1/ Thread: Is the market too short-term or too long-term oriented?
The question probably sounds a bit rhetorical since the overwhelming consensus seems to be that Mr. Market is too short-term oriented. I'm not so sure.
Let me explain.
The question probably sounds a bit rhetorical since the overwhelming consensus seems to be that Mr. Market is too short-term oriented. I'm not so sure.
Let me explain.
2/ BVP Emerging Cloud Index today closed at 17.9x EV/Revenue multiple.
High multiples fundamentally imply long growth runway and extended period of competitive moat for a long time.
High multiples fundamentally imply long growth runway and extended period of competitive moat for a long time.
3/ Doesn't market's willingness to ignore profitability in the short-term to give companies the time to ultimately dominate the industry in the long run indicate investors are playing the long game?
4/ The narrative violation here is the holding period for investors has gone down to less than six months in 2020.
[reuters.com/article/us-hea…](reuters.com/article/us-hea…)
[reuters.com/article/us-hea…](reuters.com/article/us-hea…)
5/ This has created a strange dynamic.
Market in aggregate seems to imply pretty long-term view whereas the individuals within the market exhibits exceedingly short-term behavior.
Market in aggregate seems to imply pretty long-term view whereas the individuals within the market exhibits exceedingly short-term behavior.
6/ Perhaps there's even a simpler explanation. Investors are just extrapolating tech's decade of outperformance and assuming this will continue for time immemorial.
7/ I was joking with someone the other day that if Mr. Market were a real person and if his sole responsibility were to make sure the market is "efficient" i.e. there's no easy money to be made, he would probably be fired by now.
8/ Some of the most obvious/dumb trades i.e. long FANMAG/any tech basket basically continued to massively outperform the market year-in-year-out.
One would think Mr. Market would learn something by now, and make sure there's no more easy money left on the table.
One would think Mr. Market would learn something by now, and make sure there's no more easy money left on the table.
9/ Mr. Market is probably just tired of its "failure" and hence will extend valuation to the stratosphere to make sure you get the same boring 6-7% return from your high flying tech stocks.
End/ Of course, the stratospheric valuation multiples can create a self-fulfilling prophecy of further multiple expansion.
So, is Mr. Market too short term or too long term oriented? Is it a bit of both?
So, is Mr. Market too short term or too long term oriented? Is it a bit of both?
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