Brexit on ARB, page-38

@Warrigals,

My very worst fear is that the world of near-free money - which has driven a secular re-rating of quality stocks for the past several years - continues for another 5 years.
Or for 10 years, even.

For it will mean even greater distortions of perceptions of "value" as investors increasingly view this to be the "new normal".

As it is, I sense that people have forgotten that half-decent businesses with P/E and EV/EBITDA multiples above 15x and 8.0x, respectively, used to be classified as expensive.

Today, stocks trade merrily away at multiples well above 20x P/E and 10x EV/EBITDA and the market barely raises an eyebrow.

Ultimately, no good is going to come of this.

But my sense is that - as long as the world's monetary heads remain hell bent on maintaining the status quo of keeping capital markets awash with easy capital - the re-rating phenomenon will keep grinding higher over time.

It would not come as a surprise to me if in a few years time, P/E multiples above 25 and EV/EBITDA multiples above 15x will be the order of the day.

We are already seeing it in certain pockets of the market, such as ARB.

It is creating a real problem for value investors, because maintaining investment process discipline could mean sitting out of the market for many years, waiting for valuations to return to acceptable levels.

It's becoming a real dilemma.