Welcome to August 1929

It is not October of 1929 yet, but we are getting close in the stock market.  A few parallels

  • A 10+ year bull market where many retail participants can't even remember a bear market
  • New low cost brokerage models (in the modern case, zero-commission trading at Robin Hood and emulated by most major brokerages) attracting new inexperienced investors and increasing the trading frequency in retail
  • A government that is completely clueless to its policies that artificially inflate asset prices

We see stocks today that are traded absolutely untethered to their fundamentals as if they were bitcoin rather than ownership interests in productive companies (e.g. Virgin Galactic, Plug power, Apple, Tesla, etc).  Virgin Galactic doesn't even have the prospect of selling its first product and has run up to a $6 billion valuation.  Tesla has an enterprise value close to the largest car company in the world (Volkswagon) despite 1/20 the car sales, no profitability, and stalled revenue growth.  The market in general goes way up on good news and then goes up on bad news.

Be cautious everyone.

One Comment

  1. AffiliateLabz:

    Great content! Super high-quality! Keep it up! :)