In a bull market, exuberance can run way out of line with reality with the help of the investors irrational expectation on the return of investment. Equity prices can be driven to be valued at several multiples of probable earnings.
Far more irrational are the huge valuations that the market participants are putting on businesses which are almost certain to end up being of modest or no value. Yet investors, mesmerized by rising prices and ignoring all else, piled into such enterprises. It was as if some virus, racing wildly among investment professionals as well as amateurs, induced hallucinations in which the value of stock in certain sectors become decoupled from the values of the business that underlay them.
This surreal scene is accompanied by much loose talk about "value creating". Though in the past, there has been a huge amount of true value being created by new or young businesses - which is few and far between -, however, value is destroy, not created, by any business that loses money over its lifetime, no matter how high its interim valuation may get.
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