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      12-02-2021, 08:32 PM   #66
chassis
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Good comments @BRAKE!

I see inflation peaking now. I see output of goods and services increasing through the end of next year.

Equity valuation is systemically affected by the interest rate and dividend trajectory for the past 20 years. Low interest rates and buybacks instead of dividends support high valuations. Add a strong economy to the mix and valuations seem reasonable.

When you mention 2 sigma valuations, this needs to be adjusted for interest rate regime (over decades) and dividend-buyback regime. 2 sigma valuation vs history may be the new normal, for good reasons.

Today's investing environment bears little resemblance to the 70s and 80s. A few things remain unchanged: live below your means and stay invested in the market.

Let's talk about transitory inflation: the 10-2 Treasury spread has been anchored near 1% all year. In the past week it has dropped below 1%. This is a general indication of inflation expectations in the future. Inflation will fade away. Prices will not.

Last edited by chassis; 12-02-2021 at 09:28 PM..
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