Mental Models discussed in this podcast:
- Discount Rates
- Supply and Demand
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Show Outline
Discount Rates have changed over time
- Past
- Short Lives
- A small or non-existent investor class
- No control of interest rates
- Present
- Longer lives
- Larger investor class
- Central Banks and controlled interest rates
- Future
- Massively longer lives (no death?)
- Massive investor class
- Discount rates will approach 0%.
Summary:
Discount rates form the foundation for the process of stock valuation. Value investors, therefore, rationally adjust their discount rates based on their expectations for their future. Changing expectations will reduce discount rates over time.
