From a textbook perspective markets appear completely irrational. Yet, if you look at the options of where to put capital to work what options do you have outside of American markets? You have internal inflows from workers, coupled with external inflows from foreign markets
which are grossly exaggerated because of central bank policies. Thus you chase stocks & real estate to store your "perceived" wealth in these assets. So much money is chasing so few assets you get rapid price growth. The truly perplexing part pertaining to markets is how the
winner & losers are chosen. Why is so much capital flowing into stocks that have current valuations which will take years if not decades to reach a reasonable valuation? , , , , are the most recognizable. It feels like a pendulum has swung & stocks are
chosen not on reasonable valuation metrics but purely on social judgements. This of course causes consternation for financial professionals as it is difficult to ascertain the quality of an investment based "purely on faith based metrics." After all you are responsible to your
investors to explain the logic behind your investment choices. It is a new & scary world for the quants of our profession & I share their fear. #FinTwitt
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