“Giant 5 Index” – AAPL, MSFT, AMZN, GOOG, FB – Sagged All Week, Rest of Market Rose, Still 2.5-Year Wild Ride to Nowhere

And the FANGMAN shivered as Netflix got knocked down.

A reversal of roles took place in the stock market last week: The “Giant 5” combined – Apple, Microsoft, Amazon, Alphabet, and Facebook – had a lousy week. And the FANGMAN, which includes Netflix and Nvidia, shivered. But the rest of the market rose.

Over the week ended Friday July 17, the combined market capitalization of the Giant 5 fell by 3.5%, or by $234 billion, to $6.40 trillion. Friday a week earlier, the combined market capitalization of the Giant 5 had reached an all-time high of $6.64 trillion, having skyrocketed since their crisis-low on March 16 by 62%, or by $2.54 trillion (market cap data via YCharts)

Four of the “Giant 5” fell during those five trading days. Only Apple ticked up a smidgen. The list shows the percent change over the week and the market capitalization (number of shares outstanding times current share price) as of the close on Friday:

  1. Apple [AAPL]: +0.3% to $1.67 trillion
  2. Microsoft [MSFT]: -5.3% to $1.54 trillion
  3. Amazon [AMZN]: -7.7% to $1.48 trillion
  4. Alphabet [GOOG]: -1.9% to $1.03 trillion
  5. Facebook [FB]: -1.6% to $688 billion.

Alibaba [BABA] doesn’t make the list because it’s not a proper stock that conveys a slice of equity; it’s an ADR, issued by an offshore mailbox company that has a contract with Alibaba. Holders of BABA have no ownership of Alibaba, the Chinese company. They have ownership of a mailbox company that has a contract with Alibaba.

How did the rest of the market do without the Giant 5?

Even as the Giant 5 had a lousy week, the total market, as measured by the Wilshire 5000, which includes all 3,415 or so stocks listed in the US, rose 1.6% over those five trading days.

But my “Wilshire 5000 Minus Giant 5 Index” — the rest of those 3,415 stocks without the Giant 5 — rose 2.9%.

This was a big move, but it still left the “Wilshire 5000 Minus Giant 5” 2.4% below June 8, and 8.6% below its peak on February 20. In fact, it’s up only 2.2% from January 26 of 2018, having been on a two-and-a-half-year wild ride to nowhere, and underperforming even a despicable savings account over the period, while whacking investors with a huge amount of volatility (Wilshire 5000 data via YCharts):

Under the magnifying glass.

The chart below shows the percentage change of the “Giant 5 Index” (red line) since its pre-Covid peak on February 19, against the “Wilshire 5000 Minus Giant 5 Index” (green line).

On Friday July 17, the “Giant 5” was up +14.5% from February 19, while the “Wilshire 5000 Minus Giant 5” was down -8.6%. But note the reversal last week:

Since January 2017, as the shares of the Giant 5 have skyrocketed, the weight of the Giant 5 in the overall stock market has surged from 10% in January 2017 to 20.4% on Friday July 10 – just five stocks! But the decline of the Giant 5 over the past five days, and the increase of the rest of the market caused their weight to drop to 19.5% (Wilshire 5000 data via YCharts):

The FANGMAN shivered.

The FANGMAN are the Giant 5 plus Netflix [NFLX] and Nvidia [NVDA]. The two are not giants, like Apple is a giant. It would take nearly eight Netflixes (so to speak) to equate the market cap of Apple. But they’re large and they’re crazy, and they’re captured along with the Giant 5 by my FANGMAN index.

Among the FANGMAN, only Apple ticked up during the week (+0.3%). The other six components of the index fell, with Netflix plunging over 10%. This pushed the FANGMAN index down by 3.7% for the week, or by $266 billion. After having soared 184% since January 2017 and tasted the intoxicating sweetness of $7 trillion ($7.14 trillion on July 10 at the close), the index sank back to $6.87 trillion (market cap data via YCharts):

So what we saw this week was an reversal of the divergence – with the incredibly surging Giant 5 and the FANGMAN taking a hit, while the rest of the stock market combined rose fairly strongly but remains a dud, beaten by despicable savings accounts over the two-and-a-half years since January 2018.

Was June as Good as It’s Going to Get in the Pandemic Era? Read… “Uneven” Freight Recovery after New Covid Outbreaks: Daily Truck Trips Already Fell 10% Since June 25

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  103 comments for ““Giant 5 Index” – AAPL, MSFT, AMZN, GOOG, FB – Sagged All Week, Rest of Market Rose, Still 2.5-Year Wild Ride to Nowhere

  1. Vsitr says:

    (Friendly OT… was expecting to see next QE Unwind update.) (?) (-:

    • Wolf Richter says:

      Ran out of time on Thursday, when it came out. Summary: Repos now = 0 gone, history; SPVs -$1.3 Bn; MBS +$37 Bn, purchases from two months ago; Treasuries +22Bn; Swaps -$24 Bn

      • former says:

        When market drops say 15% and Black Rock and Vanguard start buying ETF’s and who knows what else, will this be reflected in Fed’s Total Assets. Will it show in these Special Purpose Vehicles or not?

