In a market with ‘no respect for risk,’ what’s the difference between investment and speculation?

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Mania has taken hold in the equity market and there is 'no respect' for risk, says one strategist.

Veggie-foods maker Beyond Meat BYND, +5.00% trades at 282 times estimated earnings. Tesla’s TSLA, +7.30% stock price has doubled this year. Virgin Galactic’s SPCE, +5.65% stock price has nearly tripled in 2020.

Mike O’Rourke, chief market strategist at institutional broker JonesTrading, says a “mania” has taken hold, blaming zero-commission retail brokers, the Federal Reserve’s injections of liquidity, the forced buying from index fund managers, and active fund managers who are too scared not to follow suit.

John Rekenthaler, a columnist at fund-ranking service Morningstar, attempted to divine when investing becomes speculation. It wasn’t an easy task. The conclusion he reached is that an expenditure when the return is too uncertain or likely negative is speculation. But even that is too simple a definition, he writes.

The implied odds from Fed fund futures that the central bank will cut interest rates in the first half of the year have climbed to 50% from 14.7% a month ago, according to DataTrek Research.

 

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actually the real risk is getting 1-2% annually for your money (since 2009) v investing in the greatest tech companies in US financial history w growing worldwide demand and reach ..... do what you want!

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