Same Logic For "It Is Priced Into The Market"
Big Picture has a wonderful example of how people think in terms of home pricing.
I have found when I have asked people how they value things they almost never have a fundamental reason.
Certainly if you look at the housing market I did not understand at all how it kept going up. Before Greenidiot I'd studied the housing market fairly well. I had it all worked out how you get ahead. It worked out best if you saved for a down payment because of all the interest you'd save and because you'd get interest on your down payment money until you bought a house. That was conventional wisdom and the world would have been a better place had it remained true.
But, a Greenmoron was given power and probably governments saw saw what he was doing as helpful to their burdening budget problems, and interest rates were gradually lowered over a 20 year period. How was I to know that what had been would no longer hold true because of artifical and destructive market manipulation?
So, what happened is that logical people would have said the housing prices were unreasonable and questioned how people could afford them, but the declining rates made the higher prices doable, at least in the short term.
And those that tried to follow conventional wisdom were totally screwed. Home prices were going up much faster then you could save a downpayment.
So, previously far more irresponsible behavior was rewarded, little money down and you were in and you made a bundle from appreciation, it you were in early enough.
Each new generations tends to see what happened to the generation just above them the best, so, when I was urging my niece to not buy, well, housing went up another 10% from where I started urging her to not buy and where she jumped in.
I remember talking to this young guy serving me in a restaurant and he was "lucky" to have gotten his 700 sq ft apartment for something in the low $200k region and he was concerned about the developer trying to screw him out of his "deal" as he bought pre-construction and the market was up 15% prior to completion.
What was interesting to me was that even with evidence of what was happening elsewhere, people still believed that a price correction would not happen here.
I'd say the same is true for the market. Many people do not have fundamental reasons for an investment. I do have to hand it to some people, they know what they are buying is crap, but they are "reading" the market hype and just riding the hype. Certainly the ultra low rates from waiting on the side encourage people to look for better returns.
I was burned on both housing and the market when I was younger and I have no desire to repeat either of those experiences. The market is priced insanely expensive.