How Covid-19 sparked the return of the day trader

Lockdown boredom has unleashed a horde of speculators on US stocks, with predictable consequences.

Elon Musk
Tesla now has a higher stockmarket value than Toyota
(Image credit: © Tesla)

The difference between a bubble and a mania is hard to define, but most of us figure we know it when we see it, to borrow an American judge’s famous summary of pornography. The boom or bubble – according to your taste – in large tech stocks such as Alphabet, Amazon, Apple, Facebook or Microsoft doesn’t seem to pass that test. We can argue about whether they are overvalued, but they are clearly very valuable. At worst, they should be worth a good proportion of what the market now thinks.

Some other trends look more like mania. Take electric-vehicle maker Tesla, whose share price recently passed $1,000, up from around $400 in January. Its market capitalisation of $200bn is now larger than Toyota’s; its enterprise value (see below) is just a third smaller than Toyota and 20% smaller than Volkswagen, and is larger than Hyundai, General Motors or Ford.

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Cris Sholto Heaton

Cris Sholto Heaton is an investment analyst and writer who has been contributing to MoneyWeek since 2006 and was managing editor of the magazine between 2016 and 2018. He is especially interested in international investing, believing many investors still focus too much on their home markets and that it pays to take advantage of all the opportunities the world offers. He often writes about Asian equities, international income and global asset allocation.

Cris began his career in financial services consultancy at PwC and Lane Clark & Peacock, before an abrupt change of direction into oil, gas and energy at Petroleum Economist and Platts and subsequently into investment research and writing. In addition to his articles for MoneyWeek, he also works with a number of asset managers, consultancies and financial information providers.

He holds the Chartered Financial Analyst designation and the Investment Management Certificate, as well as degrees in finance and mathematics. He has also studied acting, film-making and photography, and strongly suspects that an awareness of what makes a compelling story is just as important for understanding markets as any amount of qualifications.