“Wild Ride to Nowhere”: APPL, MSFT, AMZN, GOOG, FB Soar to New High. Rest of Stock Market is a Dud, Has Been for Years

The market has come to totally depend on the “Giant 5.” A scary out-of-whack weight on the way down.

By Wolf Richter for WOLF STREET.

The “Giant 5” – Apple, Microsoft, Amazon, Alphabet, and Facebook – had another good day on Friday, with their combined market capitalization rising by 0.6% to another new high of $6.64 trillion, continuing a spike that started on March 16 and now measures 62.2%. In dollar terms, five stocks gained $2.54 trillion in less than four months.

Since January 1, 2017, my “Giant 5 Index” has soared by 184%, or by $4.3 trillion, with two sell-offs or crashes or whatever in between.

Even these days, when trillions fly by so fast that they’re hard to see, that’s still a huge increase in market value of just five companies in the span of three-and-a-half years (market cap data via YCharts):

The market capitalization – the number of shares outstanding times the current share price – of the Giant 5 has reached a breath-taking magnitude:

  1. Apple [AAPL]: $1.66 trillion
  2. Microsoft [MSFT]: $1.62 trillion
  3. Amazon [AMZN]: $1.60 trillion
  4. Alphabet [GOOG]: $1.05 trillion
  5. Facebook [FB]: $699 billion.

How big are they compared to the entire stock market?

And I mean the entire US stock market, and not just the S&P 500. The Wilshire 5000 Total Market Index tracks all 3,415 or so US-listed companies.  And the market cap of all those companies combined rose today to $32.47 trillion, up 44.4% from its crisis low on March 23.

But as the shares of the Giant 5 have surged, the weight of the Giant 5 in the overall stock market has spiked from 17.5% on June 8 – that date will crop up again in a moment – to 20.4% today, and has more than doubled since January 2017, when the Giant 5 accounted for an already amazing 10% of the Wilshire 5000 (Wilshire 5000 data via YCharts):

On June 8 – here’s that date again – the stock market hit a Crisis high. The S&P 500 closed at 3,232, and the Wilshire 5000 at 32,936. As of Friday’s close, both the S&P 500 and the Wilshire 5000 remain below those June 8 levels.

But the Giant 5 Index, which was at $5.78 trillion on June 8, has since surged by 14%, to $6.6 trillion.

While the rest of the market has declined, the Giant 5 have surged. And, this surge in the Giant 5 obscured the decline in the rest of the market.

In other words, without the Giant 5, the rest of the market combined was a dud. And this is what has been happening for years!

The Market Minus the Giant 5.

To see how the rest of the market is performing without these five stocks, I have created the “Wilshire 5000 minus the Giant 5 Index.” This shows what’s left of the entire stock market of 3,415 stocks, after removing these five giants.

The “Wilshire 5000 minus the Giant 5 Index” closed at $25,836 trillion today, still down 10.9% from the peak on February 19. Over the same period, the Giant 5 have soared 18.7%!

From the bottom in March, the “Wilshire 5000 minus the Giant 5” has surged 40.6%. The Giant 5 Index has skyrocketed 62.2%!

The “Wilshire 5000 minus the Giant 5 Index” is down 5.2% from June 8; down 10.9% from the high in February; down 1.2% from September 2018; and it’s just a tad below where it had been on January 26, 2018.

In other words, the rest of the stock market – all its winners and losers combined – without the Giant 5 and despite the horrendous volatility has gone nowhere since January 2018:

A miserable savings account would have outperformed the overall stock market without the Giant 5, and would have done so without all the horrendous volatility of the two sell-offs. Just five stocks whose market values have soared beyond imaginable magnitude pulled out the entire market.

And that’s a scary thought – that this entire market has become totally dependent on just five giant stocks with an immense concentration of power that have now come under regulatory security. And just as these stocks pulled up the entire market, they can pull down the entire market by their sheer weight.

The end of QE was three weeks ago. Now repos and dollar liquidity swaps on the Fed’s balance sheet are on their way out. SPVs declined. The Fed hardly bought any corporate bonds & ETFs. MBS were flat. Treasuries ticked up. Read… QE Unwind Speeds Up: Fed’s Assets Drop $85 Billion. Four-Week Total -$248 Billion. Big Chunk in a Short Time

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  220 comments for ““Wild Ride to Nowhere”: APPL, MSFT, AMZN, GOOG, FB Soar to New High. Rest of Stock Market is a Dud, Has Been for Years

  1. Chintan says:

    AAPL is just one revenue drop warning away for 2 trillion market cap.

  2. Bobber says:

    It’s interesting that the huge rise in market capitalization has not created any inflation. People aren’t spending their stock market gains. These greedy folk should do so, before they go “poof”.

    • VintageVNvet says:

      Fascinating is my opinion of this analysis and the rest of the stock and other markets I was involved in since the 1950s era (with my dad and other family and friends early on, to be sure), as now seen SO much clearer thanks to Wolf’s consistent presentations of actual data…
      Unfortunately it’s fascinating and motivating in the sense of fastening a lot more fiercely my focus on trying to figure out how to provide/leave anything to our grands, and at least some help for various elderly family, now and going forward.
      At this point, because of the absurd dissociation of the SM from any kind of reality I can find or imagine, that mkt is out; SO, what’s left?
      Gold or silver in the canning jars in the back yard will most likely be forgotten, by me at least, in a month or 10, is likely to crash with USD and is not very liquid,,, CDs, even if we could find another at the current 2% clearly do not keep up with the everyday inflation we of the thrifty nature find every day. RE is once again hugely overpriced and on verge of crashing, and we already sold out of our woodlands — that was a very good investment while it lasted, but also not very liquid, etc…
      BTW, thank you to the commentors answering my questions a few days ago re tax free muni bonds,,, every bit of info helps, far shore.

      • cd says:

        gold will be 3500 in less than 2 years…..a double for sure….
        I already came here with 1830 and bamm it did it….

        gold will be revered by the intelligent for decades here on out

        • sidney weiner says:

          The idea that 95% of the public doesn’t realize is that the financial markets & the real economy
          have little,if anything, in common.
          The real economy produces real tangible wealth
          & the financial markets are just giant suction machines set up to siphon off the wealth of the

        • Gian says:

          $3,500 an ounce, as in US dollars? Amazing that those selling gold today at $1,800/oz would not hold it for two years and double their money. What sours me on precious metals is the fact that dealers selling them accept my soon-to-be worthless dollars for it, as if they too do not believe their own hype.

        • Arctic Chickens says:

          Gian, why wouldn’t they live on the % premium? A million ounces of silver moved is a million dollars in premium today, and can be done without having the liquidity to own a million ounces. They’re businesses selling a product, not an investment firm. In that same vein, why would art brokerages ever sell fine art? Clearly it will be worth more a year from now…

          JP Morgan closed all their silver and gold shorts and paid billions to do it. They’re still sitting on an estimated 14 billion dollars of silver and 1.7 billion dollars of gold. They’ve got a more or less “perfect” metals trading record for the last decade, I wouldn’t bet against them.

      • Tinky says:

        Gold “is not very liquid”? I’, not sure what world do you live in, but it ain’t the real one.

        The reason that gold value tends to drop briefly during the onset of economic crises is precisely because it IS so liquid, as margin calls are immediately covered through the transfer of gold ownership.

        If, however you mean to say that an individual may not have an easy time exchanging his gold coin (or bracelet, etc.) for something of equal value, that would depend on many associated variables.

        • VintageVNvet says:

          yeah Tinky, I have only been into the physical stuff, and have made some serious profits in the past in spite of the problem is what you mention — getting ”fair value” for it when ya need to turn it into cash
          only place convenient was a certain ”coin shop” that made a market in au and ag for 1% each way on the spot close,,, that was OK then, many years ago, esp when those TX bros tried to corner the ag market, apparently not know RU was sitting on 12MM oz at that time
          now I am convinced that if I put it into the jars in the back yard, I will have forgotten where i buried it in a month or so (just kinda sorta a joke at this point don’t ya know…)

      • Anthony A. says:

        Why not put part of your nest egg in high quality preferred stocks. They pay 5 – 6% and high quality ones will be around until they get called. Pick ones that pay “cumulative” distributions if you can.

        • VintageVNvet says:

          OK aa, couple, three names/examples so i can get your drift re ”high quality preferred” and ”cumulative distributions
          not sure if that is OK with Wolf, but ya neva know til ya try, eh
          thank you

        • Lee says:

          Ah the old glory days when you could get 10 – 15% a year on electric utility preferred shares and even buy them at less than par value too……….

          What was that 35 years or so ago?

          Still remember one of the first ones I bought: OEC Preferred Series E. Had to be careful and put ‘all or none’ on the buy and sell orders or you’d end up getting 10 or 15 shares….

    • Bobber, most equities are owned by the top 80 or 90%. I suspect that they don’t need to spend their gains.

      • eg says:

        Exactly, Douglas — it’s like obesity as a symptom of a dysregulated metabolism. The patient’s hunger never abates, though he is carrying around many days worth of meals that are inaccessible.

    • Just Some Random Guy says:

      Why do you think a mid-50s 3/2 that needs a ton of renovation costs $1.5M in San Jose? Hint: people are spending their stock market gains.

  3. andy says:

    In all fairness I did spend $200 on Amazon 6 years ago.

    • andy says:

      Perhaps this is when people learn indexing does not work.

      • Briny says:

        An index that includes the Big 5 seems to work fine… until it doesn’t. The trick is figuring out when that is going to occur. I don’t believe that mere regulatory scrutiny is going to do the trick as I’ve seen zero effect from their actions to date. Something more, Congressional and Presidential action is needed. Even that probably won’t do it as they are just as captured as the regulators.

