Low interest rates = high multiples being applied to share prices = bad for long term investing

Today from “Margin of Safety” book by Seth Klarmann, I would like to point out this paragraph:

“At times when interest rates are unusually low, however, investors are likely to find very high multiples being applied to share prices. Investors who pay these high multiples are dependent on interest rates remaining low, but no one can be certain that they will. This means that when interest rates are unusually low, investors should be particularly reluctant to commit capital to long-term holdings unless outstanding opportunities become available, with a preference for either holding cash or investing in short-term holdings that quickly return cash for possible redeployment when available returns are more attractive.”

It nicely summarises why the current valuation of the stock market should make you reluctant to commit capital.

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