PERTH stockbroker Terry Hogan can't remember when share market conditions were so appetising.
After a 45-year career that has seen market booms come and go, Mr Hogan reckons most investors have forgotten what a bear market is.
"The sentiment of investors at the moment is very good," Mr Hogan said. "Quite often when the market is jolted, something has to come from left field that can change people's confidence overnight. But this bull run is the best in terms of length. It is keeping me young."
The market closed yesterday at a record 5087.2, heralding the longest share market boom in Australia's history. Twelve quarters - three years - of uninterrupted gains on the All Ordinaries index makes this one longer than any run seen by Australian investors.
The next best was the 11 straight quarters leading up to the 1987 share market crash.
This one has been longer, stronger and broader in its effects than any previous run because of the breadth of share ownership.
All booms end eventually, but right now no one can see that happening. The China-led economic boom continues to sustain company profits and a wave of takeovers unleashed this weak helped spur the market higher still. Mr Hogan said the sharp rise in the All Ordinaries over the past three years, in which the index had almost doubled, was very different to the head of steam built up in the late 1980s.
After 11 consecutive quarterly rises back then, the share market collapsed dramatically in October 1987, with more than 40 per cent wiped from its value within a few days. The dark period for the share market was best remembered by investors for the exposure of a number of so-called entrepreneurs and an inflated price-earnings ratio.
"The market then ran well ahead of reality," Mr Hogan said.
According to Australian Bureau of Statistics figures out yesterday, Australians are riding a wave of prosperity on the back of the boom.
Households purchased a net $1.7 billion in equities during the December quarter 2005 and household wealth soared by 19 per cent over 2005 - the largest increase in 12 years.
Borrowing to buy shares has also surged, with other figures released this week showing at the end of last year Australians had $19.9 billion of margin loans, up from $15.2 billion the year before. Lenders are adding new accounts at the rate of 1000 a month.
In the past year, increasingly frequent predictions that the market was running out of steam have fallen by the wayside. It seems nothing can stop the record run, not falling house prices, not the high price of petrol or even the threat of bird flu.
The resources sector has led the charge and many believe the boom in mineral commodities can go on much longer.
And despite the strong rise in Australian mining shares, analysts say they are still reasonably priced. JP Morgan equities strategist Martin Duncan says companies like BHP with a price to earnings ratio of 12 and Rio Tinto on 11.5 are still relatively inexpensive historically, and compare with a broader market PE of 15.
The PE ratio of the market is one of the main reasons why the bulls insist that the current boom is nothing like 1987 or other unsustainable peaks. AMP Capital Investors head strategist Shane Oliver says the market PE of 15 is still around the average for the last 10 years, despite the record rise.
Oliver says the average estimate for company profit growth this year is 15 per cent and 9 per cent the following year, hardly the recipe for a sudden devaluation of shares.
Duncan says double-digit profit growth this year is already on track based on company results for the half year to December.
Oliver also notes shares prices have risen an average 21 per cent over the past three years, compared with average annual increases of 51 per cent in a similar period leading up to the 1987 crash.
In 1987, the market was up 80 per cent before it crashed.
Oliver says the share market simply isn't seeing the levels of euphoria among investors that presage a collapse, with the percentage of people nominating the share market as the wisest place to invest still lower than the peak 2000 levels at around 20 per cent.
452 Capital director Peter Morgan agrees the market is not yet in bubble territory but says there are signs of irrational enthusiasm in some sectors of the market. He says while blue-chips generally have strong balance sheets and are not highly geared, the same cannot be said for many at the speculative end of the market.
Some small miners, Morgan says, are being priced too high in the hope of future earnings, a similar phenomenon to the dot.com bubble of the late 90s. "A lot of resource companies today are being priced on the value of what's in the ground, not how much it costs to dig it out," he says. Other sectors flashing warning signs, according to other analysts, are the utilities sector where PE's are as high as 30.
While the bulls say the raw statistics show there is little to be alarmed about yet, the bears point to qualitative problems with the investment climate. They note the billions of dollars pouring into the market from compulsory superannuation contributions and suggest it could push the market to unsustainable levels through sheer momentum.
Longtime share market bear Gerard Minack, an equities strategist at Morgan Stanley, says the stimulatory economic effect of the commodities boom has also postponed the damage to be done by imbalances in the economy that Minack has long been predicting will come back to bite consumers and investors.
He notes demand for credit from the heavily indebted private sector has picked up again and the nation's own balance sheet, the current account, is still in deficit to the tune of 6 per cent of GDP.
He also says it is premature to think we have coped with the end of the housing bubble.
According to Minack and Morgan, investors in Australia and around the world have ceased to fully appreciate such risks when valuing assets. This is partly because after a long period of economic growth the chance of a sudden economic shock seems remote and partly because the huge amount of money chasing limited assets has pushed prices to the peak.
"Markets have a way of building their own momentum like in the late 1990s," Minack says. But unlike the 1990s where high prices were limited largely to one sector - technology stocks - now prices are high everywhere, says Minack, and there are few alternatives investors can put their money in if the tide turns, potentially exacerbating the downturn.
The bulls counter that the most recent signals suggest the domestic economy is getting stronger anyway. Retail sales, which have been sluggish, rose 0.7 per cent in February, according to data released yesterday, after a revised 0.9 per cent rise the previous month.
Oliver also doesn't see further damaging fallout from the housing boom, noting rental vacancy rates are low, presaging a pick-up in residential construction activity.
But Oliver also sees the risk of a bubble developing - but not just yet - suggesting fair value for the ASX 200 index is around 5600.
"There is a risk that a bubble may develop and it is likely to become an increasingly volatile ride for investors," he says.