        • Pie-O-My says:

          Bogle’s Church of Vanguard is defunct, always was because there is no such thing as ‘passive investing’; it’s like the ‘free market’ or ‘jumbo shrimp’ no such thing, just an oxymoron, a tautology beyond the letters printed is completely meaningless and at core really a lie.

          hedge funds that invest in indexes see the order flow and can front run the robin hood plebs all day without any repercussions.

          the fed IS the benchmark index and one study estimated that front running costs index investors 0.20% per year which is 4X the expense ratio of Vanguard’s S&P 500 ETF.

          Wasn’t Indexing preacher John Bogle the guy who taught us that fees eat up whatever gains we make over the lifetime of any managed investment? Now even ‘passive’ will eat your lunch more than the fees do!

          He must be rolling in his grave.

    • Pie-O-My says:

      those 5 stocks effectively act as monopolies and/or increasingly as monosopies in and out of their particular domains.

      And if you look closer at their business models, MS, AAPL, FB and GOOG particularly, they make more revenue from the patents they have bought up and continue to hoard than by creating value.

      value extraction over value creation.

      As a reminder the wilshire 5000 has less than 3500 stocks in it, in fact, the last time it did it was back in 2005; in 1998 it had more than 7500.

      FANGMAN is very apt because its literally sucking up all the juice in the ‘markets’ and this makes the people on CNBC pine for the good old days, wondering if there will ever be any more M&A.

      There goes my indexing strategy, right out the door!

      value extraction over value creation.

      • Pie-O-My says:

        Re FANGMAN its also worth noting this:

        CEO compensation is negatively correlated with future stock returns up to three years, with underperformance of 8%. The effect is the strongest for CEOs who receive high relative incentive-based pay and CEOs who have been in their position the longest.

        unless the fed brrrr?

      • Paulo says:


        Plus, created destruction. If given the choice I would still be using Windows 98. I liked 7. Now, stuck with goddamn Windows 10. With Windows 7, I finally talked with my computer buddy and he warned me the update restrictions would soon be moving to banking interface, that within a few months glitches in accessing my accounts would start to arise. I finally had no option but to upgrade. My old laptop will probably be hooked up to the tv to play DVDs as my new one only streams or requires a separate player. I just inherited a swack of movies, new enough and on disk and I see are only offered up on pay-per-view cable. As for streaming or netflix, most of the time I don’t bother. Not worth the waste of time.

        They are tethering citizens into dependence and control with their products. After 4 months of social distancing restrictions we finally spent the weekend at my sister-in-law’s. Drank wine and beer outside on the patio, slept in our Westie, and watched their phones ring non-stop with texts and contacts.

        What a World. All the bells and whistles for an indoctrinated and controlled public. Crazytown. 1984 came a couple decades late, I guess.

        • Linux shill says:

          Choose Freedom and go to Linux, my friend. You will regret nothing.

        • EJ says:

          Microsoft is actually pivoting to become the least “evil” of the Big 5/FANGMAN.

          More specifically, you can thank Intel and Apple for anorexic laptop design. W10 is probably the last paid Windows upgrade you’ll make. And I don’t know what you mean by banking software (websites? terminals?) not working on Windows 7.

        • Xabier says:

          Those who train themselves to respond to whistles, deserve to live like dogs……

        • Dave Kunkel says:

          Another vote for Linux – I’ve been using it for almost 20 years and using it exclusively for the last 15.

        • Bryan says:

          I installed Linux Mint on a PC for an 80 year old gentleman.

          The install went very smoothly. It took 10 minutes including setting up WIFI. Windows always took an hour.

          I gave him a 5 minute lesson on using it and left him to it. He uses it every day and loves it.

      • Zantetsu says:

        Please show evidence, any evidence of any kind, that those companies make more money from patents than they do from their core business model.

        • Pie-O-My says:

          I did not say that they make more money from patents than from core businesses, you said that;

          I said they make more money from their patents portfolio than by “creating value”.

          Big difference.

          I can tell you that IBM holds roughly 100 thousand patents and makes more money from its patent portfolio than any other revenue source.

          For example, in just one year, in 2018, in just 2 instances, IBM sued and won over $125 million dollars from groupon and priceline because they used decades old code from Prodigy that has zero innovation and creative value today, yet IBM was able to extract hundreds of millions of dollars simply because it was able to buy the Prodigy IP in a fire sale and sued.

          show me where else IBM makes that kind of money on a quarterly basis using its own know how to create instead of extorting EPS via lawyers.

          off the top of my head I can think of samsung probably has the 2nd highest number of patents after big blue and they make a lot of money licensing their patents, instead of making phones that dont explode and screens that properly fold.

          then you have companies like Nokia, when was the last time you bought or even saw a Nokia device, yet Nokia makes billions from its patents portfolio;

          there are also companies who enjoy a double revenue stream of newish and legacy products along with a fat revenue stream from their patents; Oracle is a poster boy for that.

          or take a look at MS taking money for Linux usage which it tried to sue into oblivion;

          surely you understand companies such as Kodak and Xerox live almost exclusively off of their patent portfolios; same for Texas Instruments and Intel increasingly as well.

          Other examples come to mind like Kyocera, Ricoh, Panasonic.

          To me these are examples of value extraction rather than value creation and so I don’t think it is a stretch to say that some fortune1000 companies, including FANGMAN enjoy more revenue from their IP portfolio than from actual goods and services they provide.

          I’ll leave you with this, while AMZN also buys patents, it enjoys revenues in AI and block chain whereas, IBM just hoards patents like a vaccum and sits on them, because they can, because value extraction by suing is easier for IBM than it would be for it to create and to innovate.

        • rhodium says:

          @pie-o-my, So you’re telling me, if I had a bunch of money I could hire a bunch of engineers to create patentable technology for me and then just sit there and passively absorb more money, and then other people that I favor could come in behind me and inherit these patents and then sit there and also passively absorb lots of money? Sounds like a real deal for these people! No wonder they lobby so hard to keep it that way. After all who wants to do the hard work of innovating and competing when you’ve already got it made and you have the resources to squash all potential competition before it takes root? If I were these people I’d fight tooth and nail to prevent “socialism” and keep “capitalism”.

        • Wolf Richter says:

          “Patent trolls” is a subcategory of law firm, and it’s very profitable. They don’t even invent anything. They buy loads of old patents and then sue companies and extract settlements. There are certain courts in Texas and elsewhere that are well-known to be patent-troll friendly, and that’s where they sue. Some of these patent trolls and their lawsuits are funded by hedge funds. Most of the time, a company just settles because it doesn’t have the resources or willingness to fight this thing for years in the courts.

        • Pie-O-My says:

          entire departments and divisions in fortune1000 companies are setup to do just what wolf said, buy up patents and sue to get money; it can be a huge revenue stream.

        • Marcosa says:

          IBM has the patent on the screen cursor.

        • hidflect says:

          Thomson Reuters has a division called Thomson Scientific whose sole purpose is to collect the monthly DVD released by patent offices in Japan and other countries. This is fed into a giant networked machine that algorythmically analyses the content and automatically distributes the patents to a series of hutched lawyers around the world working for piecemeal rates to analyse for flaws that can be sold to related technology companies so they can file patents on the gaps and claim the technology.

        • California Bob says:

          re: “or take a look at MS taking money for Linux usage which it tried to sue into oblivion;”

          Maybe you’re thinking of SCO (‘Santa Cruz Operation’) who tried to ‘sue Linux into oblivion:’


          I don’t recall MS going after Linux, they mostly ignored it until they couldn’t. A net search for ‘Microsoft-Linux disputes’ came up empty.

      • EJ says:

        Its not patents, they don’t really need patents. They’re just too big for anyone to catch up, and they buy out anyone on the way. Hence very few tech startups actually get listed on the stock market: their business model is to run hot, and survive just long enough to get bought up by FAANG

      • Pie-O-My says:

        @paulo IKR dude?? f*** i would love to be running winxp, as it is i run win8 and somehow i frekin like it better than 8.1 and 10!!! go figure that, plus firefox had to go and shit the bed and f*** everyone ; since they did their thing a couple years ago ive been stuck between 5 different browsers NON of which work as old firefox used to…its so ridiculous! whats ridiculous? the almost gamification of wasting hours of my life running around obscure corners of the intertubes looking for workaroounds to firefox shtting in my bed! like right now youtube’s new layout is utter pure shit, everyone knows it, everyone says so, but its still there and every work around we found over the past 2 years google has put a stop to…instead of fixing the f***ing thing; they force you into their shitty products…looolol…

        like i dont get ‘update’ culture…just leave the f***ing thing alone…lolol

        • NewGuy says:

          For sure. And they just screwed up google maps recently. Pop ups on top of pop ups. You can’t even see the map. The phone screen is tiny enough as it is for crying out loud.

      • Mike says:

        Nicely expressed. “value extraction over value creation” I was wondering what is it that FB/Google, etc.. crate? I mean – theoretically speaking of course – for sure they know the real name of the massage therapist I visit, they know my arrival and the name of the guy before me and after me but does it really worth a Trillion dollar? Or does it really worth a Trillion dollar to distribute products made by forced Chinese labor? Or let me reverse it: How come making clean water, hydrogen fuel cells, healthy food or jet engine only worth pennies? This whole system stinks!
        The Fed must quit buying indexes and ETFs and has to start distributing resources directly to companies where capital is needed.

      • Jay says:

        >> “And if you look closer at their business models, MS, AAPL, FB and GOOG particularly, they make more revenue from the patents they have bought up and continue to hoard than by creating value”

        in what world do you live? that’s total BS… FB and Google make their money selling advertising, MSFT selling cloud to enterprise and Apple selling iPhones and other cool gigs to consumers.

        Their patents are not bringing in any sizable revenue. They are a necessary evil against patent trolls who sue for anything those days….

    • Erle says:

      Andy, thanks for the laugh.
      I went to a totally different platform to lose MSFT and AMZN wants a new password, so I canned them too. I avoid GOOG unless I am looking for industrial stuff and poor FB has never had me as a stooge.
      You made a funny that perked me up this morning. May you have a pleasant day.

  4. Lee says:

    The market cap of US companies is insane.

    The market cap of the top 20 companies in Australia (ASX20) is around A$1 trillion.

