> ...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.).

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ink_13 4 hours ago | parent | next [-]

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.

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ElProlactin 4 hours ago | parent [-]

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.

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WalterBright 3 hours ago | parent [-]

People grossly undervalued the IPOs of Amazon and Microsoft.

	▲	Teever 2 hours ago \| parent [-]
		“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

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valicord 4 hours ago | parent | prev [-]

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.