Agreed. My point was some people are buying shares in companies or SPACs that is not grounded in anything rational. A quick look at the registration and recent financials obviously leads one o the conclusion that the market cap is completely unjustified. Some of them then fall victim to shorts and others. They principals may or may not be doing anything wrong. Could just be dumb investors.
You're right on both counts, dumb investors and imbalanced markets. The first has always been around and always will be. The second I think is more complicated; there are, in my mind, two main variables in play. First, the radical changes in financial markets from the effect of '08 compounded the error of repealing Glass Steagall by, in effect, putting the bulk of the investment banking business under the restrictions of banking regulations. The result? Private equity and VC filled the gap. Now hedge funds make billions that used to be made in free markets. IPO's used to benefit private investors, whether through buying shares or holding mutual funds that did. Today, companies only go public once the bulk of the growth in valuation over. How this works out, and I don't think I'm out of line when I say it's unsustainable, I have no idea. Too many variables, and once politics is involved, too many ideologies that are ever shifting.
SPAC's are not a new idea, I remember dealing with one outfit in '96,
Frost Hanna, which was a SPAC to resurrect Pan Am. Stock went from a couple bucks to $17 but eventually went to zero. They have been popping up like mushrooms, but I expect that will work itself out in time. Many will fizzle, some will soar, then fizzle, one in a hundred or a thousand will work out. I'm not touching any of it.
Second thing is what affects the market overall and the valuations people are projecting. We've been through a bear market or five in our lifetimes, and to be honest, we all know the ropes at this point. Things are going well, everyone thinks this is the new normal, things start to go sideways, people panic, we have a selloff, then a downturn, the bear guys come in and spend their cash buying stuff up, eventually we recover. This time, though, I think we're in a bit of a different scenario. First, I think the 08 crisis built an expectation into many market participants that the Fed or fiscal policy would be there to bail everyone out. Based on the actions of the current administration and the last one, and Powell's Fed, I can see that's a reasonable short term assumption. The other half of that is the expectation people have when making future earnings growth estimates for valuation projections. things are going to return to normal and they have in every other cycle. The one thing I don't see is a discount for the uncertainty surrounding a resolution to the pandemic. Everything is sunshine and roses. That screams at me. I'm fully invested other than my reserve. but I'm an inch or three away from dumping everything