    That means the market cap of Facebook is about the same as those 20 companies in total!

    • MC01 says:

      Why should I bother with our local crummy stock market (mostly made up of creaky European banks, moribund manufacturing companies and penny stocks?) when AMZN has gained me almost 9%, or $264 per stock just this week? Since I’ll have to pay capital gain taxes and bank fees anyway when I’ll sell them I may as well get as much money for myself as possible. You may say the same about AAPL, FB and the rest of the gang.

      All of my family has a few AMZN stocks, and I think that’s a line of reasoning very common around the world right now, especially with people with no time to document themselves about sophisticated financial products nor any inclination for speculative endeavors. This stuff is expensive, yes, but it’s a good alternative to sovereign bonds as a haven for savers: it’s just as liquid as US treasuries (and may be sold faster outside of the US) but has far better real-world yields.

      Any of these five megacaps or a “dumb fund” tracing them will outperform everything else this year and will only cost a small fraction of associated fees. It doesn’t really take a genius.

      • Erle says:

        As I hate those companies I refuse to put dough in them. FWIW I dumped a heap into gold stocks in the March dive and am sitting with 112% gain since then.
        What to do?

      • GotCollateral says:

        > This stuff is expensive, yes, but it’s a good alternative to sovereign bonds as a haven for savers: it’s just as liquid as US treasuries (and may be sold faster outside of the US) but has far better real-world yields.

        Thank you CBs, again, we get to watch folks like this get wiped out :D

        Yield chasing right into the leveraged insolvency black hole, with no concept of profit taking, tail risk, and thinking they can call get out when they want forever… lol

        • Zantetsu says:

          I’ve “gotten out” at the beginning of the past two major crashes/downturns without any difficulty. Why do you say it will not be possible to “get out when you want”?

          It’s a dumb game to play but it’s profitable.

        • GotCollateral says:


          You personally might be fine if you get out at the price the you want, but most people don’t.

          I said what I say again what I said before here: (https://wolfstreet.com/2020/07/06/seems-counter-intuitive-in-this-crisis-inflation-heats-up-for-services-companies-and-theyre-able-to-pass-it-on-via-higher-prices/#comments)

          “Sure, FRBNY can set its rates, but what do “savers” do in response? They continue seek for yield mindlessly enabling the folks on wallstreet managing their money to continue doing dumb ass things making the state of the situation worse.

          Those “savers” will wished they actually saved cash for the past 10 years and took the hit on inflation when US indices have their 1989-1999 n225 moment and wipe out far more of their savings than what they were investing to protect against…”

          People that think allocating their resources should be easy, that no personal research should be done about the options available, and be done with no foresight or thought about trade offs will always get fleeced one way or another, especially in an environment like this.

      • flashlight joe says:

        “It doesn’t really take a genius.”

        You are correct. It takes luck. And it works till it doesn’t.

        • MC01 says:

          You people don’t seem to udnerstand, so let me rewrite this in terms you may be able to understand.

          Why should I, or any other saver, bother with our local crummy stock market or the expensive-to-run funds and “financial products” aggressively pushed by our banks when any of these US megacaps offer much better returns and lower costs to boot?

          Perhaps in the US it works differently, but our moribund European banks are always very aggressive in pushing stocks, bonds, derivatives and other products upon savers. The saying around here is the moment you have ten grands in your account the bank will ring you to push their own stocks and the moment you have fifty grands they will ring you to push their derivatives with the usual preposterous “administrative” fees.

          I understand you are all financial wizards but I don’t think any of you has any idea what a rotten deal this stuff has long been. Let’s stay in theme and look at banking stocks: had I bought Intesa Sanpaolo, a pretty solid bank as Italian banks go, in January 2018, by January 2019 I would have taken a 30% loss. This is all pre-Covid-19, the “good times”. Right now the same stocks sit at €1.73, penny stock territory.
          But at least Intesa Sanpaolo is traded on the FTSE MIB, a major stock exchange, meaning it can be sold quickly.
          But most Italian banks are traded on the MIM, Multilateral Italian Market. Never heard of it? Remember when our own Nick Corbishley wrote about the grandiosly named “International Stock Exchange” based in Guernsey which basically trades a couple of stocks every fortnight? Same thing here.
          It may take weeks or even months to sell the stocks of one of these Italian banks traded on the MIM. If there are no buyers… tough luck. AMZN, MSFT or AAPL can be sold in the blink of an eye.
          I won’t get into the bonds and derivatives.

          Again, while you people point and laugh you have no idea what these banks have pushed on retirees and other folks with little knowledge of financial products.
          Compared to this financial toxic stuff US megacaps are a sound deal: you may not like it, but people have taken up Jeff Bezos’s and Mark Zuckerberg’s offer because the alternative is infinitely worse.

        • VintageVNvet says:

          with all due respect for the wonderful articles and many similarly great comments on here, you seem to be ”getting out of hand.”
          As such, I can only suggest and recommend you ”take it easy for a while,” whatever while works best for you…
          I can report that I have done so at least twice since I have been exposed to and delved deep into the clear evidence Wolf puts forward for all of us wolfers,,, and that have been not only very very educational for me, but have done serious damage to many of my pre con ceptions…
          IMHO, you will get over your current challenges and then proceed to do your best to continue the work to actually make all the real numbers, etc. available to each and every one…
          Thank you

        • Wolf Richter says:


          MC01’s frustration is with the Italian stock market. He lives in Italy. So it’s his home market.

          The FTSE MIB Index (tracks stocks on the Milan stock exchange) peaked in the year 2000 at around 45,000 and on Friday closed at 19,767. In other words, this Italian stock index is down 56% in 20 years! That’s why MC01 doesn’t want to invest in this crap — that’s how I read his comment.

          MC01, feel free to jump in here since I’m busy reading your mind :-]

        • NewGuy says:

          @MC01,,Look at the Nikkei. It’s highest at 39k in 1989. Since then the lowest at 8.5k in 2011, and now at 22k. Pity the bastard that went long in 1989.

        • Lee says:

          “It’s highest at 39k in 1989. Since then the lowest at 8.5k in 2011, and now at 22k. Pity the bastard that went long in 1989.”

          Pity the person that ‘bought the share market’ and not individual shares.

          There have been huge gains in some shares and losses in others.

          And by the way, Japan offers some of the best companies in the owrld at cheaper prices than the USA and much better yields too.

        • eg says:

          MC, I relish those calls from the bank, asking what I intend to do with 20K or more of cash in their accounts. My response is invariably some variant of “whatever I damned well please,” larded with reminders to them that the MERs of their products are outrageous, then closing with a pointed reminder that I do most of my investing with one or more of their competitors.

          Cash — it’s the most entertaining zero coupon bond around …

      • RD Blakeslee says:

        What happens in the stock “market” is of academic interest to me; I don’t (never have had) any skin in the game.

        I also enjoy comparing predictions with results over time.

        I’ve got this one saved …

        “Any of these five megacaps or a “dumb fund” tracing them will outperform everything else this year and will only cost a small fraction of associated fees. It doesn’t really take a genius.”

        • MiTurn says:

          If you have a pension, you have skin in the game. You’re just not the dealer.

      • nick kelly says:

        Amazon has a PE of 125. (Apple’s is 30, it is far more profitable per share but still vastly overpriced)

        There are only two ways to justify the purchase of a co with this PE: it is the next big thing, (e.g. early Apple or MS) or you expect someone to pay more for your shares.

        A trucking and warehouse company, however competent, is not the next big thing, however big it is now. Where are the patents or barriers to, say. Walmart?

        Amazon is simply an early entrant to this ‘bring it to me’ biz, with no other moat to competitors.

        It is not immune to a 25 to a 50 % correction when the market, like Wiley Coyote, finally looks down, maybe in the next 60 -90 days.

        • Ensign_Nemo says:

          I recently built a home computer. I had to research the various companies before I bought the parts from them, and I was favorably impressed with AMD. Their technology is leading Intel for multi-core CPUs and is rapidly catching up to Nvidia for GPUs.

          I thought about buying some stock and looked up the current price and P/E ratio. I thought that a mature tech stock might be in the range of 30-40 for a P/E ratio.


          It’s 135 right now (134.85 as I type).

          It’s entirely possible to pay too much for a good company, so I’m not biting unless valuations crash or their earnings go way up.

          Yes, they are doing a good job, but it’s crazy to buy a big tech company when you would need to wait until the year 2155 to earn back your investment.

          Heck, according to Star Trek lore, the United Federation of Planets will form by 2161.

  5. MCH says:

    Are you going to wait until Tesla gets to a trillion before you put them there?

    Or will it be one of the N stocks, you know Netflix or Nvidia?

    • MC01 says:

      TSLA has a market capitalization of $210 billion or so: it has a long way to go to catch FB, let alone the four big ones with over $1 trillion in market cap. As a meter of comparison PG has a market cap of over $305 billion and WMT of a neat $370 billion. Mr Musk had better dust off his Twitter skills. ;-)

      There’s also another thing though: the S&P500 is an exclusive club where only companies with “several successive quarters of profitability” can enter, no matter how high the market cap. AMZN, MSFT, AAPL, GOOG and FB are all in because, in spite of the haters, they have all been long profitable. Personality cults such as TSLA is are not welcome.

      • MCH says:

        On the point of successive profitability, Musk is twittering and massaging his way there. ?

        Keep in mind, the rules are only operational and respectable until it isn’t. With the climate we have today, anything is mutable.

      • MCH says:

        BTW, MC01, would like to hear your thoughts on Boeing and the survivability of the Max. I think that plane is toast, and unless Boeing shifts its strategy very quickly around this, I don’t think in 20 years it will be in the single aisle business.

        • MC01 says:

          I have an article ready I will be sending to Mr Wolf in a few minutes but it deals with more immediate aspects of the air travel industry.

