The Celeri Journal #101: The “Bubble” Bubble

Written by Michael

On June 22, 2020

Global Markets Recap

I’ve felt for a while the only bubble today in financial markets is that of wealthy hedge fund managers – short equities – claiming we’re in an epic, historical bubble. As Michael Santoli brilliant reports for CNBC: “Critics love to invoke 1999 as a template for what they see as a tenuously expensive & speculative market now. But there’s no real comparison.

The Nasdaq 100, dominated by the most profitable companies on the planet, today trades for 28-times expected earnings, versus 80-times in ’99. Oppenheimer technical strategist Ari Wald, CFA, CMT notes the NDX is up 125% the past 5 years – which is how much it gained in the 12 months leading to the March 2000 bubble peak.

Sure, there have been some opportunistic secondary offerings recently by retail-trader favorites Nikola & DraftKings. But in 1999, there were more than 500 IPOs & their average first-day stock pop was above 60%.

Since 2000, after which the Nasdaq fell some 75%, commentators have been quick to cry “bubble.” Early in the 2003-2007 bull run, it was common to cite an “echo Internet bubble” after Google’s IPO, when in fact it was the enduring growth of Web 2.0.”

Remember John Maynard Keynes: markets can stay irrational longer than you can remain solvent. Bubble talk is cheap; maybe stocks are, too. Please DYOR.

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