The news today that the Nasdaq closed above 3,000 has me a little spooked. They are saying that this index of tech and other growth stocks has closed at the highest level since December 11, 2000. That was just before the tech bubble burst.
Now no one is saying that another tech bubble has formed but it has taken us almost twelve years to get back to even.
What could be driving stocks that high?
One culprit could be the excessively low returns being offered for money market accounts and Certificate of Deposits. With these cash storage devices paying 1% or less interest while the real inflation rate (what you actually pay for food, clothing, fuel, and housing) is probably something closer to 6% you lose 5% a year by just parking your cash.
So… Every day many people are dipping their toes into the stock market using mutual funds with names like “The Super Safe Growth Generator” and “Can’t Lose Undervalued Stock”. When they do this smart people on Wall Street just plow their cash into the same stocks we have seen going up for the last few months.
Like any bubble this party may be over soon. Just like last time.
Stocks can only;y go up for so long. Remember: You heard it here first.