          Regarding the MAX… provided the problems have indeed been fixed and the new training will be enough to deal with MCAS, I don’t think it’s “toast”. It’s either that or wait years for an A320neo, and this disaster has put the introduction of new aircraft designs (such as the new Airbus freighter) at very least five years into the future.
          The main problem of a “fixed” MAX is there are presently four versions, five if the -200 (a Ryanair exclusive so far) is included. They have already started cannibalizing themselves, just like the -700 ended up cannibalizing the -600 among New Generation models.

          The big problem Boeing now faces is the 777X. Customers are having second thoughts about it, so much Abdul al-Baker, the Qatar Airways CEO, has been relentlessly pushing for a 777X freighter (so his company can shift orders from the passenger to freighter version) and Emirates is looking to shift some of their orders to the 787. This is all part of a shift that already took place before the epidemic: large aircraft are losing their appeal outside of the freighter market, and rapidly so.
          The future belongs to the 787 and the A350.

          On a related note there are now hopes the production of the Antonov An124 can resume. Not only has the aircraft once again proven its worth, but it made both Volga-Dnepr and ADB a veritable bundle in this crisis. While relationships between Russia and Ukraine remain far from friendly, the present Ukrainian government has declared itself “willing to listen” to Russian proposals for restarting An-124 production.

    • Wolf Richter says:

      Any stock that gets close to the lower end of the Giant 5 may be included in the index. That limit is around $600 billion at the moment (FB). But if FB drops a bunch, it might be excluded :-]

      So for TSLA to make the cut today, the shares would have to be around $3,300.

      • andy says:

        Wolf, Alibaba and Tencent are in this range, $600+ Billion. Listed on NYSE. Trillions in yuans.

        • Wolf Richter says:

          They’re not stocks. They’re ADRs. When you buy them, you don’t own a slice of the company. You own a slice of a contract with an offshore entity that has a contract with Alibaba. In other words, they don’t represent equity. They’re a derivative product.

      • MCH says:

        So, it should get there in about three months at the ludicrous rate it has been ascending. ?

        I do believe though that it will not make it, but you have to see that there is some entertainment value in a group of stock called FATMAN, especially if you can add one of the N stock and get rid of Google somehow.

      • Cas127 says:


        Marginally on topic…

        Now that you’ve highlighted the keystone aspect of the Folly Five, maybe you could introduce periodic posts updating their PE and other ratios/metrics…should be relatively quick to generate/post, and since they have rapidly become the linchpins for the indices, different aspects of their absurdities ought to make for interesting ongoing reading.

        And speaking of indices…a pretty good post might be put together on how the Folly 5 might be the pathological output of otherwise sensible indexing/automated reinvesting.

        To the extent that an ETF’s/MF’s writ is to stay *continuously* invested in a *cap-weighted* index, it is possible to get these momentum based pathologies…especially if investors don’t really understand/pay attention to why/how true diversification works and ignore the valuation metrics of heavily overweighted index components.

        20 years of ZIRP plays a huge role too, since it closes down major off ramps/safety valves for equity overvaluation.

        In a ZIRP world where major institutional investors have to hit 8% hurdle rates in order to preserve the facade of actuarial balance, equity allocations will increase regardless of risk and valuation absurdity.

        At least until the wave of defenestrations hit.

        The remarkable thing is how slow motion the mkt’s response really is to this rather obvious Meteor of Death.

  6. Anmol says:

    I am getting burned on my Tesla short :-( It expires 17/7 so lets hope for a pulldown this week.

    • Erle says:

      Nuts to shorting. I did it on bank stocks in ’08 and made out better than I had figured, I expected the others on the long side would fold and not pay. The FED flooded with enough dough to pay my shorts. Golly, I hate them.
      I made a crack about miners above, but it isn’t fantasy. There are smalls that have All In Costs of under 900 and will do well for a few years. If the insiders do not steal it all they will be pretty darned good. That is a big IF.
      Gee I love this board, I suppose that I will have to donate again.

    • andy says:

      To short using options you need to leave enough time for the next guy, otherwise you get no bid.

    • MCH says:

      Yep, and somehow a way out of the money call at $2k expiring on 7/17 gained 900% yesterday. And pulled everything else up as well. Something is insane.

  7. Putin on the Ritz says:

    These five stocks up about 2.5 trillion since March. Fed prints 3 trillion. Cause and effect?
    Just wondering who will be buying $1000 iPhones when there are 33 million without a job. Perhaps the Fed could print some new customers.

    • Paulo says:

      Exactly. And the Titanic was state of the art until it hit the iceberg. “Exceptionalism, meet our new neighbour Mr. Virus. He is the 2nd cousin of Debt, you know…that helpful fellow down the lane with the big store and delivery service”.

      Me? I’m baking bread this morning and listening to ’60s country. Screw it. Too depressing.

      Am I missing something with this article? Between the lines and numbers I see just two words….like a watermark. Unsustainable and debt.

      • Zantetsu says:

        Some of us still have to make money to secure our future though. We can’t all sit back in our Vancouver Island property that we bought 20 years ago for a song and watch the world go crazy.

      • Erle says:

        Gee Paulo, you could stick out a wad of cash and ride this all of the way to a burned out Seattle. Ye of little faith are going to ruin the party. I am trying to hate you but it doesn’t work. I’ll try later.

        • Paulo says:

          I didn’t mean to piss folks off with my comment. I value the comments and civility on the WS site. Lots.

          Today is frustrating. I miss my family interactions and expect to be riding this out for another year.

    • joe2 says:

      The new Samsung phone is $1800.

      • RD Blakeslee says:

        My old Kyocera DuraPro flip phone cost me $25 on EBay.

        • RD Blakeslee says:

          Woops! $125. Had a hard time springing for that much, so freudian slip …

      • Lisa_Hooker says:

        Does it steam milk for cappuccino?

        • RD Blakeslee says:


          Nah. When the kids were still home 40 years or so ago, the family milk cow did that.

          Some kids have a knack got the vernacular – the cow was named “buck”.

        • RD Blakeslee says:

          Woops! I read “Stream” instead of STEAM. What’s cappuccino?

          You ever watch a cow chewing her cud? She puts tongue in cheek, out of the way.

    • prateek says:

      Congress can print customers, CARES ACT infinity. FED props up inefficient businesses whereas Congress gives just enough bouyancy to ordinary folks to keep their nose (only their nose) above water. With 5 companies and hundreds of millions of folks with just their noses above water .. the economy works swell.

  8. Dr. Fernando Arzola says:

    I travel for work constantly. Been to roughly 30 states in the last 3 months. Been to 7 states in the last two weeks. The amount of business STILL closed is impressive and unprecedented…
    I just don’t see how this is going to get better anytime soon…

    • Erle says:

      Fernando, That must be bleak. The good part of travel is to get to talk with the locals. Being excluded from those makes it akin to going from on McDonalds to the next. Those that dismiss the locals are hateful and miss out on truly enjoyable people.

  9. historicus says:

    Per a Wolf Street article a while ago….compare and contrast to today.


    Assume for a moment that the central bankers of the world work in concert. Imagine now the BOJ and others, what they hold and have added.
    Who is going to end up owning the whole shebang in the end? The money printers.

  10. Ole C G Olesen says:

    The 5 Companies mentioned produce NOTHING Humans need to survive :



    • Wolf Richter says:

      The modern economy has long ago shifted to producing mostly goods and services that people WANT, but that they DO NOT NEED to survive. This includes this website, and equipment it runs on, and everything that allowed you to post your comment here, the fiber-optic cables and wireless infrastructure and servers and routers and software along with your personal device.

      • Yes but can you be in business for yourself without a cell phone? Go for a job interview in a high paying job, they want to see your FB page?? Young guy out of college, 4.0 resume, but no cell phone, no FB page? They will show you the janitors closet.

        • MCH says:

          I actually think the former, a Facebook page or social media presence is HR’s way Of checking they aren’t accidentally hiring a psychopath.

          It’s not necessarily a bad idea. I mean an idiot who shouts I am going to stab you on social media can never be trusted in front of customers.

        • Cas127 says:


          Deloitte canning that psycho SJW harpy restored my faith in corporate semi-rationality and confirmed my low opinion of a Harvard degree.

        • 91B20 1stCav (AUS) says:

          Wolf & Mr. Bierce: though you are undoubtedly correct, i think Ole is taking the view that our tools have become more important than the mission they were supposed to address. Different, but not-so-different than the angle through which you, Wolf, relentlessly (and thankfully) observe and address the bedlam of today’s economic world. The enormity of the macro is difficult to intake and accept, even a slight understanding of it all-too-often too unpleasant to seriously countenance…

          May we all find a better day.

        • SuzeB says:

          Wistful memories of those halcyon days – a mere 12 years ago – when a human did not require an active social media presence, a FB page, and/or was not required to tweet all day long.

          Oh those days of yore, it seems like yesterday but it was just prior to 2008. Humans were allowed to live a somewhat private life, and were not required to “share” the intimate details of their lives to a voyeuristic audience of hundreds if not thousands in order to not be branded a sociopath. Yes dear, there was a time in a far away land not so long ago, when you could apply for a job and not be suspected of being a sociopath or gosh, maybe even a psychopath if you refused to participate in the “sharing” experiment.

          Imagine, a young person having to carefully craft an online persona in addition to figuring out his or her own real self. But sharing on social media is now “normal” and if you don’t participate, there is something wrong.

          Yet when confronted with the skyrocketing suicide rate in young people since the advent of social media, the experts scratch their heads….

      • MiTurn says:

        And Wolf Street beer mugs!

      • Erle says:

        I do not know much at all but I do have two beer mugs and feel sorry for yourself so I donate. You are lucky to get that. I freely pee away what I would have spent on a movie theater ticket which I last bought more than thirty years ago.
        You don’t add productive capabilities for my machine tools. Even so, I do like my entertainment from time to time.

      • Jdog says:

        What happens when the economy gets so bad people struggle just to get basic necessities. The modern economy, turns into yesterdays economy.

