I have been thinking hard about these and related questions and talking to as many experts as I can find. As I have mentioned before, valuation discrepancies abound. The word ‘bubble’ has re-entered the pundit’s lexicon. Indeed in mid-January the Financial Times ran a large article under the banner headline: ‘Valuations. Is this nuts? Investors appear to have taken leave of their senses, pumping cash into projects regardless of profitability.’ The article talked about the gravity-defying prices being paid for companies such as Twitter, Square, Ocado and Asos.
Haven’t we seen this movie before? In 2000, weren’t we being told that this time is different: jettison traditional pricing ratios in favour of ‘eyeball’ metrics? In 2007, weren’t we assured that US house prices could never go down? Thus, a foolproof way to make money was to buy apartments off-plan in Miami or Las Vegas and flip them to the next sucker. Come to think of it, that didn’t work out so well either.
Well, in 2014 it’s all about two letters: ‘Q’ and ‘E’. I don’t think many of us had heard of ‘QE’ before 2008 and yet now it shapes so many aspects of our everyday life.