A short list of growing risks that investors are choosing to ignore as they enjoy a rising market
Transcript
Chris Davis:
Obviously the short-term focus on quarterly earnings and oh, this quarter's disappointing, that what I call second derivative investing, which is the sort of momentum type trade, that I think disappears fairly quickly. I think people will not have the expression the mag seven in a few years. I just think it'll disappear the way BRICS disappeared or FANG disappeared. It's just a nonsensical grouping of seven very different businesses together in the same way BRICS was four very different countries and somebody comes up with some catchy acronym and then people think it's an investment strategy or that somehow these businesses are related to one another and they're not. I think people aren't worried enough about some very, very, very richly valued companies being added to the index and the index being forced to buy them in a price insensitive way, and essentially the long-term widows and orphans invested in the index becoming the liquidity driver for the venture capital industry.
I think people aren't worried enough about that bit of behavior. So I don't know, that would be my list. Danton, what do you think?
Danton Goei:
Yeah, no, I guess I've been surprised that valuations have remained this high for this long, and we know that they're well above historical norms here, and maybe it made sense when interest rates were zero, but now that the 10 years over five, it makes a lot less sense. And so I think that's something where people just haven't focused on it because it's sort of momentum, it's worked until now, but it's certainly something I think that the numbers would say it matters a lot.
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