[ElProlactin]

> ...and dangerously untethered the stock market is from reality.

"Disconnected from historical valuation norms" is a more sensible statement.

The idea that the stock market is "detached from reality" is dangerous too because the stock market is...reality. People make and lose real money in it every day.

There are good arguments that the historical valuation norms are reasonable and deviation from them is "dangerous" but there's no actual law that says the stock market needs to behave according to history.

While I personally think the current behavior has significant risk, I also can't dismiss that the role the stock market plays today is different. It's not just about raising capital, providing liquidity, price discovery, risk management and building wealth, for large numbers of laypeople it's also the go-to casino (entertainment) and a platform for expression (way to express dissatisfaction with corporations, politicians, the world, etc.).

[ink_13]

For certain values of "reality". It doesn't take a financial analysis to tell you that it is bananas that Tesla (~1.3T) is worth more than four times as much as Toyota (280B), and yet.

[ElProlactin]

But there's no law that says prices must be based on standard financial analysis.

You and I and a million other people might run away from Tesla's valuation but that doesn't mean that the market must.

I think it's very obvious that the historical norms that governed and explained pricing in the stock market no longer apply, for better or worse. Between the massive manipulation of the markets by central banks to the rise of the retail investor (and social media, meme stocks, etc.), there are a lot of factors in play that weren't a thing 30 years ago.

[WalterBright]

People grossly undervalued the IPOs of Amazon and Microsoft.

[Teever]

“But the fact that some geniuses were laughed at does not imply that all who are laughed at are geniuses. They laughed at Columbus, they laughed at Fulton, they laughed at the Wright brothers. But they also laughed at Bozo the Clown.” -- Carl Sagan

[ElProlactin]

The problem is, as an investor, you don't know whether you're looking at a genius or a clown when dealing with these types of powerful trends.

Markets allow people to bet on it. So one would assume the author is taking the revenue from his $70/year subscriptions and shorting the bubble he sees (or at least positioning himself to do so).

[tarsinge]

Bitcoin has a 1.5T market cap with 0 revenue. I think Musk really got his eyes opened when he started playing with Dogecoin a few years ago. He applied the lessons successfully with Tesla, making the company an empty shell PR vehicle to support the TSLA "token".

[valicord]

People make and lose real money in Las Vegas every day too, but millions of people don't have their retirement dependent on casino winnings.

[Zigurd]

There is a simpler explanation: passive investing in index funds turned out to be too effective and ruined the game for active investment management. Now the banks have figured out how to exploit passive investors and turn them into involuntary bag holders. That is why the IPO will go out at the stated price and the underwriters face little risk.