      • former says:

        Edit: … when BlackRock and Vanguard start buying IN FED’S NAME, …

  2. Trinacria says:

    Thanks for keeping tabs on this, great information. From my way of looking at the tea leaves, it just proves how the many years – decades in fact -of phony money and cheap rates has spurred demand based on such unsound principles, has truly ushered the entire world in some weird distorted and altered state. Just like the laws of chemistry, when the laws of economics finally kick in to seek and establish some kind of equilibrium, it will be extremely harsh.

    By the way Wolf, are you still short the markets? Thank you.

    • VintageVNvet says:

      Trin,
      Not to disagree with your major concept above, but, in my long study of both ”physical/hard sciences” and even longer for the ”social” or ”soft” sciences such as economics, there really do not appear to be any such thing at all as ”laws” in the latter similar to those easily proven over the last few centuries since that guy in what is now Italy, etc…
      And, to be really really ”rigourous” in the most anal way of the ”hard” sciences,,, even most so called ”laws” there are just mutually agreed theory or concept at this state/stage of our inquiry.
      Any hard core scientist who has not sold out to money will be happy to tell you the difference between GAAT ”science” and the basic theory beneath them, usually with a lot of conditions, AS there Always IS!!!

      • jmayer says:

        Also any real scientist will refrain from using the word proven. First day in introductory bio sciences, “The scientific method is not used to prove anything, rather you disprove all other possible avenues until you arrive at a possibility that can’t be disproved, and that remaining possibility is your answer for the time being.”

        • nocte_volens says:

          Exactly what I was told at my first day of university many decades ago.

        • Underground says:

          There is such a realm. I used to construct proofs for a living.

        • CRV says:

          BINGO!
          But sadly journalists and politicians like to speak in the more powerfull terms like science-‘proof’ and science-‘fact’, instead of ‘possible’ and ‘plausable’. The latter have the sound of ‘i’m not sure’. Thats considered a weakness.
          Dont forget we, the people, only accept hard decisions based on facts, not assumptions. It’s all psychology.

      • Paulo says:

        Vintage,

        You have to accept in these crazy days the old time hard science that encompasses “Gravity”. :-) The tale of Issac Newton getting conked on the head by an apple might be a decent foreshadow/metaphor for those boosters who are going to get conked on the head by the falling Market or limits to growth.

        And will we hear the whining and gnashing of teeth in a vacuum; the vacuum of empty heads? I don’t think we will. I think we’ll be too busy picking up the pieces and wondering why it took so long?

        regards

      • Lisa_Hooker says:

        Example:
        The Scientific Method.
        Or less cryptically – “So far, so good.”

    • Clockwork Orange says:

      If only there were such things as laws of economics.

      • M says:

        Yale’s Stephen Roach predicted a dollar decline in Bloomberg. That is what I see. The Weimar Republic is just one example of money printing gone wild.

        The conflict with China and allies’ desire to stand by us may delay this but not forever. Since the real value of most transportable assets will remain, some business values will go up in dollar terms. Many will go down in real purchasing power internationally.

        • Dale says:

          But what currency will prevail?

          Here are some of those in far worse shape than the dollar, in terms of CB balance sheet vs GDP:

          Euro
          Yuan
          Yen

          Source: yardeni.com

        • Wolf Richter says:

          You need to add the Swiss franc (CHF) to the list.

        • M says:

          Free Advice: do not have anything to do with the Chinese communists’ fantasy economy or companies or money. With luck, if things keep going the way they are, the Chinese people will be freed from those parasitic, communist cadres soon. No one knows when that economy will blow up.

          If you want to invest with the Chinese communists, I recommend that instead you seek a friendly, American con man and make a nice investment in a bridge in Brooklyn. That way, at least the economic multiplier effects will remain in the USA.

  3. jmayer says:

    2nd paragraph has a typo, should be 6.4T not B.
    Is there any data on who is purchasing this stuff and whether the high share prices are being used to collateralize other bets? I just don’t know where all this money is coming from.
    I sold 75% of my equity to hang out in cash about 2 weeks before your short announcement. A week later I went short about 5% of wealth with actual shorts at 310 and Oct puts on SPY at a 303 strike . So far getting hammered but not too bad as other equity positions have softened the blow.
    I feel like I am living in La La Land right now, something has to give.

  4. Charts are supportive of a move higher. The money flow oscillators are pointing up, and I don’t think the institutional buyers will pass on a chance to push through to new interim highs and bring the retail trade into the rally. Bank reserves are elevated which implies there is money in trading desk accounts. Low volume has been key, such is the weapon of the bull. A small amount of money is currently able to leverage an outsized move in price. Regime change is priced in. Challenger promises to heal the nation and continuity in economic policy. Circa 2007. The corporate bond market is well positioned. A rise in yields is a boost to bond ratings. Otherwise companies can open new lines of credit. Getting ahead of myself the next big thing is Tesla. US consumer pulls back, there are others.

