With stocks hovering around record highs, investors have been on the watch for signs that enthusiasm is getting out of hand. However, the source of real market bubbles could be in some less obvious places.
Two areas stand out: initial coin offerings for cryptocurrencies, which are getting plenty of attention due to their meteoric price surge, and special purpose acquisition corporations, or SPACs, which have attracted considerably less notice.
Analysts at Yardeni Research believe both areas are exhibiting bubbly characteristics, mainly because they are attracting billions in cash from investors who may not fully understand what they're getting themselves into.
SPACs are sometimes called "blank-check companies" because they look like initial public offerings but have no actual operations. Instead, they raise money in the public market and then look for businesses in which to invest.
So far in 2017 these companies have attracted $5.5 billion through 18 offerings, according to data Yardeni cited from Renaissance Capital. That's close to the total raised over the past two years combined and is on pace to challenge the all-time high of $10.7 billion through the 58 deals that came to market in 2007.
"This is concerning because ideally SPACs should raise and invest money when prices are low and they can make acquisitions on the cheap," Yardeni Research founder Ed Yardeni said in a note. "However, when stock prices are low, investors aren't usually brave enough to buy into a blank-check offering. High stock prices appear to embolden bravery at what may turn out to be exactly the wrong time."