…stockpiling some cash until after the turn of the millenium. I know, I know – another alarmist. On the contrary, I think Y2K will be relatively harmless, but I think an educated investor can turn a profit on the fears of others.

I recall the 1995 movie "Strange Days" which contains a subplot alluding to the end of the millenium as the end of the world. This was a "techie" type of science fiction movie with lots of computerized gadgets in the "future" 1999, but the theme was not about the crash of computers, rather the crash of society. As the new millenium approached, chaos began to deteriorate our already delicate balance of society. This chaos reached its climactic focus as the clock struck 12 – but (and this is the key) minutes later, a tenuous stability returns and society lives on.

So why am I ranting about a (possibly) prophetic sci-fi from 1995? What does this have to do with us? Well, it is a backdrop, a prediction if you will, of what is to come. Recently a huge amount of money has poured into the market based on wild notions that tech stocks (and likely the market) can rise exponentially forever. Much of this money is from amateurs who have never invested before and many of them don’t know anything about the companies or funds they have invested in. Except, of course, the expectation of grand returns.

I was one of those amateurs until very recently. In fact, I am still an amateur, but I am now a slightly more educated amateur. As far as I can tell, today’s  market is being driven partly by pipe dreams of overvalued (primarily) tech stocks. These dreams are a self-fulfilling prophecy – the more the dreamers invest, the higher prices go, the more money they make, the more they invest... Do we see a pattern here?

Sounds great, right? Well, it's not. The bottom will drop out (well, at least a little) when the pipe dreamers lose their shirts. All of these fools will sell in the scare and the market will go through a significant, but fair correction.