    • sunny129 says:

      ‘Low volume has been key’

      That’s bad news going forward when the smart monry is selling and the retail keeps on buying! Just like prior to 2008!

  5. sunny129 says:

    I shudder to buy directly any of these fabulous FAANGs stocks. But I do trade options, both ways in small quantities. Hard to go against GOOG and GOOGL just against TSLA. Until Fed NOT allow any price discovery, nothing will change!

    But I have ventured into buying ( nibbling on dips -ONLY) these indirectly thru ETFs/ETN like FDN, OGIG and FNGU! ( study them before investing!)

    All my TRADES have built-in hedges, learned from my long experience, since ’82, especially since ’09, when this surreal mkt took off!

  6. sunny129 says:

    How much stocks are over valuated?

    The current forward price-to-earnings ratio on the S&P 500 based on 2020 earnings is 35.6 times earnings. The historical average forward price-to-earnings ratio on the S&P 500 dating back a century and a half is 15.6 times. Thus, today’s valuation is more than +125% greater than the historical average.

    The forward P/E ratio on the S&P 500 has been higher than 35.6 only two other times in history. Both are recent episodes. The first was from 2001-Q1 to 2002-Q2 during the bursting of the technology bubble. The second was from 2008-Q2 to 2009-Q1 during the Great Financial Crisis.
    h/t Eric Parnel

    FED is busy in continuing ‘EXTEND & PRETEND’ operations!
    I continue to pray for the day of reckoning and the great RESET!

    • Chauncey Gardiner says:

      Not to be heretical nor defend an institution whose policies have damaged those citizens seeking to avoid speculation and withhold their support from looters whose actions have led to the concentration of extreme wealth in the hands of a relative few through abuse of debt. But IMHO it’s not all on the Fed. Further, I anticipate continued and even more severe financial repression of the prudent and ethical by methods besides Fed monetization going forward. The only politically acceptable avenues to enable the servicing and reduction of the tremendous overhang of private sector debt is by suppressing and maintaining Treasury bond yields below the rate of inflation for a protracted time period, as well as restructuring through bankruptcy. As Keynes observed, “By continuing a process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”

      I know, hard to imagine inflation in our current environment. But just looking at the prospective effects of the M1 and M2 rockets for the 4 months ended June 30th, the sudden emergence of official discussion of “Yield Curve Control” policies, and prospects for modestly improved economic activity, I attach a higher probability to it going forward. Also seeing it in food prices, etc. Would Luv to see the perps pay the economic and social costs, but view that as unlikely under current structures.

      • sunny129 says:

        ‘suppressing and maintaining Treasury bond yields below the rate of inflation for a protracted time period’
        ??

        The inflation rate is around 2.0%. Fed rate is around 0.25% and 10 y yield is below 0.7%.

        So it is already BELOW their ‘own’ inflation rate. Real inflation is much more than that (5-13%!?)

        • Chauncey Gardiner says:

          In May the CPI fell for the third consecutive month

          Don’t think that has happened before. Over the past year, consumer prices in May were up 0.1% and “core prices” were up 1.2%.

          But in June, the CPI jumped 0.6%, or over 7% on an annualized basis. It’s the continuing differential between very low Treasury bond yields and the CPI that represent financial repression. I feel that’s a key metric we should be focused on.

          Does the government game the CPI numbers?… Entirely possible, maybe even probable, but darned if I know.

    • Zantetsu says:

      Nobody knows what the P/E ratios “should be”, only what they have historically been. I see no reason that P/E ratios cannot be arbitrarily large. The stock market is just a big gamble on what you think other people will think, P/E ratios obviously don’t affect people’s thinking as much as you are suggesting they should.

      • Raymond Rogers says:

        Exactly. At one time normal was not normal. Prior to being normal it was the new normal. Some people didnt know it at the time.

      • Cas127 says:

        Z,

        “I see no reason that P/E ratios cannot be arbitrarily large”

        There is a perfectly good logic to rational PE valuation if you view stock/equity as a sort of machine…x dollars “in” in exchange for y net dollars out (as retained earnings, dividends, buybacks, etc.). Those flows (with interest rates also included) can be approximated using discounted cash flow formulas…PE ratios are a reflection of those flows, with an implicit growth factor (but that assumed growth factor can be absurd, as with the case of absurdly/illogically high PE ratios).

        It is not a perfectly accurate process, but it is anchored in a view of a company as a cash in/cash out machine…not a blind bet about the blind bets of others.

        It also has a superior long term track record.

        “The stock market is just a big gamble on what you think other people will think”

        That is only *one* transient way of viewing it, the way that leads to gross volatility and armies of ruined, guessing/gambling investors.

