I wonder if it has something to do with interest rates. While the rates were low, the situation was “people constrained” and funding was plentiful. Now that the rates are high, capital becomes more of an issue.
Both low interest rates and high valuations for more speculative financial assets are a reflection of more demand for financial assets than supply. They are both functions of the overall level of savings in the economy, which is the source of demand for financial assets. Demographics, globalization, and inequality drove a 40 year boom in the aggregate level of savings that peaked during the pandemic. This era is now over, largely because of changes in demographics and globalization, but also because of a need for more physical investment in the real economy (energy, housing, etc). This physical investment will need to come from the more limited pool of aggregate savings, leaving less for financial assets. I have written several longer papers on this if you would like to discuss further.
I wonder if it has something to do with interest rates. While the rates were low, the situation was “people constrained” and funding was plentiful. Now that the rates are high, capital becomes more of an issue.
Both low interest rates and high valuations for more speculative financial assets are a reflection of more demand for financial assets than supply. They are both functions of the overall level of savings in the economy, which is the source of demand for financial assets. Demographics, globalization, and inequality drove a 40 year boom in the aggregate level of savings that peaked during the pandemic. This era is now over, largely because of changes in demographics and globalization, but also because of a need for more physical investment in the real economy (energy, housing, etc). This physical investment will need to come from the more limited pool of aggregate savings, leaving less for financial assets. I have written several longer papers on this if you would like to discuss further.
Yeah good point, would be interested to hear from people who understand this stuff