in demand across the economy will. second order effects as credit is no longer available due to banks panicking and govts intervening...

Clewza313 5y ago

Didi is the Chinese Uber, and Uber's market cap as I write this is $90B, so on the face of it $70B for a fast-growing market on track to be several times larger than the US doesn't seem crazy. Of course, that's assuming Uber's valuation is sane, which is not a bet I'd personally be willing to take.

pram 5y ago

1) A market correction is deflationary pretty much by definition 2) Inflation is a lagging indicator. The obvious expectation months ago would have been economic activity increasing after COVID 3) Valuation is often disconnected from revenue or anything else you'd consider rational, and it has nothing to do with inflation. An equity is its own thing, not a perfect indicator of economic reality

quickthrowman 5y ago

> These valuations are crazy To whom? 0% interest and the Fed put have a massive impact on valuations, particularly growth stocks.

Traster 5y ago
To people who existed in 2020. Let's take the example someone else mentioned of Uber. Uber is worth close to 50% more than it was worth at the beginning of 2020. This is what I mean by talking about the macro effects, as we get back to relative normal, what happens to these valuations? Is it a real reflection of inflation? Maybe, seems unlikely.