        The “machine”/metric based view described above tends to have investors avoid the extremes created by the “guessing about guessers” view you appear to support.

        At any given moment a stock can diverge from a metric based valuation, due to the transient enthusiasms of the crowd (divorced from any realistic underlying economics of the company) but the metric based valuations tend to be the mean that prices regress to in the long term (because they are anchored in the real world results of the company…not the mere speculation of the crowd).

        • Zantetsu says:

          But money is not put into the market or taken out of the market automatically based on processes explicitly tied to earnings. It’s all human judgement (or algorithms designed to execute human judgement on a faster time scale).

          Therefore, regardless of fundamentals, the actual prices follow human judgement. And therefore predicting future prices means predicting the future of human judgements.

          Sure, ‘fundamentals’ can be one factor that one can try to correlate with expected human judgement about prices. But it’s proving an increasingly weaker and weaker factor.

        • Cas127 says:

          “based on processes explicitly tied to earnings”

          “But it’s proving an increasingly weaker and weaker factor.”

          Only in the short term…plenty of heavy trading types get “caught on the corners” and slaughtered every day because they miss the turn of fundamentally unknowable crowd psychology.

          Looking to the longer term, real world performance of the underlying company anchors valuation to more knowable, predictable factors (as least opposed to “popularity”/”momentum”…which work until they…don’t, usually ending in an accelerating crash as the unreasoning crowd all head for the doors simultaneously)

          There is a reason for the saying that, “in the short term, the mkt is a voting machine…in the long term, it is a weighing machine.”

      • Earnings are derived from credit, and that is easy and plentiful. The P/E of individual stocks feeds off the P/E of the market, and is self reinforcing. It also works that way on the downside. Wall St is loathe to ever sell the market based on earnings. Earnings season is a celebration, that is why they call them earnings.

        • Zantetsu says:

          But except for divident-paying stocks, earnings don’t get a stock holder *anything* except the expectation that someone else will pay more for the stock, and that is only based on historical trends where higher earnings correlate with higher stock values.

          Sure, if a company goes bankrupt I guess the stock holders also get something, although I think it’s usually a pittance and just a consolation prize for having lost a bunch of money. But aside from that (and dividends, for those stocks that pay them), earnings only indirectly correlate to stock values, and only because “people expect them to”. And fewer people are expecting them to these days …

          “Sexiness” is probably more closely tied to stock price than fundamentals since the mid 2010’s or maybe even earlier.

      • Ross says:

        I worked for E*TRADE at the end of the previous century, and at that time, our (and many other bubble companies’) forward P/E was north of 200. We had many smart and well respected industry “experts” try to convince us (employees) that this was the new normal. Turns out it wasn’t. Historic averages are useful because they smooth out the booms and busts.

    • Lisa_Hooker says:

      No worries sunny – this time its different.

  7. Mark says:

    Seems to me this is a result of a market capitalisation weighted index, so that the largest stocks are driven up disproportionately during a bull market.

    Together with passive index-linked investing necessarily driving new funds disproportionately into the top cap stocks.

    Of course when the party ends the effect will work in reverse …

    • sunny129 says:

      ‘when the party ends’
      ?!
      Only, when the FED and other CBers, quit supporting the indexes and this 3rd largest ‘everything’ bubble. They are NOT in a mood to end the party at the Wall ST! It is their creation!
      They will carry this circus with more ‘credit creation’ aka printing digital $$ out of thin air, until it crashes on it’s own weight! Until then PRETEND & EXTEND show will go on!

      Covid 19 spread will challenge them all the way!

      • Zantetsu says:

        I actually agree with you. But if you can’t beat ’em, join ’em. I recently converted my 401k entirely into a brokerage account where I can do day trades at will. I did this because I like the more instantaneous control I have over positions — I have sometimes moved my 401k from index funds to treasuries when I figured the market was going down, and it’s saved me from some losses. But it is frustrating that getting out of the index fund happens on their schedule and at a price/timing that I can’t control. With a brokerage account I can get out immediately whenever I want to, and can get back in just as quickly.

        I tried to mimic the S&P by basically buying the top 20 stocks of the S&P, the only difference is that I weighed a bit more towards the FAANG stocks since they just keep going up.

        When everything falls apart again I expect to get out quickly.

        Overall since inception of this method I am pretty much flat this week, maybe 0.4% up or something small like that.

        I’m already learning some lessons. I stupidly put an overnight market price order in for a stock that had just had great news, and ended up buying it at its highest possible price and then immediately losing 10% on that one. Luckily, the stock has come back 15% since Wednesday so I’m slightly in the green. But it would have been so much smarter to put a limit order in the next day based on the actual price instead of letting some seller dictate a stupidly high price to me.

        Similarly, I’ve just barely missed on a few stocks that I had “a good feeling” on that I declined to buy because they were like 10 cents over my target price, and they’ve since gone up 10%. Should not have been so obstinate over such a small sum. Still learning …

        • Anthony A. says:

          Rule of thumb: Never place a market order.

