We are amidst one of the largest stock market bull runs ever. It has lasted for so many years that some investors and traders are now wondering if it will ever end. Tesla has been the key piece in this speculative mania, with the share appreciating tremendously over a short period of time. Recent news that Hertz would be buying Teslas for their own fleet only pushed the stock higher, and Tesla is starting to seem like the Iomega of 2021.
How Long Can this Bull Market Last?
Well at this point it is nearly impossible to tell how many more months, or years, or even decades this bull run can last. Although inflation has been surging and has affected some stocks, overall investors are still very positive about the long-term outlook of the economy. Most companies are still posting great earnings, and if it continues there is no reason why the stock market could not reach new highs.
What is Driving this Bull Market?
This time around there is more than just a frenzy of buying. Similar to what happened during the dot-com bubble the excitement is palpable among most market participants. Be it on stocks, options, or even cryptocurrencies like Shiba who have turned common people into millionaires overnight. This is completely unprecedented, even during the last mania of the 2000s people would not turn into millionaires from night today. However, in this day and age, the internet and social media have completely changed how the markets operate. People are now able to communicate and orchestrate investments together. Completely changing what was even possible before.
This Time is not Different
One of the most common things some investors say at the end of a bull market is that “this time is different”. Well, this time it’s no different, and we shall soon see how this crazy speculative mania will end. Some stocks are trading at such ridiculous multiples that there is no discerning between reality and a fairy tale world. Implied growth on some of these names is just too optimistic. Being priced for perfection is the right time to sell and not the right time to further accumulate shares.
The meme Effect
The meme effect is another important aspect to consider and beyond that, these meme stocks have become FOMO stocks. With everyone looking to get into the action as soon as possible, this has driven margin levels to be completely off the charts. Never before have investors or traders borrowed so much money on margin. This makes the market a propped-up speculative machine hanging on by margin accounts. If this unfolds abruptly we could be in for one of the worst stock markets crashes ever witnessed.
However, it is too soon to tell what will happen in the short term, although things are starting to look a little scary. Let’s for now wait and see, keeping our eyes on important economic data that should show some signs of deteriorating. This time is not different, and only time will tell if this is true or untrue for now, all we can do is to wait.