I'm going to be talking really big picture. I know this is a very complex issue, but I'm not trying to write a thesis here. Just trying to get an idea out and see what people think. So on to my theory.
Everyone keeps saying the market is overvalued, but I think it may not actually be. What if the value is justified? Technology is increasing efficiency so rapidly in so many areas which allows firms to create more value in their goods and services or sell them for cheaper. The higher value and cheaper goods and services allow other firms to do more and so it spreads.
For example, we are in a stage where automation is starting to be adopted by more and more firms. Automation increases efficiency and that frees up capital to do more things like R&D or expansion that would have been taken up by the cost of the goods and services. This gives them a higher current value as they can do more for less, and a higher predicted future value because they are contributing more to R&D and expansion.
What all this effectively does is change the ratios that investors look at to determine how valuable a company is. The ratios that used to signal that a stock is overvalued no longer apply because companies are creating more value at a lower cost than ever before as well as having more future potential. So analysts look at all these numbers and ratios and say everything looks overvalued, but the market is still going to draw in money because the value is really there.
This is why the tech sector is currently so hot as they benefit the most from advancements in technology (duh). Not only do they benefit from the tech, they make it and sell it to others. Firms able to capitalize on the tech also benefit greatly, but even firms that can't use it as effectively still benefit. A rising tide raises all ships as they say.
I know there are a lot more factors. I think interest rates are also playing a big part, but there are many other smaller things to consider too. I do think the biggest factor is the tech though which is really starting to take hold all over the world and there's still more on the horizon.
So that's my theory. I'm going to bed, I'll be back in 8 hours to discuss or see my post was ignored.
Disclaimer:
I'm not trying to advocate any sort of investing strategy. I'm not an analyst, but I do spend a lot of time thinking about things like the economy and the future of the human race. As with anything you read on the internet you should take what I say with a grain of salt. I think I may be on to something, but I'm more or less just going by my gut because I can't back any of this up with numbers.
Submitted November 14, 2017 at 04:01AM by Cats_n_Porn http://ift.tt/2yAI3xX