        • sunny129 says:

          Experience is a good teacher but the tuition is always high!
          (been in the mkt since ’82 – I know!)

          Remember : Reversion to the mean can be delayed but cannot be banned. Study the Mkt history of over 200 years! Stocks’ valuation is stretched beyond 1929, 2000 and 2008!

        • DeerInHeadlights says:

          “When everything falls apart again I expect to get out quickly.”

          Famous last words…

        • Zantetsu says:

          Yes, Deer, I will have to be fast to avoid losses. But I feel like I can be faster with individual trades than I can waiting for my index fund to get around to servicing my request.

          The alternative, of course, being to not invest in the market at all, which I will be happy to do once the charade is up.

        • Happy1 says:

          Zantetsu,

          The algorithms and professional traders are thousands of times faster than an individual investor and they don’t sleep or take a day off. Unless you are invested for the long term you should reconsider your strategy, it’s enormously risky.

        • Zantetsu says:

          I don’t have to be the fastest. I just have to be fast enough to make a better return than I could using index funds. I’m not expecting to get the best return possible, just hoping to do better than I could using index funds.

        • Mark says:

          Algorithms are micro-second traders and institutions have liquidity problems so the retailer that is nimble has an edge.

          I could tell you that statistically, even with that edge, you will not be the exception as a trader and will probably end a net loser.. but I won’t, even though it’s true :P

          Once upon a time I worked as a trader on a desk at a rather large firm and the previous posters are right to the extent that if you knew who you were trading against, you wouldn’t even bother.

          If you and I are being chased by a bear, I don’t have to outrun the bear. I just have to outrun you. And I spent 60+ hours/week perfecting my sprint. Such is the market and woe to the uninformed traders.

    • Cas127 says:

      “a result of a market capitalisation weighted index”

      That does seem to be a big part of the current pathology, along with a broad refusal to exit entirely an obviously overvalued equity mkt, because the spearpoints of ZIRP gut anyone trying to exit.

      Corrupt gvt policies have made the equity mkts and broader economy sicker and sicker…justifying more and more perverted gvt involvement.

  8. JasonB80 says:

    What about “COVID” stocks like NVAX, INO, SNOA etc etc etc

    Very hard to determine value anywhere!

    • sunny129 says:

      Every one claims that they invented the next ‘HOLY grail’ vaccine including MRNA and Gilead, every week!

      • EJ says:

        And they’re all priced like its already out, and they’re charging $1k per subsidized innoculation.

  9. Bruce George Adlam says:

    If you can get past gravity the universe is the limit but it’s a very very very harsh environment as we keep coming back to earth .despite NASA and all others efforts they end up back on earth. we are not even remotely close to leaving without having to come back .the market is no different it will come back to earth

  10. Fat Chewer. says:

    Question: If the mainstream media doesn’t report it, did it ever really happen?

    • andy says:

      It likely didn’t happen if they did report it.

    • Cas127 says:

      Hmm…if the MSM *did* report it…*did* it actually happen?…

      90% of the MSM have operated as uniform ideological propagandists for so long, they are distrusted even when telling the (approximate) truth.

      Along with a lot of other US “institutions”, they reclined on/sh*t on their received credibility so long, that they have lost it through demonstrable deceit and incompetence.

  11. MonkeyBusiness says:

    Technology is deflationary by nature. Not sure what people are smoking when thinking that technology will be a panacea to everything.

    • sunny129 says:

      Deflation to certain repetitive labor intensive industries but boon to E-commerce, distant learning/conferencing, cloud space, robotics and cyber security .

      That’s where my money is being invested, only nibbling on dips. the above areas will thrive in the post covid recovery, if and when it comes.

      • MonkeyBusiness says:

        Commerce is the most repetitive thing there is. It’s buying and selling. When everyone has moved online, why would e commerce be an advantage?

        Also why is Amazon opening physical stores like crazy?

        • MiTurn says:

          Cheap deals on brick-and-mortar properties?

          I remember when the big and successful women’s clothing retailer Coldwater Creek went bust. They were super successful as a catalog retailer and seamlessly moved into online sales, but got arrogant when the also moved into brick-and-mortar– killed the company, went bankrupt. Talk about a misstep.

        • sunny129 says:

          ‘When everyone has moved online’

          Has every one, really?
          E-commerce will keep growing with many platforms for many enterpreneurs and clients and products across the World! Checkout EBIZ and ONLN etfs!

        • sunny129 says:

          TEchnology is replacing the repetitive ‘manual labor’ or skills and such that.
          E-Commerce itself is being re-invented along with robotics in many industries

        • MonkeyBusiness says:

          Amazon has been opening physical stores since way before the pandemic.

          Seems like people replying to my post keep ignoring that point.

