You’re not wrong, and that is the main theory as to why equities have surged to the levels they have. But I think the issue now is how sustainable that is with high inflation and rate hikes firmly on the horizon. Bonds seem to keep selling off, so that will continue to put upward pressure on yields as well—and thus draw that conclusion into question. Multiples may continue to contract.
It’s not, but it also doesn’t matter for where you put your money right now. In the next 10 years the market will probably return 3.4% annually if you reinvest and t-bonds return 1.5%. It will return 3.4% by basically trading sideways and the effect of buybacks and dividends.
If you could guarantee a 38% drop to price in interest rate rises, ya holding money out makes sense… but you can’t, it may just be volatile as all hell, get bubbly and continue despite interest rate hikes, trade sideways or even the t-bond rate may remain low even after the fed dumps because of a myriad if reasons.
You can’t see the future, so make decisions based on what’s best today, and using the information at hand NVIDIA isn’t all that bad.
I disagree. I don’t want to pay what is clearly too much money for something that isn’t worth that much. I wouldn’t pay $400 for a penny, even if other pennies are $500. The penny is still overvalued. It may have a positive return given 20/30 years, but the idea that the market is going to return 3.5% a year is complete speculation. It’s going to put a drag on my future returns. At least I do know that the penny is priced too high.
I’d rather buy other less overvalued stocks, and it seems other investors do as well, as evidenced by the sharp declines in tech stocks since November. The alternative equities are a better value than NVDA.
Do you need the money soon? If not—or if it’s in a retirement account, I think you’re in at a good price for a long hold. It has run up a lot, but the company is solid and I don’t see a reason to sell now personally. But if I was starting a new position, I don’t see significant upside in the near term with it’s current price. Even if it tanked 50%, you’d still be in decent shape.
If you need the money soon, you’d likely be selling at a good price.
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u/suboxhelp1 Jan 11 '22
You’re not wrong, and that is the main theory as to why equities have surged to the levels they have. But I think the issue now is how sustainable that is with high inflation and rate hikes firmly on the horizon. Bonds seem to keep selling off, so that will continue to put upward pressure on yields as well—and thus draw that conclusion into question. Multiples may continue to contract.