  11. charles monot says:

    Who will say that AMZN is the error in this group? ie PE>100, and there are high doubts on the E here : 6 months ago, AMZN announced that their servers will last 4y, not 3.. A bit strange when AWS is supposed to be booming … and hop, + $2B profit just with this rule change.. And even with that, AMZN guidance is losses for Q2… Also can you help me to find the 840.000 employees of AMZN ? Because they say 125.000 in the US, I find 60.000 in Europe and 65.000 in India…. Where are the missing 600.000 ?…

    • historicus says:

      What is very very likely…
      if these central banks own massive concentrations of these few companies that are so ever powerful, anti trust and monopoly concerns in court won’t go very far, will they?
      Central Banks involved in equity ownership is a deal solid perfect conflict of interests.

      • The Colorado Kid says:

        historicus, this State Capitalism that you describe has another name: fascism.

        • The Colorado Kid says:

          Fascism also requires another main component: a militarized police surveillance state…oh wait.

          I sincerely hope the American People can see what’s happening here and we can somehow find our way back to our Constitution & Bill of Rights and not trade this for some form of authoritarianism. That will not be ‘fun’ at all.

  12. Brant Lee says:

    In other words, the stock market has been over with for a few years, but no one wants to believe it. A few have cashed in big time and the rest are left holding the bag if you don’t own the giant 5.

    We have Debt created for Middle Eastern wars and stock buy-backs with nothing material to show for it. We have no manufacturing base to fall back on which equals thirty plus million out of work. Proud corporations like Boeing biting the dust because they got too greedy, cutting corners. Oil production is over mostly gone forever with the jobs.

    The only things working full time are the money presses. I don’t think the U.S. will be able to now stop handing out stimulus helicopter money.

    • historicus says:

      “…. created for Middle Eastern wars…”
      Indeed. Endless with the costs hidden by fake interest rates. To the delight of the Military Industrial Complex (Eisenhower caution)

      • MiTurn says:

        You know, allegedly Eisenhower wanted to use the term ‘military-industrial-Congressional Complex’ but his brother thought that was too ungainly, hence the current, shorter, usage.

        • Cas127 says:

          And let’s not forget that with DC being China-Craven for 20 years, the US now has a long-standing de-industrial complex…

    • RD Blakeslee says:

      “no one” is wrong. I believe it.

    • The Colorado Kid says:

      Milton Friedman said it best, “nothing is so permanent as a temporary government program”.

      How about the ‘temporary’ suspension of the Gold Window by Tricky Dicky.

      You’ll have a better chance of retrieving a bone back from a large male pitbull as dialing back these ‘stimulus’ programs and that goes doubly for the main recipients which are decidedly NOT the regular folks and the SME’s.

  13. NoEasyDay says:

    Well, no surprise to me considering that I use products and services from AMZN, GOOG and MSFT regularly despite the COVID-19 shutdowns, and I don’t think Mnuchin or Powell had to support them.

  14. Joe says:

    Wolff.. please do a story on Zombie Banks and Zombie Companies. Thanks.

  15. timbers says:

    Worth noting that all 5 of these companies figure prominently in surveillance of you, me, everyone in various forms, and a 6th partner also has a big interest in that – our government.

    These corporations treat our private data behavior as their corporate property often times in violation of the law, but also in compliance with bad laws that allow them to do this.

    For example over the years there have been companies that provided truly private encrypted email and such. What happened to them? The U.S. government shut them down for that very reason.

    Not unlike what’s going on in HK now. Don’t think our side is any different.

    On another note, new Covid cases broke into the 70 thousands yesterday, confirming we are truly the most exceptional of all.

    • MiTurn says:

      The US is implementing the Swedish covid-19 strategy, just not on purpose. Herd immunity…

    • Brant Lee says:

      Exactly. And the 7th partner of the 5, the Chinese, just for monetary reasons, of course. The chickens are coming home to roost on all fronts now.

    • Yertrippin says:

      Spot on. And while investing in these companies has been, and may continue to be a profitable strategy, in the long run it is investing in the assured destruction of the society and by extension your personal gains.

      I would speculate most, if not all, readers on this board are not at a level of of wealth to avoid the consequences of the eventual outcome of a five entity economy.

  16. CCC says:

    Hi Wolf,
    Do you happen to have estimated 2021 earnings for the big 5 and the Wilshire 5000? FRED shows Q1 2020 corp profits of about $1.6T. Looks like their market cap is greater than all of the annual earnings for corp America.

    • Wolf Richter says:


      The whole game of estimated future earnings – and how they’re then downwardly adjusted as the reporting date nears so that companies can “beat” them – is a hoax designed to pollute your mind. Look at GAAP earnings when reported and draw your conclusions.

      For example, here is Apple. It makes a lot of money but there is zero earnings growth over the past 5 years – 2015 to 2019.

      Apple annual GAAP net income:
      2015: $53.4 Bn
      2016: $45.7 Bn
      2017: $48.4 Bn
      2018: $59.5 Bn
      2019: $55.3 Bn

      • CCC says:

        I agree with you re earnings. The reason I asked the question is that I am trying to look at the these valuations from a macro perspective. If one were to be bullish at these levels (I am not) he would need to believe that there will be future growth. As you pointed out, Apples earnings have gone no where for five years which is the same for US corp profits in total, looks like they have been stuck around $7t since 2011. So to be a buyer or a holder of the big five right now, I would have to believe that either America’s corp earnings are about to go through a growth spurt like in 01-06 (and big five earnings along with it) and/or the big 5 can grow and become an increasing portion of all of corp Americas profits. Both are difficult to buy into.

        The top 10 most profitable companies in the US reported about $350b in profit last year the big five about $160b. If the big 5 were to some how grow to make the same as ALL of the top 10 today, the current market cap implies a future PE of almost 20 if and when their collective profits double from here. Or in a more bullish scenario they all manage to become as profitable as Berkshire at $80b then that future PE is “only” 17.

        I think Wolf is going to be booking profits on the short soon.

  17. Pandora says:

    These stocks are substitute for cash, because the G is destroying the currency.
    Same as Zimbabwe, the stock market is soaring. Of course most of the stocks are trash, because the real assets are priced to fantasy.

    • The Colorado Kid says:

      Pandora, no it’s not the same as Zimbabwe, or Weimar, Venezuela, et al. The kind of nominal gains that you see in a Zimbabwe come from hyperinflation. Regular inflation ,however, will put a big fat nail in the coffin of this market. Observe the 1970’s for example. Regular inflation is a very different monetary phenomenon from a hyperinflation and will decimate broad market equities & bonds.

      Personally, I think we are headed for a deflation overall with pockets of some inflation due the impact on the supply side.

      We shall see.

      • sierra7 says:

        Colorado Kid:
        Food: Inflation
        Most all others: Deflation
        It’s important to remember that the average “food chain delivery” from source (or very large distribution centers) is average about 1500 miles from the end consumer.
        Take a bite out of that system and chaos.
        The “Abyss” is yawning larger and larger…….

        • The Colorado Kid says:

          S7, yeah I agree.
          To make matters worse is just that- the inability to utilize one of the extreme advantages that we used to have with regard to the movement of our goods. We used to be able to utilize our waterways. We were able to beat any nation in the world because our navigable waterways were and are the best in the world for cheaply and easily moving goods to markets.
          Sadly, we lost this ability with the passage of the Jones Act. Look it up. But, now countries like Mexico without any real navigable waterways are able to hand us our asses with regard to moving goods because we really are not able to leverage our waterways which is the cheapest most economical way to move goods and now we have to try and compete with trucks.
          This is something that could be corrected and needs to be, if our Congress could ever get out from under the trucking lobby.

  18. Robert Khan says:

    It would truly be a service to the investing community if someone created EOD automatically updating chart that can be checked anytime by anyone that shows the Wilshire 5000 less the 5 largest stocks (whatever they are at the time). Anyone smarter than me now how to do that :) ?

    • EJ says:

      Sure, one would just scrape some site for the historical market cap of the Wilshire 5000, subtract the market cap of the big 5, and plot it like any other stock.

      But it wouldn’t tells us anything we don’t already know.

  19. Petunia says:

    The giant 5, Apple, Microsoft, Amazon, Alphabet, and Facebook, won’t be the giant 5 forever. Things change and technology evolves, often in different directions, let’s look at each one:

    Apple –
    It died with Steve Jobs. The only thing keeping it going is their horde of cash and its app store. If you can’t sell as many expensive phones, developers move on. As its market share drops, so will their ranking.

    Microsoft –
    Right now it’s just appliance software, not a real operating system anymore. It’s closing down its utility to developers and that’s a group that moves on quickly.

    Alphabet –
    Google changed its name to diversify away from search because they know eventually they will get a challenge in that area. It’s a real weakness for them.

    Amazon –
    As retailers become better at managing their own sites, which is happening rapidly, they won’t need Amazon.

    Facebook –
    What’s that?

    • Nicko2 says:

      5G and internet of things changes everything. Almost 3 billion people still don’t have a mobile phone. Apple/Microsoft/Alphabet/Amazon are building the global infrastructure of the 21st century.

      • Xabier says:

        They don’t have sufficient natural resources, either; so dream on………

        Progress and growth are -patently – now over.

        A few toys won’t change that.

      • Anonymous says:

        “3 billion people do not have mobile phone.”

        Do you know why?

        Maybe they can’t afford it:(

        • sierra7 says:

          Don’t know how old u are and remember when the telephone companies gave most everything in hardware free to the consumers and sold the service. Even back then if consumer had to pay for all the hardware up front the phone companies would not have survived as they did?
          Maybe we could be heading in the same direction, eventually?????

      • Andrei says:

        “5G and internet of things changes everything”

        Can you elaborate on how exactly they will do that?

        What is that you will be able do with 1Gbps of 5G (in some “hot spots”) that you can’t do now with 100Mbps of 4G (in wider areas)?

        IoT does look promising, but the idea and technology have been around for quite some time. I attended at a conference on “ubiquitous computing” almost 20 years ago (will never forget since my presentation was on 9/11/2001!). And the term itself was coined more than 10 years earlier.