        • Thomas Roberts says:

          MonkeyBusiness,

          The big thing ecommerce will have difficulty replacing is food. Amazon’s setup isn’t built around this and it would be difficult to just add food to it’s supply chain. Physical stores are still the best way to go for this. In the future maybe, Amazon, can combine or phase out the “whole foods” supply chain, but, that’s a ways off. And there is always going to be enough demand in every city to justify B&M grocery stores. The level of demand determines the size and numbers of said stores.

          Book stores. Amazon only has a handful of them. There will continue to be enough demand for many specialty stores in big cities. The absence of any book stores, gives a potential competitor an easier chance to first open book stores and then move online as well, and then compete with Amazon. Amazon opening its own book stores makes this harder. Books are still a significant part of Amazon.

          While online could take over many things, there will always be certain things that will be needed locally. Stores like AutoZone and many others, could be replaced by competitors or a single got everything costco like store, but, B&M isn’t going anywhere.

          There’s mainly just a very large overabundance of clothing stores. And many things are going digital, which, is neither online or B&M. There are of course many smaller stores being pushed out in favor larger stores. And the decline in disposable income could effect alot as well.

    • Cas127 says:

      Not sure what central banks are smoking when they treat cost efficiency (“deflation”) as the ultimate evil, worth ruining the economy over.

      I mean, my god, look at the horrible results of relentless computer price deflation…there is hardly a vacuum tube behemoth to go around thanks to all the “destructive” price competition that has merely resulted in the creation of billions of PCs.

      What a dystopia ZIRP saves us from…

      Almost makes you think the CB’s are in the service of incumbent producers rather than the country as a whole…

  12. breamrod says:

    the bulls will say yes is a healthy rotation taking place . sell tech and buy healthcare, biotech, utilities. we’ll see !

  13. andy says:

    S&P 5 represents 37% of the S&P500 value and 10% of its revenue.

  14. polecat says:

    Poor, poor Corpserate Goliaths ….

    Honest to GODs everywhere! The really insulting thing about it all, is that they all haven’t had their date with the HANGMAN!! These bidness behemoths ( there ARE others…) don’t .. by humble human societal standards, deserve to exist. THEY ARE, in essence .. the primary cause of the chaos we all are experiencing presently – ‘monopolies de morta’ *

    It is in essence, 90% of Wall$reet, at the behest of our gloriously beneficient, compliant, and totally corrupted Federal Gov.TM .. with spoonfulls of Academia/Credentialed Class, all gauntlet to gauntlet … to give us what is ‘our rite(s) & bernaysian rituals as is demand by ‘consumers’… from the chummy Clouds they all float through!

    To its exponential conclusion, We, Homo S. var. AlphaInsanensis, ‘the top of the line’ .. or so we think, get to experience various ‘bottlenecks’ .. maybe rather soon, too.

  15. Robert says:

    It’s likely we’ll see a rotation into value stocks, while the big guys trade sideways. Fed balance sheet back into expansion mode, and the money has to go somewhere.

    Either the market is blasting off this summer or correcting.
    It appears the men with the printing press will win. The only shoe to drop is something confrontational with China.

    Stock valuations are apparently meaningless. Fed money supply is the one ring to rule it all.

  16. Illumined says:

    Do you guys think we’ll ever get back to a time when markets set asset prices instead of central banks? Surely this can’t continue forever, or can it?

    • Clockwork Orange says:

      When has a market set a price? When was a price not set by a market? What is and isn’t the outcome of a market? Would be nice for words to have a meaning. Would make room for the use of reason.

  17. raxadian says:

    Netflix biggest competition is Disney and Amazon. Disney owns Marvel meaning all Marvel stuff, save old movies, is gonna end as an exclusive on Disney streaming service sooner or later.

    While Netflix has original series only a few of them are really popular, so with losing Marvel? No wonder they are taking a hit.

    • sunny129 says:

      Sorry. AMZN and DIS have no chance of dislodging NFLX!

      Have you seen the choices among the these 3!? I have AMZN and NFLX but prefer the latter!

      • MonkeyBusiness says:

        You know what’s the most watched show on Netflix? Friends. And that has moved to Disney. It has nothing to do with what you like.

        • MC01 says:

          For me the most amazing thing is how a company like Disney, well known for having the right formula to “hook ’em up young” (move along tobacco companies), has been resorting to very expensive M&A to buy growth.

          The most popular children cartoon from the last decade in Europe, and by a large margin, has been Masha & the Bear which was produced using an off-the-shelf animation software on a budget that wouldn’t pay for designing a single Disney background character.
          It’s not like Disney did not try hard to squash this upstart but here is the extraordinary thing: it’s the parents that try and push Disney cartoons because, well, Disney is Disney and so seen as safe as it can be. The children however love Masha and her chaotic, energy-filled adventures. No need to tell who has won in the end. ;-)

          That a company like Disney had to resort to buying the rights to broadcast a 20+ year old sitcom instead of creating successful original content tells me that this once great company has lost its way. Those children who now watch their two Masha & the Bear episodes a day will be extremely hard to hook up at a later date and, dare I say, they will be extremely difficult customers to please. Cannot keep them satisfied with a 20+ years old sitcom that 40-45 year olds are watching to relive their youth, let alone with Seinfeld (whose broadcasting rights Netflix bought for over $500 million).
          Kinda like it has happened with music, the Internet will provide far more choices and will usher in a new golden era for TV.

