Are we in a bubble? A look at the brave new world of zero rates
With U.S. stocks hitting all-time highs, and tech stocks being worth more than the entire European stock market combined; you might be wondering if we are in a bubble. It’s a serious question especially if you are looking to get in or out of the market in these times.
On a linear scale, the Nasdaq Composite looks like this.
Although the Dow Jones is looking more conservative, skeptics would argue that the market should go down. After all, we are about to enter one of the worst economic crisis due to the Coronarvirus; and unemployment numbers are just terrifying. But the stock market doesn’t seem to think so.
Which begs the question: Are we in a bubble?
How are stocks priced anyway?
To argue whether the market is overpriced, we need to figure out how to price stocks. If we know how much a particular company is worth, we should be able to reason about its stock price. Stocks, like...
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