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Whch goes to show how useless this metric is.
I think such high valuations can be explained by companies having more dominance and less uncertainty, such as through moats, network effects, scalability, and reliable automated recurring revenues, so the uncertainty of competition is lifted, hence higher valuations for big, dominant companies. Also, the end of business cycles. Post-2009 has been a perpetual boom, the longest ever.
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It is unclear what the thesis of the article's author is, and why he thinks this evidence is linked to it. Although just personally - if the US does suffers a massive stock market crash then nobody has the right to be surprised.
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The European Central Bank has also maintained low
rates, and many European sovereign yields are lower
than U.S. Treasury yields, but European equity
valuations are not as high
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if it looks like a duck, is something they may know, but who wants to be used, so i get it
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There’s some depth and valid points in this article, but the above sentence was my confirmation that the author is starting from a fixed ideological position.
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> In modern capitalism, value-extraction is rewarded more highly than value-creation: the productive process that drives a healthy economy and society. From companies driven solely to maximise shareholder value to astronomically high prices of medicines justified through big pharma’s ‘value pricing’, we misidentify taking with making, and have lost sight of what value really means. Once a central plank of economic thought, this concept of value – what it is, why it matters to us – is simply no longer discussed.
* https://marianamazzucato.com/books/the-value-of-everything
> In this scathing indictment of our current global financial system, The Value of Everything rigorously scrutinizes the way in which economic value has been determined and reveals how the difference between value creation and value extraction has become increasingly blurry. Mariana Mazzucato argues that this blurriness allowed certain actors in the economy to portray themselves as value creators, while in reality they were just moving existing value around or, even worse, destroying it.
> The book uses case studies - from Silicon Valley to the financial sector to big pharma - to show how the foggy notions of value create confusion between rents and profits, a difference that distorts the measurements of growth and GDP.
* https://www.goodreads.com/book/show/29502362-the-value-of-ev...
One interesting anecdote she brings up: the US government gave a $456M guaranteed loan to Tesla, which Tesla paid back. But now that Tesla is "successful" and Musk is super-rich, does the US government get any credit for helping its success? How much 'value' did the folks at Tesla create versus the US government in helping to fund it?
Her previous book, The Entrepreneurial State: Debunking Public vs. Private Sector Myths, also has an interesting thesis:
> This book debunks the myth of the State as a large bureaucratic organization that can at best facilitate the creative innovation which happens in the dynamic private sector. Analysing various case studies of innovation-led growth, it describes the opposite situation, whereby the private sector only becomes bold enough to invest after the courageous State has made the high-risk investments.
* https://www.goodreads.com/book/show/17987621-the-entrepreneu...
* https://marianamazzucato.com/books/the-entrepreneurial-state
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No one knows for sure -- by which I mean, a lot of really shrewd, smart, knowledgeable people disagree about the reasons. At one extreme, there are those who feel nothing is wrong, because they believe we're on the cusp of a shift to much faster economic growth, driven by new technologies like AI, quantum computing, cheap sustainable energy, and space exploration. At the other extreme, there are others who think the current arrangement is a result of regulatory capture by the wealthy, at the expense of everyone else. There is no consensus as to why.
The author posits one possible explanation: Judging by trends in corporate behavior, financial market incentives, government regulations, and federal reserve policies, the US economy has become increasingly organized around maximizing asset values and returns on capital independently of growth. Decisions everywhere are now being made, or not made, based mainly on whether they impact asset prices and returns on capital.
In my view, it's not a bad explanation.