Too much cheap money and distorted market valuations

As of November 2015, what does "Finally, too much cheap money lets companies operate with bad unit economics and cover up all sorts of internal problems" mean in the case of distorted valuations? How does this make a startup less robust in the future?"

Let me tell you all about it! 

Interest rates are being held at zero by the Federal Reserve, using quantitative easing, in order to protect the economy from recession. Unfortunately, this has been necessary since 2008, and the Federal Reserve is continuing to postpone raising rates, i.e. monetary normalization, although it is increasingly difficult to justify.

...the entire public market is likely to go down—perhaps substantially—when interest rates materially move up, though that may be a long time away.

The Federal Reserve intended to keep interest rates low, in order to encourage businesses to invest in R&D, new ventures or make capital expenditures for plants, property, and equipment. The logic is that with interest rates so low, there is a strong disincentive to accumulate cash reserves, for both businesses and investors. For reasons that aren't entirely clear, businesses have not taken advantage of the ultra-low interest rate environment (the cheap money in your question) for building durable wealth, but instead, have been doing things like stock buybacks.

This recovery has been one of the weakest in U.S. economic history, and cannot seem to get past stagnant wages and persistently high unemployment.

In a world of 0 percent interest rates, people become pretty focused on finding new sources for fixed income.

Investors are chasing yield, which only drives speculative markets higher. Speculative markets include the stock market as well as venture capital. There are fewer sources of return on investment, despite easy credit for businesses due to extravagantly accommodating monetary policy.

Buy and hold and hold and hold

If you were allowed only to buy only 1 stock + put options for downside protection in that stock and be forced to hold it for at least 1 year from now what stock would you consider buying to achieve the best returns? 

I would never set up a trade like that with any stock. Being long put options for an entire year is crazy. In order to realize any positive return, you would need to make a profit on the stock that was greater than the premium you paid for the put option, plus any commissions and fees you incurred. US stock options expiry is monthly, so you would also have the inconvenience of remembering to roll over the put option, 12 times!

Instead of buying put options as insurance, I would buy stock and sell call options, with appropriately chosen strikes depending on the stock price each month. That must be followed very closely too, due to the potential negative upside exposure if neglected. 

If your intent is to buy and hold one stock, for an entire year, you are making a decision based on something that is driven by fundamentals of the company.  In that scenario, stay away from options. Buy a small cap company, of the sort that Mario Gabelli picks for his small cap growth fund (GABSX), see Mario Gabelli makes big bucks bucking trends. 

If you don't like that, do your research and find a company with publicly traded stock that is NOT on the Pink Sheets and is undervalued, or has a high likelihood of growth, or the expectation of a massive one-time dividend (I'm thinking of Apple, just as an example) due to accounting or regulatory circumstances.