“Pet Rocks” & Other Signs Of A Rich Market

“Pet Rocks” first appeared in the mid-70s as a novelty item. Just recently, digital NFT’s of “pet rocks” sold for over $100,000. To wit:

“Rarely do they create waves for investing in something as dead as a rock. Well, they do now. A digital painting of a Grey-coloured rock, part of a pet project from 2017, has sold for an outrageously high price. Its non-fungible token (NFT) version was sold for ETH 33 — equivalent to $100,000 (roughly Rs 75 lakhs). These rocks are one of the first-ever NFT collectible projects on the Ethereum blockchain. Only 100 such “pet rocks” were created.”

Pet Rocks, Technically Speaking: “Pet Rocks” & Other Signs Of A Rich Market

As I noted on my Twitter feed:

“If you don’t know what a ‘pet rock’ is, you are probably too young to have experienced a real bear market.”

Pet Rocks, Technically Speaking: “Pet Rocks” & Other Signs Of A Rich Market

Yes, people really did buy these and as Peter Atwater noted:

We have previously discussed the many similarities we see between the peak of the markets in 1999 and today. When there is too much money chasing too few assets, digital “pet rocks” are typically a sign of exuberance.

 

Signs Of A “Rich” Market

As noted previously, valuations are a terrible market timing indicator. However, in the short term valuations tell you everything about market psychology. In the long term, they tell you everything about expected returns.

Currently, every measure of valuation suggests investors have thrown all “caution to the wind.”

“The chart below shows the ratio of nonfinancial market capitalization to corporate gross value-added (MarketCap/GVA), which is the most reliable valuation measure based on its correlation with actual subsequent market returns across history. Notably, U.S. nonfinancial gross value-added is at a record high. The insanity you’re looking at is all numerator.” – John P. Hussman

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