      • VintageVNvet says:

        sun12,
        Spouse and I had the most amazing experience Sat. eve, when instead of the movies we checked out the tv offerings, and, voila,,,
        added a dozen, some old, some new ”original” stuff, and ended up laughing so hard I was choking,,, but what a way to go, eh
        IOW, I think you got it backwards, and if i were still in the SM, i would be shorting the flix one far shore!!
        ( OUT of the SM since 1982, after 30 years of ”learning experience.”)

      • raxadian says:

        Disney is fighting Disney.

        Disney most popular modern cartoon, new Ducktales, airs on regular Disney channel. Disney Big Hero Six cartoon airs on Disney XD that’s also on cable. Heck both Disney and Disney XD usual are to be on the same just slightly above basic Cable package.

        So most people liking Disney can just get by using Cable.

        Now if you want all those Marvel shows, get Disney streaming service because Netflix is losing them.

        • Lisa_Hooker says:

          Very little “airs” anymore. There is little free broadcast TV anymore, excepting 30 minute commercials and 30-40 year old game shows and “court” TV, etc. Broadcast “news” has become politically biased editorializing. It’s all the least common denominator. What you deem “airs” is internet streaming. After so many years “they” have us where they have wanted. We now have “pay-TV” with advertising. In addition we pay the internet providers monthly for what was once free broadcasting over-the-air.

  18. MCH says:

    FANGMAN minus the Ns account for something like 35% to 40% of the NASDAQ 100, this has been a topic on various financial media channels. The only real question is how they will fare this earning season.

    So, it’s either on we go through the stratosphere or back down to Earth we come. I don’t think either of the Ns are as meaningful at the moment. But Microsoft is on deck first this week, then we have to wait for a few weeks to get the rest.

    I would guess that out of all of them Apple is going to be worse off since they face a number of hurdles with their essentially hardware business. I also think FB and GOOG are both in trouble because ads are being discretely cut, but the extent of that trouble is TBD. Ironically, Microsoft is likely to be least affected out of all of this mainly because they never had much of a hardware business to start with and the rest of their business seem to be focused on enterprise. And Amazon will be Amazon.

    Expect the Qs and SPY will be up through most of next week, but Amazon and then Apple will decisively knock down these numbers.

    • sunny129 says:

      Not if the Covid 19 # also zooms up. all over, again!
      Come Thursday another a couple Millions to join the unemployment roll.
      Nearly 40 if NOT 50 M will be on the receiving dough at the end of this year. I hope I am wrong but, this time it is different, right?

      My bets are gold/gold mining stocks!

    • MonkeyBusiness says:

      I think all tech stocks will disappoint, but they will still beat expectations. That’s just how the game is played.

      • Thomas Roberts says:

        Apple recently announced their computers are going to use in house ARM chips (it’s being phased in, but is a permanent move), meaning better margins or lower prices leading to more sales. Intel chips are garrbage, and on the way out. ARM chips produce less heat, will be faster (not immediately), and cheaper. They are many other advantages as well. This is computer only though (phones and tablets already use ARM). I think this years iPhone will probably do better than expected. I would expect apple to do better than most this year. With everything going on though, who knows what crazy sh*t will happen?

        Longer term.

        Most consumer electronics companies probably got 5 years of large profits left and then it will decline hugely over time, by year 20 from now, they could still be around, but, make very little. The yearly incremental updates will start to run dry and cheap competitors will catch up, plummeting the price, similar to what happened to TV’s. Apple might do better than most, because, it owns it’s own operating systems. Microsoft could make more money from videogames then it currently does, but, less overall than it does now (total including windows and everything else). In consumer electronics owning the digital store, where most people buy digital media from and getting a slice is the real prize.

        The real tech companies making money going forward, will be those involved in automaton.

    • EJ says:

      I’d argue that Apple is increasinlgy using their hardware to sell software.

      Also, Amazon and Google are making some rather large investments into their own silicon design, for more or less the same purpose: to sell time running software.

  19. MonkeyBusiness says:

    Speaking about Tesla, a Chinese competitor called Xpeng Motors just received a 500 million dollars investment from a number of VCs. Their offering is one third the price of a similar offering from Tesla.

    Last time around when Xiaomi came up with a similar business model, Samsung went from no 1 to irrelevant within a year or two.

    Tesla is almost toast. “Destruction secured!!!”

    • Thomas Roberts says:

      I don’t trust those kinds of announcements from China, lotta scams there. Also, we are in a trade war, that will probably hugely intensify, I don’t expect Chinese cars will be allowed in.

