Tag: Federal Government
Shervin Pishevar is one of Silicon Valley’s most important venture capitalists. Through his firm, An investing firm, he has been the driving force behind some of the most famous businesses to emerge from the tech sector. Projects on which Shervin Pishevar has worked include WebOS, Uber and Airbnb.
Recently, Pishevar engaged in a 21-hour tweet storm. He covered many topics, including the dangers of rapidly expanding debt within the United States. A few of the tweets served to elaborate Shervin Pishevar’s view that the U.S. debt markets are quickly becoming unsustainably overheated.
With bond yields at record lows and corporate borrowing shooting through the roof, Shervin Pishevar warns that there may currently be no safe asset classes for investors. He warns that the mechations of the Federal Reserve have driven down yields to such low levels that it is unlikely that current bonds will prove to be anything other than productive of dismal future returns.
At the same time, he says that the borrowing binge that corporations across the country have gone on in order to engorge themselves with buybacks of their own stock has left the equities markets in one of the highest inflation-adjusted states of valuation that have ever been seen. Pishevar refers to this as asset inflation, noting that future returns for standard stock portfolios are likely to be as low as 2 to 3 percent, before inflation, over the next few decades.
This leaves investors with very few good options. Even the real estate market, says Pishevar, is at historically high valuations. This has been a consequence of easy credit, which was created by the expansionary policies of the Federal Reserve. As he says, a home is worth what a bank is willing to lend. Throughout the country, banks have been more than willing to lend historically inflated amounts for the purchase of residential real estate.
— Plan Maestro (@PlanMaestro) March 18, 2018
But Pishevar says that, in the current environment, even cash isn’t safe. Given the huge deficits that the federal government is running and the constantly increasing mandatory entitlement programs, Pishevar sees the government eventually having no choice but to begin printing money to cover its budgetary shortfalls.