This is the price of popularity

Aug 10, 2019

There are a handful of decent quality stocks in Australia with strong growth prospects.

The problem is, the prices of many growth stocks right now are outlandish.

In the US equivalent stocks, the prices are often borderline ludicrous.

Not everywhere around the world has been so expensive, but at the moment you often need to look towards out-of-favour emerging markets to find any semblance of value.

Across the sectors, energy has also been relatively speaking out of favour for some time now.

It’s a good time to be cautious, and similar principles apply to all asset classes.

In the property markets prices have come off over the past two years in Australia, and normally what you might expect to see at this stage in the cycle is a flight to quality.

During the preceding boom in prices and then construction, higher-density units could be built to an inferior standard on busy highways, next to airports, with ‘views’ overlooking car parks, miles from infrastructure, or pretty much anywhere else…and yet still they were sold apace.

Through this cycle the unsuspecting buyers were often overseas investors, many of whom bought sight unseen.

Only when the music stops at the peak of a cycle do people tend to become more judicious about their choices.

When something is both scarce and popular, prices can run very high; that’s the immutable laws of supply and demand at work:

Please watch the video here

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