    • MC01 says:

      VAG (Volkwagen AG) has just spent €1 billion to buy a 50% share in JAC Motors, a Chinese State-owned EV manufacturer, plus another €1.1 billion to buy a 26.5% stake in Guoxan High-Tech Co, a Hefei-based battery manufacturer which will now supply batteries to VAG-built EV “all over the world”. Just one ordinary day in the world of EV.

      Honestly Xpeng Motors is the last of Tesla’s worries but Tesla shareholders are still clinging to the notion the company possesses some unique and exotic technology that will somehow allow them to rule the world while these days EV manufacturers are a dime a dozen.

    • MiTurn says:

      Status-conscious people will prefer the Tesla, in part because it is 3x in price.

  20. Martok says:

    From Marketwatch:

    “The wealthy loaded up on stocks in March — now they’re selling, warns ‘fortress bank for billionaires’….”

    “UBS, which is known as the “fortress bank for billionaires, said that these families, with an average net worth of $1.6 billion, are moving those profits out of the stock market and into illiquid and private assets — everything from residential real estate to private equity.

    Stadler said he expects the bearish trend, which is happening all over but is most pronounced in Asia, to continue and weigh on markets for the remainder of the year.”

    Also Wolf was mentioned in another article from Marketwatch, – Congrats Wolf!!

  21. Island teal says:

    Nutflakes has been propelled by funny money for years. Many times discussed on this very same blog. The new co-Ceo certainly is not going to improve anything as he is part of the historical Ponzi 😊😊

  22. DanS86 says:

    If the Fed chases away all the shorters, they think the market has nowhere to go but up. That’s like thinking taking away a predator is good for the prey…until the food shortage and disease arrives.

  23. Us need to look to see if this mess is spreading to the corporate bond market. If so, then a really deep crisis awaits us. However, this is rather deflationary than inflationary imo.

  24. Duane says:

    In “the naughts” Barrons would write articles on how over priced AMZN was. Nothing changed, AMZN marched higher. NFLX will continue higher as the hype machine will not be stopped. This is our economy now. The Fed backstopping the stock market is more effective than FDIC insurance on bank accounts. (Whose accounts pay nothing thanks to the endless war on savers by the Fed). Look at the stock market the past twenty years, IMO not natural. Wishing for stock indices to fall is a fools errand, the Fed will not permit it anymore. And how else would we know that the economy was A-OK if stocks weren’t rising? These 5 stocks just provide an easy way for central banks to manipulate the market.

    • Cas127 says:

      “The Fed backstopping the stock market is more effective than FDIC insurance on bank accounts.”

      Tell it to the 200 publicly traded oil companies the Fed let go BK post 2014.

      The Fed Put is not an infinite put.

  25. Just Some Random Guy says:

    I’ll take a few more years of that chart Wolf. 150% gain followed by a minuscule drop? All day every day.

  26. Adam Smith Engineer says:

    And yet today Amazon is up 5.5%, Goog and MSFT are up 2.5% each and AAPL is up 1% so far. This is not going down that easily.

  27. CCC says:

    I have been racking my brain over the last few weeks trying to come up with a plausible scenario where the Fed actually lets markets find clearing prices on their own. My current conclusion, the Fed will never allow markets to stand on their own so long as it has its current broad mandate and DC is in no hurry to change it. In fact, I expect its balance sheet will explode higher in the next 10yrs when DC begins the pension fund bail outs. First the private pensions which I believe have a $1-2T hole and then $4T for the public pensions. The Fed will be there hoovering up T issuance to keep rates from exploding higher.

    There will be very short periods of volatility and maybe the occasional “terrifying” 20% sell off whenever the Fed tries to shrink its balance sheet too much. But that is it.

    Is a 30 PE for Apple crazy w the 10yr at 0.70%? I am not a buyer but maybe buyers/holders have a long term view on rates.

  28. MonkeyBusiness says:

    IBM just posted pedestrian results, but because it beat sharply reduced expectations, the stock is rallying 5% after hours.

    ROFL.

    Markets will never drop more than 50% from these levels. Care to guess why? Because they’ll just close them till morale improves.

  29. unreasonable movements says:

    I think everyone is underestimating China’s corona stimulus. And their money escaping from loans from shadow banks and Hong Kong.

    Chinese individuals will take out loans to invest in stocks and foreign real estate and then flee the county. Of course it’s illegal, but capital flight from China is a big business. An enormous business.

    Plus Jack Ma & other multibillionaires investments in the US. Plus Alibaba’s associated US acquisition/shell companies for US assets and minerals.

    It’s intricate and opaque.

    I don’t like Trump much, and I’m not a Republican, but his and the GOP’s idea of sanctioning CCP members really appeals to me.

    Do people think a burgeoning cold war would not include China’s nationalistic manipulation in other countries’ resources and finances?

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