        I agree it’s cool to have your fridge getting the stats from your TV on which beer commercial you watch the most and restock it automatically on Amazon fresh or whatever, but I am still not convinced how IoT will “change everything”

        • Erle says:

          I still like the birds and the bees. I am perplexed that with the rise of all of the RF saturation that my pals are so much less present.
          Does anyone remember how many bug splats on the windshield there were in 1967 as the nothing of now? I had bigger stuff messing up my goggles and in my face back then, and nothing now. The RF noise must be doing some bad things for two legs and two wings and the six leggers.
          I don’t buy their crap, so do not blame me.

    • MiTurn says:

      “Facebook – What’s that?”

      FB will die with the Boomers. They’re the only ones that use it.

    • EJ says:

      I strongly disagree with this.

      -Apple is transforming into a top tier semi designer, like Nvidia or AMD.

      -Windows isn’t Microsoft’s bread and butter anymore. Heck, the running joke is that Windows 11 will be a linux distro. They’re a cloud company like Amazon, an enterprise software company, with many other large consumer ventures on the side.

      -What device are you reading this on? Unless its a linux box, I would bet money that Google and/or Facebook are running in the background right now, even if you’ve never had an account with either. Even if Google search and Facebook users fade away, their grip on the targeted advertising universe will be more stubborn.

      -I don’t think Big Cloud is going away anytime soon. Its often cheaper to use an external host than to do everything yourself, and AWS is already getting away with higher prices than the competition.

      I’m not saying these companies are immortal… in fact, I forsee a whole bunch of antitrust coming. But you can’t predict thier demise with a dated understanding of what they do.

      • Petunia says:

        I’m old enough to remember more tech companies that have disappeared than exist right now. I am writing this on a laptop that is basically an appliance, thanks to Windows. I’m ok with easy to use, but it has its limits, both in development and use.

        The cloud business is a throwback to the old time sharing days, everybody went bust competing and they are doing it again. Online advertising is just the yellow pages delivered with more targeting. Amazon is a great retailer but the lack of curation will keep it out of many markets. Google is fast but has a finite capacity. Apple is coasting on the cash Steve left them. Facebook is a big fat message board.

        It’s all a bunch of rehashed software from the 60s, 70s, and 80s. The only guy worth a damn, right now, is Musk and you people don’t see it.

        • astropuppy says:

          amen, Nothing has changed since the von Neumann architecture. Same cat different colored spots.

    • Ethan in NoVA says:

      Facebook owns Instagram, super popular. And I still see TONS of Facebook usage all the time. Markplace is being pretty good to me right now.

      Amazon – AWS still HOT. Cloud people are in demand. Companies where Amazon are direct competitors still turn to AWS, which is nutty but job security for the next job I suppose.

      Microsoft – It’s not about your desktop OS. It’s about O365, Teams, and all the business apps. People rent software these days as service, and it’s more profitable. $10/mo a seat forever versus a $XX CAL (Client Access License.) Plus their Azure crap for the AWS haters.

      Apple. Got in this fight last night. Apple shipped 74 million iphone Q4 2019. Q1 had supply chain issues. Still strong, even though I miss the older laptops and products. Love it or hate it they make pretty nice stuff usually.

      Sure, these companies need competition. But like, your Steve Jobs was an accident. There are tons more Steve Jobs in the USA right now, but they would never be given a shot to run things. Steve Jobs lucked out over the Apple 1/2 fortune, that money is the only reason he was allowed to run a company like that versus some Ivy league boring person.

      • California Bob says:

        The story goes–affirmed, I believe, by The Woz himself–that in the pre-/nascent-Apple days he fabbed some circuit boards for sale to a local company. Jobs, the ‘businessman,’ conducted the transaction and took more than his half-share of the profits (and lied about it to Woz). I’d say Jobs was a perfect CEO candidate.

  20. NoFreeLunch says:

    There have been other eras where just a few companies rocketed and the west of the market stayed flat, like the nifty-fifties. Everyone thought IBM was invincible and could not possibly envision what happened to them. What happened to them was mainly due to a couple of nobody geeky guys (Jobs and Gates) who ultimately took IBM down. That example shows that any one of the current FANGMAN can be potentially vulnerable to what seems now to be some innocuous little thing.

  21. B.A.C.A.H. says:


  22. fred flintstone says:

    In the 70’s it was the nifty 30……..the market went up due to them…….such stocks as IBM etc…….but then they dropped and that was all she wrote.

  23. Lisa_Hooker says:

    In the End – “There can be only One.”

    • BuySome says:

      And it will run on electricity…which requires???
      Costs of survival are up, ergo costs must be passed along in tax fashion with no escape. So, slip it into the material chain and avoid voter decisions and consumer choices. Claim it is necessary for the environment until we can replace this via techno-pops. And control the material via government decrees…can’t lose control of the power of graft. What is it?

  24. Yancey Ward says:

    If you look at the 7 stocks- AMZN, MSFT, GOOG, FB, NFLX, TSLA, AAPL as a whole, total revenue and total net income growth rates are falling rapidly between 2016 and 2019. And we haven’t even seen the impact yet of COVID-19 on 2020.

    In my opinion, these 7 stocks are all way over-valued by any metric you want to use except for one that assumes a huge inflationary wave is coming on the level of the 1970s, but even if I assume that scenario, history tells us that stocks don’t actually do well then either on a value basis.

    As I wrote a few days ago, I semi-seriously considered taking a naked short position on Tesla’s mid Oct call options striking at 1885 when the stock first pierced $1000/share (they now have open call options all the way up to 2850!!!). Thank God, I didn’t do it- the call option I thought about selling is now just short of 10x higher in price than they day I thought about selling it.

    This will end badly for whoever is holding the bag when it does end- and it will end since it always does. I just don’t know when it will end, and am not willing to wager anything on when it does end.

  25. Christoph Weise says:

    The trade war is cutting a substantial market off for the 5 heavy weights. The more ludicrous is the valuation. I would not be surprised if the 5 stocks were systematically bought by the central banks. It appears the whole thing is a gigantic value trap.

    • Gordian knot says:

      So with those 5 stocks a simple EMP would destroy western dominance. Dont tell our enemies.

      • 91B20 1stCav (AUS) says:

        Gordian-where the relentless economic quest for short-term profitability through a falsely understood and enacted ‘efficiency’ slowly extinguishes the resiliency of existing redundant systems. The result? Revelation of the underlying fragility of any society (look at the U.S. in the present moment).

        A saying from horse-drawn days was: “…don’t bind the mouths of the kine that tread the grain…”. True then, true now, ignored at our peril.

        May we all find a better day.

    • Cas127 says:

      “systematically bought by the central banks.”

      Easy to believe…but the major counter argument is that there are much, much, much, much lower profile ways for a crooked Fed to prop up the equities universe (and some of those ways are now in place…).

      Usually the Fed is not this obviously sleazy…its writ is more obscure sleaze.

  26. raxadian says:

    Funny enough all the top five have benefited on some way due to quarantine.

    Sure it has also negative effects to them too.

    And I am sure Apple dependency on China is eventually gonna bite it in the behind.

    But as long as people are stuck inside their homes online services are doing great. People needs computers and devices to do everything at home so that’s also doing great.

    Quarantine ends? Apple and Formerly Named Google will still be okay. Going outside means people will buy new phones. Amazon however will have a drop on deliveries.

    Microsoft? Well people will keep using Windows and their online services.. so who knows?

    • Jon says:

      Its be interesting to see if the general economy suffers and if with millions of people unemployed and even employers people have economic insecurities then

      How would people afford $1000 iPhones or any expensive phones

      How would people spend big money on tesla cars ?

      If the other businesses are suffering then how would google Facebook Twitter would get ad money

      Microsoft.. if businesses are suffering why would they give money to Microsoft for latest and greatest enterprise products and services

      Amazon.. other businesses are wising upto online offerings..

      These are just the domino effects I was thinking

  27. The Quants (buy good companies, sell bad) have had something to do with this, but leadership usually narrows late in a secular bull market. This is consistent with reduced liquidity. You can put the two together and chart this ratio for us? To get the pulse of the market you must check a broad range of indexes, energy, precious metals, bond funds. When all these lift together liquidity is good, and we have an all-in-one market. The last few days energy and PMs diverged, and yields backed up (ostensibly on the news of economic recovery, (THE FED CANNOT ALLOW A RECOVERY). This bull market cannot survive for long without new money. In a recovery money goes to work, instead of stock buybacks capital goes into spending.

    • raxadian says:

      As Tesla shows, stocks can completely ignore reality. The fact the big five have benefited due to the quarantine is anything anyone can see and read about so of course the stock price rises.

      Of course this means at least one of the big five will have their stock go down if quarantine finally ends… for real. Not the open up a few days then close down again due to more deaths.

    • sierra7 says:

      Ambrose Bierce:
      “Recovery” was aced out in ’08-’09…..
      The trillions that were literally “given” to the “hoi-paloi” by the likes of Larry Summers/Timothy Geithner Gang dwarfed the $750B “bazooka” that Mr. Paulson peed into the economy.
      We are all now in the “….barrel going over the falls”…….”Modern (Financial) Capitalism” is going to shatter in pieces at the bottom……
      Imagination overcome by greed is always ugly.
      Get ready!

  28. Just Some Random Guy says:

    At some point in the future, Apple, Tesla and Google will all collapse and be replaced by something new and better. There is always going to be the next best thing. But IBM dominated the world for what 50 years? FAANGS (I always add Tesla to thing group) still has a long way to go. And wishing they go away isn’t going to make it so.

    I keep reading comments (not necessarily here but generally speaking) how Wall St is only for the rich and the little guy never profits. Well little guy, start investing and you will profit too. Instead the “little guy” sits on the sideline and whines that Amazon and Tesla are overvalued year after year after year. Sorry “little guy” that’s a you problem, not a Wall St problem.

