Over a long enough time frame the stock market and even the whole economy behaves like a pyramid scheme as it is dependent on new generations to be more people than the previous one.
This is not true. The stock market is usually valued after the dividends it can pay over a certain number of years, somewhat between 10 and 20. It’s not infinite. If no further grow comes that’s it and the stock keeps it value and will keep paying dividends for the foreseeable time, and has for already 100 years. Sure investors ask for growth in their communication, but the actual thing they are asking for is a better performance than the rest of the market. You could say this bottoms out at 0 but recent event have shown that low negative interests are possible, because stashing cash has a physical cost.
Many economies can still work well without population growth, other fail despite population growth. If that was the case that population dictates GDP, then investment choices would be very easy.
That really only seems to be true when you allow unchecked mergers and acquisitions, because once you've eliminated competition continuing to grow the market through innovation is almost impossible.
I'm not convinced this is some natural "tech" bubble. This feels like an M&A bubble to me.
I think you're right but I don't think it has to be that way.
Like others, up until a few years ago, I was a Keynesian. But then I realized that if you allow inflation you're not just "rewarding investment", but you're taking non-participation off the table -- and that's a big problem. Because then people participate in markets not based on value but because they have no choice. That means that you go from value investing to "growth investing" -- which is another name for pyramid scheme and people unironically saying that "the market always goes up."
Not how I understand it. That just means you're willing to tolerate a higher P/E for that stock. You still expect earnings will eventually cover the price.
When you have 401(k) plans which essentially say, "Put your money in the 'market' and it will go up to beat inflation," or you outright say (as many do) that "the market will always go up over time," that's growth investing, and it's straight up a Ponzi scheme. You don't care about the earnings, you just expect to sell for a higher amount than you bought.
Why not? Do you think the society will soon stop inventing new things? They are clear indicators that evolved societies are disconnecting their growth from the energy usage, and especially carbon emissions. With that new heights are possible.
But besides this, yes, slow growth back like for most of humanity is also an option and probably not a bad one in the longer term. It’s a very bad option until we are depending on fossil fuels, because we need the money for the transition.
There is still an element of optimization which involves compressing the problem space. This might be why we see thin vertical segments, but they are way over-valued for the optimization they provide.
I think VCs' expectations misalign with reality. They are the ones incentivising infinite growth.
That isn't true. Otherwise when the wheels come off (recession/depression) then the market would never recover as it's "just a Ponzi scheme". there is real value in the market and until some communist or anarchist can provide a reasonable solution that doesn't depend on the general human being altruistic 100% of the time I'll just keep going with the market and count on avarice. I'll trust in the general sense of fairness that most humans seem to have even if they aren't altruistic.
