White Papers

The basic premise is that overpaying for earnings today leads to lower rates of return in the future. Of course, given the flood of liquidity from global Central Banks, the overvaluation of markets is of no surprise.

During a recent CNBC interview, Jeremy Siegel suggested stocks could rise another 30% before the boom ends. Just when it seems like “euphoria” can’t get much more “euphoric,” every bullish guest in the financial media attempts to “out bull” the previous.

There is no way this bull market doesn’t end very badly. We all know that is the reality of this liquidity-fueled market, but we keep investing for “Fear Of Missing Out.”

Despite the recent correction in the markets, leading to a hedge fund imploding, investors remain exuberant. The hopes for more stimulus, government spending, and Fed liquidity displace fears of a correction.

The end of the value trade may be near as investors push prices beyond economic growth expectations.

I recently discussed why “Free, Isn’t Really Free” regarding the retail investor. While “free trades” have certainly reduced the transaction costs, the selling of data to the highest bidder has likely cost investors more than they saved.

Since the “Financial Crisis,” the hope was that inflating asset prices would trickle down into economic growth. Unfortunately, after a decade of monetary interventions and artificially suppressed interest rates, the wealth gap has exploded. More problematic is the Fed has forced investors to take on excess risk due to the lack of alternatives.