Bezos, Musk, and Branson (BMB) are not the only ones to recently touch the earth’s thermosphere for a brief and shining moment; take a look at today’s stock market valuation. Note the structural shift, which took place around 1995. Before the mid-1990s, valuations traded in a nonvolatile range of around 50 percent of GDP.
Lots happened in the 1990s, the internet, the return of the emerging markets post debt crisis, the rise of China (probably the most important factor), the end of the Cold War, and some massive sovereign bailouts.
We get the trade, as we do in Crypto, but we do dare ask if valuations can continue to defy gravity, or will they be forced to return to earth – as in revert to the mean valuation — as did BMB? If so, that would reverse the fears of inflation to deflation. Is that what the bond market is signalling?
Nah, the bond market is not a real market.
Valuations Lost In Space
The reservoir of liquidity, wealth, stimulus and base money in the global financial system coupled with highly negative real interest rates probably allows valuations to stay lofty and lost in space until the worldwide reversal of monetary policy starts to bite. Until then, in the words of the great Carol K., who remains in a coma in a Boston hospital,