Key Points
These are the stocks of companies believed to have many years of rapid growth ahead..
Marks points out that the excessive liquidity in recent years has led to unprecedented levels of corporate debt and an overvaluation of assets, which could spell trouble for the market if interest rates start to rise.. In this note, Marks uses the term long stocks..
Yet, investors may become more attracted to these stocks when rates are low because they want the higher returns that such rapid growth is likely to bring..
Just as the prices of longer bonds fluctuate more in response to a given change in interest rates, the so-called growth stocks usually rise more than others in times of easy money, and fall more when the money dries up...
Its not a precise analogy, but equity investors should pay attention to whether they are too enamoured with future growth when that growth depends on the continuous flow of cheap money..
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