What's up guys and welcome to wall street millennial on this channel, we cover everything related to stocks and investing the stock market is at all-time record highs, with a spy currently sitting at 23 above its pre-coveted levels. Despite many parts of the economy still suffering significant impairment, the frothy levels of the market leave many people to wonder how much higher the markets could go and was the likelihood of a correction. The s p 500 is at a record high valuation, based on the trailing price to earnings ratio which is represented by the blue line. The forward p e ratio represented by the blue line, is significantly lower than the dot com bubble levels, but is still very high by historical standards with the recent bull market.

This has caused many new investors to get excited by their recent winnings. Many young investors started trading in just the last few years and have never experienced a protracted bear. Market people tend to extrapolate trends. When traders see the recent strong price action of the market, they think the market will continue its bull rally.

This causes them to take increasing amounts of risk to chase higher investment returns. This can be seen by the skyrocketing amount of stocks being bought on margin. In march margin, debt hit a record high of 822 billion dollars. The rising risk appetite of investors can also be seen in the high valuation of speculative stocks, for example, trevor milton's nicola still trades at 15 above its back price of 10, despite being exposed as a near total fraud.

Wall street has taken advantage of the red hot market by raising record numbers of specs in 2020 and 2021. Many of these stacks merge with speculative pre-revenue companies with questionable transparency. The stock market tends to go up over time and generally time in the market beats timing. The market, as the great peter lynch says, far more money, has been lost by investors, preparing for corrections or trying to anticipate corrections that has been lost in the corrections themselves.

However, markets are at all time, high valuations and there is undeniably some frothiness in some of the more speculative assets, so it may make sense to de-risk your portfolio. For example, you can take profits on some of your high-flying winners and shift to boomer value stocks, which will be less vulnerable in a market crash in this video we'll go over some of the examples of individual stocks that appear to be completely divorced from their fundamentals. Keep in mind that we are not financial advisors and this video is, for entertainment purposes, only make sure to do your own research and consult with a professional before making any investment decision. One example of a stock that is completely detached from fundamentals is hometown international ticker symbol.

H-W-I-N h-w-i-n is a small food company in new jersey which, as it turns out, operates one deli in rural new jersey. Last year, this publicly traded company did about fourteen thousand dollars. In sales, according to cnbc, it's trading at a 100 million dollar market cap, which means it's about ten thousand times sales. Obviously a small town in delhi doesn't deserve a valuation of 100 million dollars.

One hundred thousand dollars might be more appropriate depending on its assets and debt. This market missed pricing was first brought to light several weeks ago by hedge fund manager and famous tesla short seller, david einhorn. In a letter to investors, he commented on the state of the stock markets at the current time, including talking about the short squeezes of gamestop and amc. Interestingly, he actually half-heartedly defended elon musk in the letter saying that his involvement in the gamestop short squeeze was virtually sanctioned by regulators, because they didn't do anything in the past when he tweeted about tesla stock.

In the letter he gave hometown international as an example of how markets have become strangely detached to fundamentals. Joking that the delhi's pastrami must be amazing. Only a few days after his letter pointing out the company, the exchange on which the company was traded on, announced that they were delisting the stock due to quote irregularities unquote. In addition, another company called e-waste was also under investigation.

According to the exchange, the fact that these companies can fly under the radar of the market and even their own exchanges, don't seem to realize anything. Fishy is going on. Just shows how crazy the markets are right now. So next we have microvision tigger symbol.

Mvis microvision is currently the most frequently mentioned stock on wall street bets beating out tesla, palantir amc and even gamestop. The stock has increased 70 times in the past year and now has a market cap of almost 3 billion dollars. Microvision has historically been a penny stock with its price trading below two dollars for most of the past five years. At its pandemic lows, it fell to a trough of just 18 cents a share since then.

Microvision has increased in value by 100 fold and the stock. Now trades for almost 18, this increase in stock price cannot be justified by the fundamentals of the business. Their revenue decreased 65 in 2020 to just 3 million. They also reported a net loss of more than 13 million dollars at the current valuation.

