The world is awash in capital, in so much cash, that it is a little difficult to comprehend. Not only are equities priced higher, but every asset class you can think of is being driven up as faithful money seeks a dry, safe and happy home.
If capital is the fuel that drives the economic engine, we are not just topped off, but the supplemental tanks are filled to the brim as well. Consider a few asset classes/styles/pools that are being driven higher by all this cash:
-Crypto / Blockchain
-Rare Earth Metals
-Climate Change Adaptive Tech
-Corporate Bonds (Investment grade)
-Option writing strategies
-PE for the mass affluent
There are surely many negatives to this, ranging from valuations pushed from fully valued towards pricey, to making the already massive wealth gap even larger.
But there are so many positives in this massive pool of capital that are also worth exploring. New ideas are getting funded, new businesses starting up to monetize all of the energy and innovation and technology. From apps to pure science R&D and all in between, there is a Cambrian explosion of value creation coming from this massive pile of capital, the results of which may be hard to see from here, other than to note its speed and size.
Take billions of dollars, put them in the hands of wealthy institutions and sophisticated UHNW individuals. They will seek to generate a return on capital that is attractive, but in the process, move forward a raft of sectors via technology and ingenuity.
Take a moment to contemplate the net results this massive influx of cash, innovation, and labor is in the midst of producing. It’s enough to turn a curmudgeon into a capitalist.
Global venture capital investments hit record high.
Gaurav Dogra, Patturaja Murugaboopathy