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there's been a lot of ink spill lately on the notion that markets are getting euphoric maybe are euphoric isn't that scary isn't that a sign of the end the forgetting about the fact that usually once you hit euphoria it runs on for a fairly long period of time before you hit the end um a lot of people haven't been through multiple cycles of euphoria and don't really know what euphoria is like so i'm going to speak a little bit to that what is it that euphoria looks like the fact is that euphoria is a world where you justify things under it's going to be really good for a really long time basis that otherwise wouldn't be justifiable and uh that we're in a different world and it's because of this or that and that changes everything so with that usually comes abundant initial public offerings ipos and not just abundant ones but abundant very low quality ones of businesses that are purely speculative also big companies buying other companies funded purely by equity which then creates equity dilution to the creation of new shares to pay for the bid up this is a sign that those managements are really optimistic remember the seller always knows more about the thing than the buyer does always maybe not almost always the reality of euphoria is that it includes people buying stocks commonly on projections of earnings two and three years out now no one's really able to project earnings per share two and three years out so the notion that you're buying stock based on that in and of itself highly speculative and uh considered foolish most of the time but in a euphoric world it isn't foolish the euphoric world has this part that believes it's different now because of this feature or that feature uh currently you know there's a lot of people that believe that because of what happened that we all know about happened tied to covet and the lockdowns shut down the economy and as the ramp up in that return of opening up the economy has allowed for companies to make full or partial return to the way they were before that the ones that haven't been able to fully return to the way they were before will benefit from the government spending uh of the covered relief bill uh now the 1.9 trillion dollar bill has been much publicized and that that will lead to earnings growth that will go on likely followed by an admin the administration offering an infrastructure bill that will provide more growth and and these kinds of things particularly ones predicated on government action uh that will generate growth several years out are exactly the kind of thing that pop up as you begin to get into euphoria when you get fully into you for you you get even crazier once uh and that for example that people who remember it from uh 21 22 years ago uh recall with the internet boom and bust of the late 90s into 2000 2001 uh as people justifying everything because and the saying at the time was it's the internet stupid so the reality is these kinds of things that look to it'll be great because it's going to be great uh without a justification for what makes it truly different to normal times and why you can break all the rules because of this greatness that we will now have for a really long time maybe forever that's what euphoria looks lik
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