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“100% of the information you have about any business reflects the past, and 100% of the price of that business depends on the future.”
– Bill Miller
Are the markets still looking forward?
One of the main principles of investment theory is that property prices guess the market prices (and sometimes the worst) future.
This is the reason why shares are considered valuable on the multiples of further earnings, not the following. And the price of bonds is on what the economy is expected to do, not what it has already done.
It does not seem that what is happening right now.
This week figures showed inflation back again, and Everyone Week data explodes federal deficit. But the treasury yield is flat in the week and below in the year.
Meanwhile, the American economy is in recession, but stocks keep creating new heights.
There are two possible explanations.
A valuation expert is introduced by Aswath Damodaran, who Thinks The market has left for a “prediction machine”.
After recalling the marks of the year forecasts, they say, the market has moved into “reactive” mode, where they expect it “will” be “until we detect a better future system.”
In other words, investors are living in the moment and are not worrying about tomorrow.
The second possible explanation is the opposite: that the stock market is still in prediction mode; It is only predicting that things will be good.
It may seem difficult to square with constant drumbets of worrying headlines: a weak jobs market, President with Fed, with Fed, a political bureau of labor statistics.
But the market is watching through all that and seeing its favorite thing: easy money.
The FOMC is expected to start cuts in interest rates in its next meeting and can be harassed by the President to cut more and rapidly, as fast as possible.
And a federal court may be on the verge of cancellation of the President’s tariff on high -deficit price and high -earning benefits.
Low interest rate, large budget deficit and high income are a certain recipe for high stock.
But investors may be even more forwarded.
With the stock market valuation near All-Time Highs, it is easy to think that investors should be blind to the risks that see in the headlines every day.
But Recent research Suggestions that investors do not think in terms of risk, as textbooks believe, but in terms of fear: “Fear historically (by shares) provides an alternative clarification for the magnitude of additional returns.”
Can there be anything more fear-motivation than AI Boom?
For example, Chief AI Doomar Elizer Yudkovski, Warned This artificial general intelligence can be reduced by two years since human extinction. On a long timeline, he generously gives us “a chance” to survive.
For investors, however, actually the existence risk is missing.
This may be less hyperbolic as much as it seems that appropriate people may be afraid that Superintendent AIS (whether they should choose to live us) can take all jobs.
If so, the only way to make money will be from investment – and you will need to make investments that can be any time before handling AIS.
Personally, I think there will always be a lot for humans, so I am not as pessimistic.
But record-high stock can be a prediction that I should be.
Let’s check the chart.
More money:
M2 money supply is growing again, thanks to bank lending and increase in deficit expenses (I think). There should be many of the upcoming two. Foot Write The AI Boom has created a race among private capital providers to offer “more and large loans” to manufacture data centers.
Capex Race:
The chat took out the initial gun and the race is settling. Big Four Hypersscalers are expected to spend $ 350 billion at data centers in 2025 and $ 400 billion in 2026.
Cash flow will not cover it:
Morgan Stanley estimates that hypersclers will spend $ 2.9 trillion at data centers in only four years, and that their cash flow will cover less than half of its.
Don’t forget small people:
Based on the increasing number of new businesses, Torsten Slok says “America remains the most dynamic economy in the world.” Thanks to AI, some of these may be soon One-person unicorn (That is, $ 1 billion companies with the same employee).
Fleeting?
The manufacturer’s prices were rapidly higher in July, suggesting that companies are starting to pass the cost of tariffs through consumers. Economists at the Goldman Sachs estimate that consumers absorbed only 22% tariff cost through June, with other two-thirds (through low margin) to absorb businesses. Goldman hopes to flip-flop the numbers by October, with two-third tariff cost consumers.
What tariff?
Brad setser Note China’s trade surplus (export minus imports) in goods is increasing despite the trade war with its largest customer.
Time to re -organize the rent:
The cost of renting the data of Cleveland Fed has shown an unprecedented collapse, as measured by new fare agreements. Jeff Venigar Guessed This is the result of non-citizens residents “Self-sufficient,
End of an era?
The rate of wage hike for low -income workers has fallen below the rate for high -income workers for the first time in 10 years. “The era of Big Rise for low-paying workers is over,” According For Wall Street Journal. If yes, it was an excellent run.
Fomo assessment:
27.2% stock in S&P 100 business at at least 50 k/e. Just a trade trades 10x.
All-time greatest foam?
Next year sales around 100x, Economist They say Palathir can be the most overwelled stock of all time.
Are the markets still in business business?
I think they are – and I think they are predicting good things.
For investors, at least.
There is a great weekend, future readers.
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