Manias: How To Navigate Them
Is a deli with sales of $35K worth $100M market cap? In this market, it evidently is.
In this video I discuss how some things in the market do not make sense. Seeing a situation like this reminds us of the DotCom era. With prices like this, what is going on cryptocurrency does not seem outlandish.
Here is the article mentioned in the video:
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with a bit of luck we might see some hive mania this bull run, especially since people are saying the altcoin season hasn't even begun.
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We might see that. I think we need to really get some development whereby we can see a big jump in users. If we do that, I think it will all fall in line.
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There is just way too much speculation right now so its tough to see what has value backing it up and what doesn't. It's funny how returns keep getting pushed back to a longer date horizon. As for that deli, I would just take the money and run.
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Speculation is the name of the game. Everyone seems to have forgotten what a bear market in equities can look like.
As long as the Fed is still providing a backstop, the market is happy.
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That is the biggest issue. The Fed can't backstop it forever. Eventually everything will be unwound and it will be even worst.
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Summary:
In this video, Task discusses the concept of manias in the stock market and advises caution when investing. He highlights the example of a New Jersey deli with $35,000 in total sales being valued at $100 million, illustrating the irrationality in some market valuations. Task compares this to the recent Coinbase IPO and suggests that while the valuation may seem high, there are justifications for it being a solid investment choice. He warns against blindly investing in overhyped assets and emphasizes the importance of thorough research before making investment decisions.
Detailed Article:
Task begins by drawing attention to the irrational exuberance and manias that can be observed in the stock market. He uses the example of a New Jersey deli to underscore the stark contrast between sales figures and market valuation, pointing out the absurdity of the situation where a deli with modest sales is valued at $100 million. He stresses the importance of being cautious when evaluating such investments that lack fundamental justifications for their valuations.
Moving on from the deli example, Task shifts the discussion towards the recent Coinbase IPO. While acknowledging that the valuation of Coinbase may appear high, he presents arguments in support of its potential as a profitable investment. Task mentions that Coinbase provides an alternative means for investors, who are restricted from owning direct cryptocurrency assets, to gain exposure to the crypto market. He also notes that Coinbase faces limited competition and significant regulatory barriers, positioning the company well within the industry.
Additionally, Task points out that traditional banks entering the cryptocurrency space could potentially pose a threat to Coinbase, given their established client base. However, he emphasizes Coinbase's strong reputation in the cryptocurrency realm, suggesting that it is well-positioned to maintain its market share and continue to grow.
Task concludes by cautioning viewers against labeling every investment as a bubble or mania, citing the example of Uber's IPO where similar concerns were raised but did not materialize. He advises against reckless investment strategies and encourages a thoughtful and informed approach to investing, especially in a market environment characterized by heightened speculation.
In essence, Task's discussion revolves around the importance of discerning sound investments from irrational market exuberance, urging viewers to conduct thorough research and exercise prudence when navigating the volatile investment landscape.