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Brandon Snow's picture
Submitted by Brandon Snow on


Thank you for your question.

In our view, the downfall of any DCF is the fact that the cost of capital for both debt and equity are cyclical and correlated.  So today, we have had extremely loose monetary policy for many years, which has led to high asset prices/low yields, and it is very dangerous to extrapolate this environment into the future when deciding on what to pay for a permanent investment like buying a company.  Cost of capital has always been cyclical, but recent monetary policy has created a super cycle in corporate financial engineering.



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