The Fed is looking to hold interest rates at effectively negative (QE) for a total span of at least six or seven years, and most likely for a decade or more. The moment they allow interest rates to rise, the economy will crash, requiring them to immediately go back to QE infinity.

It's not a very far reach to believe that investors have become spoiled by the Fed and accustomed to a hyper low rate policy.

Every time there's talk of tapering or letting off the QE party, the stock market tanks. That's not a coincidence.

The 1999 stock market bubble was spurred on by Greenspan's errors of leaving interest rates too low for too long.

To try to artificially stimulate the economy and dodge a recession temporarily, the Fed did it again in the early 2000's, which led to the house bubble and the stock market bubble of the mid 2000's.

Not relevant.

http://finance.wharton.upenn.edu/~acmack/Chapter_05_app.pdf

I should probably just ignore such a dismissive reply, but here goes:

It is relevant because your claim is that investors are over-valuing the future cash flow of companies like Amazon, because they are using the current 0% interest rate to compute the NPV of these companies.

However, a smart investor would, like you, predict that the current interest rates will not last forever, and so will not use a formula for NPV that implicitly assumes the current interest rate will last forever.

You can't just point to the "standard" definition of NPV and somehow claim that this automatically leads to wrong valuations by investors.

please give future comments as arguments, not links. While my PhD is in economics, not finance, I'm familiar with the mainstream literature. I'm not saying I'm 100% right all the time, but if there is disagreement between us, it isn't because I lack basic education in the field.

Broadly speaking, the only critical element is as follows:

Investors are using a <directonally lower> discount rate.[1,2]

_________

[1] The purpose of fed policy is to effect such marginal change. The rest is simple, no need to overthink it.

[2] The term structure of interest rates discussion linked above will only reinforce this point.

Ok I understand your meaning now, but you are not saying the same thing as 7figures2commas' original comment.

The original comment said "You can't seriously look at the charts of companies like Netflix and Tesla and believe that this is the result of DCF analysis"

While your claim is that low interest rates automatically raise the value of companies, when computed with DCF analysis.

So I agree with you that low interest rates do increase stock prices, but it's not relevant to the discussion at hand, since the original post was clearly referring to mis-pricing of stocks. That also explains why I and, perhaps others, didn't understand your meaning. You were applying your own notion of how the Fed drives stock prices, not the one in the original post.