    I remember when Amazon crossed $2K and all the smart people convinced it was headed for a huge crash. Now it’s at $3200. How’d that work out little guys? Also see housing market for the past 10 years.

    • Cas127 says:

      “Instead the “little guy” sits on the sideline and whines…”

      You sound like the “promoters” of the Russian roulette tournament at the end of The Deer Hunter…

      The Fed acts like the “promoters” of the Russian roulette tournament in the *middle* of The Deer Hunter….

    • 728huey says:

      Disclosure: I own stock in Amazon which I bought around 20 years ago right after the dot Com bust. I bought some shares with money I could afford to lose in Las Vegas at the time (about $1,000), and while I was hoping for some long term gains, I didn’t envision making 150 times my investment (on paper). As exciting as it may be to see the stock price go up through the stratosphere, I’m considering cashing out my holdings, as this rise won’t last forever. Either the reality of this second great depression is going to cause a huge crash in the stock price, or there will be legal action to break up the company into separate entities (like AWS, Twitch, etc.). And that will apply to the other FANGMAN stocks as well (Google – YouTube, Facebook – WhatsApp, Instagram).

  29. Just Some Random Guy says:

    My retirement portfolio as of yesterday is about 7% higher than it was in mid Feb, right before the Corona nonsense started. Granted I’ve made contributions in the ensuing 5 months buying ultra cheap stuff in March was especially nice. So taking that out it’s probably somewhere right around break even.

    Anyone who panic sold in March made the biggest financial mistake of their lives and will regret it for decades to come.

    • Wolf Richter says:

      Great. And anyone who shorted the market before the crash, covered before/near the bottom, and then went long at around that time made a ton of money, not 7%. Check out my articles on my short positions.

      • Cas127 says:

        Golly, Just Some Random, so the one simple trick is just Godlike timing?

      • cb says:

        If you did go long after you covered your short, and article calling out that move and the reasoning behind it, would have built more fame that your initial “Short” article. I would like to see such an article, even though it is now looking backwards (unless you are still long). Did you go long because you thought the market was undervalued, even in the face of economic shutdown and expected hammered forward earnings? or, was it purely a play on expected Federal Reserve intervention and/or Treasury stimulus?

        • Wolf Richter says:


          I may not call out another trade. This is getting way too controversial. I was always worried about that. If I say I bought stock X, or the SPY, or whatever, people will accuse me of trying to pump up the market, or worse pump-and-dump. Both are standard financial-media elements. This is not the kind of discussion I want to have here. My purpose is not to “build fame,” as you said, over some trades; it’s to produce valuable and insightful analysis and commentary on financial, business, and economic issues.

      • cb says:

        Thanks, buy it is still very useful financial and economic commentary to call out (especially since the trade is in the past), what you saw that hepled you recognize a near bottom with enough conviction to go long, for what time duration you expected that long to hold, how that long worked out, what indicators you looked for to end the long, etc.
        Was is fundmentals, or was it simply anticipated Federal Reserve action. To take us through your thought process would be Platinum.

    • Optimist_Tim says:

      I agree with you Just Some Random Guy.

      It was easy for me to say that stock prices were too high, so I sat largely in cash for a long time. I knew the companies I wanted and when they were 40% off, I bought as much as I could afford without using margin.

      Ask everyone here who complained about high prices (I did endlessly), whether they bought when they saw a huge discount.

      My stocks yield over 6% in dividends, which are tax free for me, and have payout ratios under 50% and plenty of cash flow to cover them.

      People that complain about low interest rates could easily find similar companies with a little effort.

      Give Just Some Random Guy credit where it is due.


      • cb says:

        @ Optimist_Tim –

        What companies did you buy? Which ones are you looking at for the next correction?

        • Optimist_Tim says:


          Canadian Imperial Bank of Commerce (CM) and Scotiabank (BNS) with a little TD and BMO on the Toronto Stock Exchange. CM and BNS yield a bit more. Naturally there is currency risk if you are not using the Canadian dollar.

          These are boring old companies that people in Canada love to hate, but still use. I’m not giving investment advice and am biased because I own these, so be careful as this is an example of poor diversification. It just happens to suit my individual needs.

          Low or negative interest rates crush earnings. North America doesn’t like negative rates now but that could change.

          Loan losses.

          Disruptive financial technologies that they are unable to buy or join. In the past, Canadian banks tended to buy up smaller competitors like trust companies, stock brokerages and insurance companies. There are some interesting payment and financing methods sprouting up around the world.

          If I had gambling money during the next crash, I might look at the medical devices ETF IHI or Shopify. They do not fit my investment goals today nor do I know enough about them to understand the risks, but I’m bullish on the medical field and innovation.

    • The Colorado Kid says:

      JSRG, If you’re the average person trying to time the market, or speculate be aware of who your competition is. You’re up against brilliant sociopaths with an army of quants that, quite possibly, have inside information like for instance: Bill Ackman, who will short the market and then get on CNBC, start crying and carrying on saying it’s the end of the world as we know it.
      The only chance the average 401k punter has is to diversify into non correlated assets and rebalance when the rebalancing bands are hit. This forces one to sell high and buy low. You will never be able to time and beat the market LONG TERM- it just ain’t gonna happen. You can speculate and win sometimes, but with your nest egg, it probably won’t end well if you try and go all Davy Day Trader. Oh, and a news flash, having all your money in equities ‘diversified’ between sectors Jim Cramer style is not diversification.
      If you don’t have to hold your nose to buy an asset class and at least one of your asset classes isn’t getting killed, or at least performing poorly, then again, you are not truly diversified. If all of your portfolio is going up, or conversely, going down, then somebody isn’t diversified. Sermon over.

      • eg says:

        This is solid advice, Colorado. I would add only that your investment horizon also matters — what I’m putting my teenage children in is nothing like what I have my elderly mother in …

  30. Whatif says:

    What if someone from the future came back to tell you that the stock market is *cheap* right now and will go parabolic in the next 2 years because of MMT, UBI, QEinf, NIRP, YCC, etc? Would you listen? Would you buy?

  31. MonkeyBusiness says:

    A Democrat president will put an end to these guys. Higher taxes, anti trust, etc.

    Also the US is using Chinese tactic to ban competitors to these 5, like Tiktok. i.e. if you can’t beat them, just ban them.

    People like using TikTok because their recommendation engine (AI) is very very good. Just the fact that the US has to resort to banning other people’s apps means that in effect we are paying too much for inferior tech (our tech companies).

    Privacy problems? As if your data is not sold to the Pentagon already?

    • MCH says:

      Or an earthquake large enough on the west coast will wipe out all of these companies.

      But do you seriously think any Democrat president will go through the trouble to wipe out so much of their own donation base? Seriously, there is a significant part of contributions coming from the employees in this company. Unless that President is senile and insane, he will not do that. Like cutting off his own arm.

      • MonkeyBusiness says:

        Yeah, but our “cancel” culture will put significant pressure on the President to do “something”.

        If we are talking about natural disasters, it’s not just the Earthquake, a Yellowstone eruption too would put an end to the US.

        • MCH says:

          Heh, point on the natural disaster.

          Depending on how far this cancel culture goes, it may become another cultural revolution, I have already seen people on places like Nextdoor advocating for that kind of crap.

          Granted, we are very far from that point right now, the Chinese version of it was far more horrifying because the mob was directed by someone who had a cult of personality.

          Right now, in the US, it’s just a directionless mob for the most part, but you can already see signs that there are people who want to harness that mob… and if they succeed, that will be truly horrifying.

        • Mass media allows the audience to applaud, not boo or heckle, the celebrity. You don’t go to a rock concert to complain about the band. A small passionate fan base is more useful than a large apathetic group, even if they are motivated, and act on their beliefs. Numbers don’t matter. This in part explains the presidents success with the virus as hoax. The numbers of people infected or dying, is irrelevant to their logic. If you go a rock concert and you look at the faces in the crowd, you may not recognize yourself. This is the cancel culture. Woodstock became epic when it drew in a lot of middle class kids. The cancel culture shames the audience as much as the celebrity.

        • Yertrippin says:

          “Cancel culture”, “virtue signalling”… also known as stop being a d*ck. It’s not who you are, it’s what you do folks.

    • Wolfbay says:

      If the Dems take both houses and presidency then Dr Kelton’s MMT could be the policy. We could have bail outs of irresponsible cities and states, reparations, UBI and big infrastructure programs. This might just send the market even higher. Anything might wind up better than cash.

  32. John says:

    Wait, you are forgetting about Hertz. Big capital gains in that one too!

    Your article is correct. The Fed won’t be able to print enough digits when this blowup happens.

  33. Jdog says:

    The market at this is no longer an investment vehicle, it is a religion. It is based on faith, and not fundamentals. Unfortunately the religion is based on fantasy and not reality. This is very probably the most irrational market since the Dutch tulip market, and will end the same way.
    As we all know, it is impossible to talk sense to someone who is influenced by faith, so all that can be done is to wait for the reckoning.

  34. sunny129 says:

    Wonder, where would these 5 FAANGs would be if Fed had not thrown 3 Trillions goose up the mkt since march 23rd.

    Fed is the main complicit for this bubble mania!

    • MonkeyBusiness says:

      Takes two to party. Dave Portnoy and his army of RobinHood traders did their part too.

  35. RightNYer says:

    The thing that investors forget is that the same characteristics that supposedly justify tech stocks’ high multiples also can lead to their downfall.

    What those characteristics? They don’t need a lot of PPE and the marginal cost of each additional sale is low. But those things also make it much easier for a competitor startup to displace them. To compete with a company like Walmart or Toyota, the competitor ultimately will need tens to hundreds of billions worth of real estate, stores, and manufacturing equipment.

    What do you need to compete with FB?

    I’m nearly 40 years old. Remember Netscape? Remember AOL? Would any of you have believed if anyone had told you in the late 90s that they would be gone or insignificant only 10 short years later?

    • Cas127 says:

      Agreed…and vastly under-discussed.

