21 years ago, the US stock market was in the midst of the Dotcom boom/bubble. Stories like the one below were common.

“On this day [June 8th] in 1999, drkoop.com, Inc. went public on the Nasdaq, selling 9,375,000 shares at $9.00 each. For a brief shining moment, founder Dr. C. Everett Koop’s stake was worth more than $50 million. Within a year, the online health-care company was on its deathbed.” – Wall Street Journal

Something notable is happening the US stock market amidst the pandemic. After having been down some 34% from its peak the S&P 500 is now positive for the year. Two months ago, let alone a month ago this would have been nearly unfathomable. Market volume has surged amidst historically fast market moves and has produced all manner of crazy charts.

Many experienced investors like James Montier, Leon Cooperman, Byron Wien see a stock market disengaged from questionable fundamentals. Matt Phillips in the New York Times quotes Montier as saying:

“It’s the only way that you can kind of explain what’s going on, is that people really do believe that there is no downside in equity ownership…”

The story below is indicative of what Montier and others are saying.

Nikola (the Tesla of trucks) went public via SPAC and changed its ticker from VTIQ to NKLA. The Company is pre-revenue (as in ZERO), +70% today and trading at a $22B valuation.

Just leaving this here for posterity. pic.twitter.com/owjwflAFzs

— Post M. (@Post_Market) June 8, 2020

Nikola ($NKLA) stock would continuing rising finishing up nearly 103%. So there is definitely some weird stuff going on.

Red light.

Investors are looking for growth. A whole new class of investors has begun investing. The question is whether this is an imminent sign of a market top or a welcome longer term development.

Barry Ritholtz at the Big Picture relays an anecdote of a young man trading stocks like a video game. You may not understand it, but that does not necessarily mean its the end of the world. Ritholtz writes:

I agree with John, that these sorts of anecdotes can be amber warning lights.

That said, remember that Greenspan’s Irrational Exuberance speech was in 1996, so whatever madness there was went on for 4 full years before it all came tumbling down.

Millennials trading 5 shares at a time whole under lockdown at a time does not make for the sort of national pastime that day-trading was in the 1990s.

Yellow light.

Myles Udland writing at I’m Late to This has one of the better explanations for what is going on with young investors today. Udland notes that maybe investors have learned the lesson from the past and saw this March as an opportunity. He writes:

The free trading pioneered by Robinhood and now mimicked by just about every major investing platform creates the conditions for retail to be a significant bid in the market. That millions of small money, novice traders understood there was opportunity in the stock market after a 35% decline isn’t something to be lamented, but celebrated.

Udland notes that today’s novice traders have some of the same characteristics of sports gamblers who have been largely sidelined during the pandemic. Sports will restart at some point providing a distraction, but something seems to have shifted. Udland writes:

In the meantime, I think it is important for professional investors and those who look carefully at markets to not only not dismiss this retail rally, but think seriously about what else fresh eyes on the world of investing might yet unearth.

The gap between sophisticated and unsophisticated market participants has never been narrower.

It is very easy to conjure a scary scenario, think a second wave of coronavirus infections, where this all goes badly for the fast trading crowd and by extension other stock markets as well. That would not change the fact that there has never been a better time in history be an individual investor.

Green light.