Price is what you pay; value is what you get. — Warren Buffet
A stock price should be based on the company’s value, not the other way around. Consider the recent rise in the price of Bitcoins. For years, you could have bought Bitcoins for a price of about $200, so why did so many more people want to buy them after the price rose from $200 to $2,000? The value of Bitcoins hasn’t changed, only their price. People got one-tenth as much for their money and liked it. Would you scoff at the idea of buying 12 ounces of Coca-Cola for $2, but race to buy 1 ounce at the same price?
If we look at high-flying stocks like Tesla (TSLA), Amazon.com (AMZN), and NVDIA (NVDA), we see a great many investors becoming more eager to pour money into them as they rise higher. This is a common, even constant market phenomenon, but it almost never happens to this extent — indeed, in 22 years, I’ve seen the likes of this only once before, in the crescendo of the early internet bull market in 1999. It was that same year that the entire market began to look like a house of cards (which, of course, it proved to be) and everyone connected to the market was talking about one influential website with a very naughty name, F***edCompany.com.
So maybe you’ve heard all this before, but you haven’t heard what coming next. If you like being outraged (and who doesn’t, nowadays), keep reading!