In 1983, the market for goats took off.
Previously, goats that were only found in Lebanese butcher shops were now worth thousands of dollars. In particular, anything that grew Cashmere or Angora wool.
I remember a bloke at school named ‘Macca’. He had a few Cashmere goats on his parent’s farm which he bred and then sold the wool for pocket money.
Macca was also saving up to buy his first car, so the timing couldn’t have been better.
When the market was going nuts, a hobby farmer visited their farm one fateful day and offered $5,000 for a Cashmere buck (male)!
I kid you not.
But Macca wasn’t home at the time, so when his mother realised she was standing in front of someone dumb enough to pay $5,000 for a goat that clearly wasn’t worth it, she took the money and ran!
(On ’ya Mum!)
And a week later, Macca was a schoolboy hero.
He was the proud owner of a white, brand spanking new, Holden Ute with twin exhausts, mag wheels, and a cassette player.
Legend.
So what’s my point?
Following last week’s Moowsletter, I got quite a few emails all chorusing a similar theme…
“…you keep saying the markets are over-valued and the economy is really weak, but the market just keeps going up and up. Why?”
In my opinion, the answer to that question is really simple. We’re in what I call…
A Bipolar Market
In Mid-March when the whole world was slipping into a COVID-19 funk, there were suggestions we might be heading into another depression.
(BTW…even though some of our economic data is weaker than during the Great Depression, I don’t think we’ll go into one).
But now, three months later, the market has made a massive recovery with the NASDAQ achieving euphoric, record breaking, highs.
The market has literally swung from a deep low into a manic high.
And typical of a manic market, the narrative is even more optimistic than before the March correction.
There are even suggestions we’re moving into a ‘new tech-based economy’ (as if tech is new) and therefore the nose-bleed valuations on stocks can be easily justified, especially with all the stimuli being pumped into the economy.
(BTW…I heard the exact same talk when the dot.com bubble burst twenty years ago).
But speak to any psychiatrist about bipolar, and they’ll tell you the only thing more dangerous than someone in a depressive low is someone on a manic high.
Mania is like a high energy wrecking ball capable of producing erratic, irrational behaviour that has landed many a man in goal.
And that’s my concern with this market.
In just three months, buyers have gone from a depressed state into a manic high and convinced themselves it’s ok to pay $5,000 for a $50 goat.
Have a great weekend!
Adam
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