      The “moat” around many of the Folly Five really isn’t that great…people can chatter about insurmountable network effects, but at the end of the day, if one of the FF gets too abusive, lazy, costly, insular, sloppy, etc., mass migration away from them is really not that hard (the underlying tech for the most part being eminently available).

      Just ask MySpace…

  36. OSP says:

    Very interesting conversation today from all commentors.

    Of most interest to me: “tail risk”, and the hedging of same.

  37. WES says:


    OT but what the heck is happening to used car prices? They seem to be going up!

    • Wolf Richter says:


      Yes, weird things happen when you have the combination of a supply shock and demand shock, along with pent-up demand, a shift from new cars to used cars, and pent up supply (the rental auction cars are being held back at the moment. As I said in an earlier article, I don’t expect those rental cars (Hertz etc.) to show up at auctions until later this summer.

      The auction volume, which has soared from the deep-freeze in April to just above normal in late June, is now already backing off again. So it seems, pent-up demand may be sated at the moment, and over the next few weeks the market will try to figure out where the new normal is.

      Automakers are still not manufacturing a lot of new vehicles. They’re ramping up production, but they keep running into problems, including not being able to get all the components from Mexico and other places. So this represents a supply shock in new vehicles.

      And there is still the demand shock in new vehicles. Automakers are now rolling out incentives to get volume going. This translates into price reductions on those vehicles. Tesla also cut its prices of the Model 3 by a big slice, trying to get US sales going. The new vehicle market is still a big mess.

      But some new trucks and SUVs are selling well. Don’t expect deals on those.

      • MiTurn says:

        I’ve also read that people who previously used mass transit sre switching to personslcars to commute. Makes sense, anyhow.

      • DeerInHeadlights says:

        It’s not just supply demand Wolf even though that’s a big part of the story. People simply are much more averse to taking public transit now due to the virus and there’s only one place to turn to for a solution: the used car market.

  38. wkevinw says:

    I follow the Value Line indices. The arithmetic mean price performance since 1/2018 is ~-15%, the geometric ~-12%. (equal/price weighted indices)

    There are only about 1700 stocks in there now. I think it used to be almost 3000. The Wilshire 5000 now has ~ 3500 (cap weighted index).

    Anyway, yes, the market performance for a couple of years has not been good outside of these big “tech” stocks.

  39. Brant Lee says:

    The world gold supply is valued at just over ten trillion so what, another month for the giant 5 to catch up?

    • DeerInHeadlights says:

      The market’s definitely in the ‘irrational exuberance’ phase now and has been for the last 2 years now (since the late 2018 dip). It can be argued that it’s been like this since 2016 even. So if there was ever any doubt four years ago that it’s inflated, there really shouldn’t be any today.

      Yet, there are many who insist that this is the ‘new paradigm’ and the “new normal”. All I can say is…watch out!

  40. M says:

    Rationality has left the building. For example, companies that will be damaged if the US manages to change its suppliers are going up. This is even as competitors arise and fewer and fewer customers are willing to pay extravagant prices for less and less innovative but more and more expensive products.

    I understand why companies that can operate without contact, and may even get more business, because of fear of personal contact, may rise in price. The price on those stocks will stay high as long as people remain afraid of contact, which may be 2021-2. However, I think that it is fair to say that most stock prices are now irrationally optimistic.

    Most investors apparently cannot perceive the damage that the loss of so many smaller businesses in the US will ultimately do to the economy. Bankster manipulation of the stock market through their “Fed” can only hide these problems temporarily.

    Each represents many years or decades of savings and investment. They will not return quickly, albeit some businesses that use bare-bones investment (like small restaurants) may be able to reopen after they purchase and use equipment of failed businesses.

    By the way, if you do declare bankruptcy and are a small business owner, you can often purchase back your own equipment (because used equipment is not very expensive and the trustee is glad to get rid of it) if you get some relatives to help fund your purchase despite the bankruptcy. Thus, some small business owners can declare a Chapter 7 bankruptcy in the year after their business goes south, when their net income is much lower, get their debts discharged, and purchase their equipment from the trustee, so they can start again.

    I sure hope that we get a technological fix to our looming problems: e.g., a cheap, easily produced treatment available in sufficient number of doses or a vaccine. I have high hopes for monoclonal antibodies. It is unfortunate that more and more of our heroic nurses and doctors may also need such treatment, because they are not being provided with enough nor even the best available PPE.

    • M says:

      One more thing, if you are a small business owner and have to declare bankruptcy next year to get out of an unbearable debt load, many landlords may let you re-let the same premises after you discharge most debts but buy back your own equipment. Remember that they do not want to have any empty places that they may have difficulty renting for months.

      Of course, Chapter 7 places no impediments to your re-hiring your old workers. If our government leaders are wise, they will allow some state-sponsored credit access (subsidized) to enable those thousands of small businesses driven insolvent by this pandemic to re-start. Why should only parasitic banksters (and I read some law firms, whose main talent is probably the review of files and then their destruction of damaging documents) be the only ones to get governmentally subsidized, ultra-low interest rate loans?

  41. B Wilds says:

    Apple and Amazon have many admirers, however, it is important to look from where much of their success flows. Both Apple and Amazon share an ugly truth that is rooted in exploitation and how they excel in exploiting America.

    Due to their strong ties to America’s government, these companies have been allowed to create a persona or facade that far outshines reality. Both receive and feed at the teat of our government and receive a lot of American tax dollars.

  42. Rosco P Coltrane says:

    Missed opportunity to call it the Wolfshire 4995 index

  43. Tbv3 says:

    Wolf, is it possible the SNB has increased its holding of the Giant-5 relative to the Wilshire 5000, thereby partly accounting for the phenomenon?

    My question is a backhanded way of requesting you to please update your Nov 2019 analysis of the SNB.


  44. Joe says:

    So, if you did get out in March, and are waiting for the fall to get back in, what would buy when it happens? Asking for a friend.

  45. Lauren Michelle Lynley says:

    You left out Tesla. Your post a couple of weeks ago recommended, as did many of your commenters, to short Tesla stock. Today, it is up past $1,500.00 per share. You are so deluded; you actually think that Tesla is a car-making company. ?????

    • Wolf Richter says:

      “Your post a couple of weeks ago recommended, as did many of your commenters, to short Tesla..”

      Effing braindead BS. I’m on record telling people to NOT short Tesla, including in the comments on that article. So keep your effing braindead BS to yourself.

  46. BoulderMike says:

    Wolf: People always refer to Market Cap as the value of a company. Isn’t that really the value of it’s stock? If you look up the financials of the “big 5” the largest has a balance sheet of approximately 300+billion. I believe Amazon is ~225 billion. Not sure what the actual liquidation value is. And, having been a corporate controller years ago, even then financials were iffy at best. So, even assuming these companies financials are honest, which is a big assumption, why don’t we refer to them by their balance sheet value, or even net worth, rather than Market Cap?

    • Wolf Richter says:


      There is something called “book value” or “equity” on the balance sheet, which is assets minus liabilities. This can be a negative number, and is a negative number with many companies these days, including Boeing (-$8 billion).

      Market cap = number of shares outstanding x share price. It’s the price the company sells for at that moment in time. If you want to buy a slice of Boeing, that’s the price you have to pay, determined by buyers and sellers in the market.

      Liquidation value is what you get when you shut down the company and sell the assets at fire-sale prices and then try to pay off the liabilities with the proceeds from those sales. Good luck with that.

      • BoulderMike says:

        Wolf, thanks, and yes, I agree about book value. Theoretically, Retained Earnings should be the profits generated historically by a company. For companies that don’t make a profit ever, this would be negative. What I am really saying is, as you know, this is all hype. Amazon is not a 1.6 trillion dollar company, their stock is valued at that. Amazon is at best a 200 billion dollar company. And, as you say, if you look at book value, net worth, or some other similar measure, they are likely much smaller than that.
        I often wonder who is buying all of this stock that is inflating in value everyday to give these billionaires more billions every day. Pension Funds, EFT’s, Mutual Funds?
        I really can’t see why Amazon is viewed as being so successful, especially during this pandemic. In my neighborhood there used to be “d*ck vans” as I call them constantly delivering boxes. Since the pandemic I rarely see them, and if I do, it is usually delivering an envelope. And, I have NEVER seen a UPS of Fedex driver sit in their van/truck for 5 minutes or more during a delivery like Amazon. And, with increased competition, and companies failing, how can the Cloud be a huge growth business.
        To me, all of this, especially the “big 5” is outright fraud. And today I read how Wework says they will be profitable next year. Really?
        I do understand what you say, and I am not naive enough to not understand, I am just amazed that the system is so gamed that it seems at this point that the only thing that can stop this greed and money printing is an external event such as climate disasters, or something else unforeseen. And even then, they would probably find a way to profit off of this like they have off of the pandemic.
        Anyway, thanks for your site. I enjoy reading it and appreciate your wisdom. Thanks for responding to me also.

  47. Hg says:

    TSLA up 88% on the month. Goodbye FAANG Hellooooo, GNAFTA!

  48. happy_man says:

    Wolf I love your writeups on the giant 5!

    How to justify such insane valuations:
    1) Facebook & Google will obviously quadruple their advertising revenue & profits.
    2) Amazon will never screw up and issue shares to buy ALL retail and ALL retail real estate in the entire world. And never ever screw up.
    3) Everyone will switch from android to iphone, and get hooked on pay to play apple store apps
    4) Businesses will triple their spending on microsoft products. And not consider any of the free and better alternatives for email, spreadsheets, operating systems, chat, collaboration, webservers and databases that have existed for 20+ years.
    5) Facebook, Google and Amazon will suddenly become shareholder friendly.


  49. aqualech says:

    Disclosures first: I own little or no mega cap tech stocks. But really, you could now live in a world where everything was purchased through Amazon, maybe even real estate by now. All social interaction through FB. All electronics (phones, computers) from Apple. Software to make the world run from MSFT. Your data owned stored sold by Google. These monopolies are being allowed to flourish

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