With property and share markets trading at all-time highs, it’s reasonable and perhaps prudent to consider whether we are in a (asset price) bubble. Bubbles cannot grow indefinitely and at some point, all bubbles burst.

Is the share market about to crash?

Share markets around the world have been incredibly resilient throughout the pandemic and almost all markets are trading above pre-pandemic levels. That probably shouldn’t come as a big surprise, as government fiscal support here and abroad has been unprecedented and interest rates couldn’t be much lower.

Rivian is a good example of a bubble

There are some very clear examples of bubble-like share market valuations. The recent listing of shares in Rivian Automotive Inc. in the US (NASDAQ) is a perfect example. It listed on 9 November raising $US12 billion from investors. Rivan is valued at $US110 billion making it the 5th most valuable automotive manufacturer in the world, behind Volkswagen, which sells 2.8 million units (cars) per year. It’s worth almost as much as Australia’s most valuable company, CBA.

Perhaps the most noteworthy thing about Rivian is that is hasn’t manufactured one product yet. That’s right! It hasn’t generated $1 of revenue, let alone a profit. It is true that Amazon has agreed to buy 100,000 electric delivery trucks from Rivian, which are to be on the road by 2030, but it effectively hasn’t manufactured one unit. There is no conceivable way on earth that a $US110+ billion valuation could be justified for this company. It’s insane.

But not all stocks in the US are overvalued

It is true that the large US tech companies have contributed substantially to the US stock market’s returns over the past 10 years. The FANMAG stocks now account for almost 24% of the S&P500 index. The total value of these six companies is almost $US8.5 trillion. Japan’s entire stock market is worth $US6 trillion. It is also noteworthy that Tesla’s market capitalisation (value) has added almost $US0.5 trillion to the S&P500 index since joining it in December 2020.

But some of these tech companies have been driven by sound fundamentals. Take Apple as an example. It took 38 years to reach a $US1 trillion market valuation in 2018. It only took 2 years t

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