Last week I discussed how the risk are piling up on the debt side of the equation. However, those aren’t the only risks piling up which isn’t uncommon for humans. When we stray, we usually stray in a big way.
So, on top of the debt, there are other huge risks and today the discussion will be about valuations:
- Debt is being used recklessly.
- Valuations don’t matter as growth is the key and profitability will come.
- Book values are so old fashioned.
- Stocks can only go up and corrections and bear markets don’t last long.
- Real estate can only go up.
- If you invest in index funds, you will do well.
Now, I’ll discuss a lot of macro, and even some politics on Monday, but such factors might be insignificant or very significant depending on market valuations. High market valuations make stocks fragile, while low valuations make them more robust as once stocks are low, there is little room to go lower. However, when stocks are high, a lot of bad things can happen. The sad thing is that we have been there and we are doing the same mistakes all over again. More →