No price too high

Howard marks, who predicted many of the historical bubbles released this a couple of days ago. The last post in this sub made me think about it. This was not written regarding quantum computing in particular but rather the dotcom bubble where everyone was investing in companies yet to make profit before the crash. Please read it, i've copied a few excerpts. The full memo is brilliant.

“ In my view, a bubble not only reflects a rapid rise in stock prices, but it is a temporary mania characterized by – or, perhaps better, resulting from – the following:

highly irrational exuberance (to borrow a term from former Federal Reserve Chair Alan Greenspan),

outright adoration of the subject companies or assets, and a belief that they can’t miss,

massive fear of being left behind if one fails to participate (‘‘FOMO’’), and

resulting conviction that, for these stocks, “there’s no price too high.” “

…

“If bubble thinking is irrational, what is it that permits investors to get away from rational thinking, like the thrust of a rocket ship that breaks free of the limits imposed by gravity and attains escape velocity? There’s a simple answer: newness. This phenomenon relies on another time-honored investment phrase, “this time is different.” …

“The foregoing discussion centered on the risk of overestimating fundamental strength. But optimism surrounding the power and potential of the new thing often causes the error to be compounded through the assignment of too high a stock price.

In fact, it’s not infrequent for investors to treat all contenders in a new field as likely to succeed, whereas in reality only a few may thrive, or perhaps even survive.

Ultimately, with a really hot new thing, investors can adopt what I call “a lottery ticket mentality.” If a successful startup in a hot field can return 200x, it’s mathematically worth investing in even if it’s only 1% likely to succeed. And what doesn’t have a 1% likelihood of success? When investors think this way, there are few limits on what they’ll support or the prices they’ll pay.”

Full memo: https://www.oaktreecapital.com/insights/memo/on-bubble-watch

Wish you all the best fellow redditors / 🌈🧸