They have a 1 000 times price to sales, multiple they developed scanning and laser technology, which is interesting and seems like it could have potential. However, their products are far from commercialization and for some of their products they have failed to find even a single customer. Most of the hype around microvision comes from vague speculation that they could be acquired by a bigger company. Their technology could potentially be used for lidar and autonomous vehicles, so it's theoretically possible.

An automaker would want to acquire them. However, their technology is far from proven and there's no reason to believe that an acquisition is imminent. In fact, the company has been attempting to sell itself ever since february of 2020 and has yet to find any willing buyers, given how difficult it has been for microvision to find any customers for its products. It seems like a slim chance that any acquirer would be willing to shell out upwards of three billion dollars to buy them out at a valuation of one thousand times.

Sales microvision has its own dedicated subreddit called r, slash mvis, which has more than 25 000 members on the forum. People post speculation about a potential takeover memes and game port on their mvis yolos retail investors probably saw massive amounts of game porn posted on r slash wall street bets in our slash mvis and got fomo. This in turn caused even more buying pushing up the stock. Even further and generating even more hype around the company, this hype can be seen on wall street bets where mentions of mvis are more than double the second most mentioned stock.

A lot of people have made a lot of money on mvis, but this amount of hype is extremely dangerous. Whenever a stock goes parabolic like this, there will inevitably be some people who buy at the top and end up holding the bag. Our final example of a company that is, or at least was completely detached from fundamentals, is quantum scape. Quantum scape is a severely pre-revenue startup that hopes to produce a revolutionary new type of rechargeable battery, primarily for evs.

They actually do have some pretty impressive technology, including a very thin solid-state cell, that promises safer, cheaper and more efficient electrical energy storage than standard batteries. However, they're having problems, making the technology scalable to the sizes, that would be necessary for use in electric vehicles, and these hurdles are issues that may or may not ever be solved as a result, they are not promising free cash flow or even revenue until 2024, even By their own management's estimates by 2024, they expect to see their first year of non-zero revenue at 14 million dollars for the year. They then forecast massive growth to 6.4 billion dollars of revenue only three years after that, which would allow them to generate a slim margin of positive free cash flow of 69 million dollars. So in this very optimistic estimation, they'd be making a minute school amount of free cash flow, seven years from now at the earliest.

Meanwhile, at the peak in late december, 2020, quantum escape stock reached an all-time high of 131.67 that gave it a market cap of about 50 billion dollars. At that time, quantum scape was trading at 710 times 2028 free cash flow at the current market cap. It's still at 195 times, seven years forward, free cash flow even compared to the most hyped tech unicorns to go public in 2020, quantum state's valuation is highly inflated, and if the valuation wasn't enough, when a short seller came out with allegations of fraudulent behavior at quantumscape, The markets seemed to shrug off the attack pretty quickly scorpion capital accused quantumscape of misleading investors and not actually having a viable technology, but stock has largely rebounded in the several trading days after the report was released. This just shows that the markets are for some reason willing to suspend their disbelief about the company.

To be sure, none of these examples means that the market is necessarily in a bubble, that's about to burst, or even overvalued as a whole. If history has taught us anything about the stock markets, it's taught us that shorting stocks, just because you think they might be overvalued, is a dangerous game that can ruin billionaire hedge fund titans. Even if you think the stock is overvalued based on the fundamentals, the stock price can stay elevated for a long time before it reverts to fair value. If it ever does.

In 2020, tesla underwent a stock split that saw its share count increased five times, but its share price decreased by significantly less than five times in response. Many people then cried out that it makes no sense for the stock to go up just based on the stock split, but the stock continued to moon, ruining countless bears in the process. Even so, it doesn't change the fact that the markets seem to have gone berserk right now, even if there's no obvious way to play the craziness at least, we should recognize that in these markets anything can happen. Alright, guys that wraps it up for this video.

If you like, the content, make sure to smash that like button and subscribe for future videos also check out our second channel wsm research, where we post due diligence about high growth socks. As always. Thank you. So much for watching wall street millennial signing out.