RE:RE:RE:RE:RE:RE:RE:The effect of rate hikes...Capharnaum wrote:
I would also add a couple of things...
The short term rate isn't necessarily indicative of the long term rate. So, if you're looking at investing long term, the risk-free rate might differ from the short term rate (which is why an inverted yield curve matters).
Also, the premium over the risk free rate isn't fixed or linear. Even if the long term risk free rates are at 1% and long term inflation is at 2%, you might still look for a minimum return on your investment. Let's say that minimum real return for your money is 6%, then with those numbers you'd be looking for a return of 8%. If long term risk free rates move up to 4% but long term inflation stays at 2%, then a return of 8% still brings you back a real return of 6%, which is still higher than the risk free rate. Is a 4% premium over the risk free rate enough? Well, that will depend on many factor. However, just because the risk free rate moved from 1% to 4% doesn't mean that the expected return for a riskier investment will move up 3%... This will depend on both the saving rate and the money flow to safer investments vs riskier investments. A lot of moving parts.
Considering all the factors that come into effect, it is tempting to say that multiples will contract. Based on historical values, the market's overall multiples might effectively contract, but it may not be due straight up to the increase in interests rates rather than in the general market being overvalued. When you look at one specific stock, the starting point for the stock might not be the same as the general market. And so, multiples might not contract but expand, despite the headwinds.
Coming back to WELL, they have shown serious organic growth in the past year and they are generating increased cashflows every quarter. Compared to its sector, the stock is quite cheap considering its current metrics. I'd treat the macroeconomic environment as a headwind more than as a cap on the value of the stock.
Wrong. You obviously missed my commentary on the bond markets (i.e. long term rates) and the Fed. I've already explained why valuations for almost everything will be reduced. Based on your commentary, there was obviously no point in me doing so.
As someone already mentioned, WELL is not gov't debt. and WELL is not "cheap" as you say. Again, deny or debate all you want. Our monetary system is designed to function in a certain way, like it or not. You will see.