The Wild Ride of the FANGMANTIS Stocks v. Rest of Market

These 10 stocks, weighing 25% of the total market, are on one heck of a ride, now in the wrong direction. Rest of market has gone nowhere in nearly 3 years despite huge volatility.

By Wolf Richter for WOLF STREET.

The FANGMANTIS struck again. This WOLF STREET index of ten giant tech stocks, accounting for 25.5% of the total stock market capitalization as tracked by the Wilshire 5000, fell 1.1% today, though the broader market eked out a minuscule gain, with the S&P 500 up a hair.

These 10 stocks – Facebook, Apple, NVIDIA, Google parent Alphabet, Microsoft, Amazon, Netflix, Tesla, Intel, and Salesforce.com – are considered “tech” though they’re also into ecommerce, auto manufacturing & auto retailing, social media, film production and distribution, and the like. Their combined market value (outstanding shares times share price) at its high on September 2 was $9.3 trillion. Since then, the FANGMANTIS Index has dropped by 12.9%, or to put real dollars to it, by $1.20 trillion (market cap data via YCharts):

And yet, the FANGMANTIS Index has only fallen back to where it had been about a month ago, unwinding only the 15% gain between August 14 and September 2, that was part of the most astounding blistering blow-off-the-top 24% rally that had started on July 1. And despite the crash in late February and early March, the index is still up about 40% for the year.

While the FANGMANTIS index – I purloined the idea from a WOLF STREET comment by Duane – has dropped 12.9% from its closing high, the individual closing highs of the 10 stocks were spread over a period between August 31 through September 2, and these stocks have dropped between 5.8% (Intel) and 25.1% (Tesla) from their respective highs (date in parentheses):

  • Alphabet [GOOG]: -12.2% (Sep 2)
  • Amazon [AMZN]: -11.9% (Sep 2)
  • Apple [AAPL]: -16.5% (Sep 1
  • Facebook [FB]: -11.9% (Sep 2)
  • Microsoft [MSFT]: -12.0% (Sep 2)
  • NVIDIA [NVDA]: -15.3% (Sep 2)
  • Netflix [NFLX]: -13.7% (Sep 1)
  • Tesla [TSLA]: -25.1% (Aug 31)
  • Intel [INTC]: -5.8% (Sep 2)
  • Salesforce [CRM]: -13.6% (Sep 1)

Alibaba [BABA] is not in the FANGMANTIS because it’s not a common stock; it’s an ADR, issued by a mailbox company in the Cayman Islands that has a contract with an entity of Alibaba in China. Similar story with other big ADRs, such as Taiwan Semiconductor [TSM].

And all the other stocks without the FANGMANTIS?

The FANGMANTIS accounted for 25.5% of the total market, as tracked by the Wilshire 5000, which includes all 3,415 or so stocks listed in the US. So how did the overall market do without the FANGMANTIS?

This is tracked by my handy-dandy “Wilshire 5000 minus FANGMANTIS Index.” It followed a very different track. It has not reached its February 19 high. It is down 5.3% for the year. And it is up only 2.5% from mid-January 2018, essentially having gone nowhere in nearly three years despite the enormous volatility in between. On the other hand, it is down only 3.1% from its post-crash high on August 28 (Wilshire 5000 data via YCharts):

FANGMANTIS v. the rest of the market since February 19, in percentages.

The chart below shows the percentage changes since the pre-Covid peak of February 19 of the FANGMANTIS Index (red, +33.5%) v. the “Wilshire 5000 minus FANGMANTIS” (green, -7.5%):

The huge US stock market has become totally dependent on a few mega-ton high-fliers. There are plenty of smaller high-fliers too, with even nuttier percentage gains, but they don’t weigh that much.

And there are some former monsters that have collapsed, such as Exxon Mobil [XOM], down 65% since June 2014 and Chevron [CVX], down 40% since June 2014, along with the entire energy sector, where hundreds of companies have filed for bankruptcy since 2015, with their shares mostly getting cancelled and becoming worthless.

But it seems the entire world has focused on the FANGMANTIS stocks, with retail investors in Europe and Japan and elsewhere, where stock markets are still way down from their peaks many years or decades ago, piling in as the only sure thing that can only go up.

And that calculus worked out with some, let’s say, interruptions in recent years, but it also resulted in completely overblown valuations. The stocks of these companies were already giant in January 2017. But from that moment until the high on September 2, they gained $6.5 trillion in market valuation – nearly half of it since February 19. With trillions being tossed around on a daily basis, it’s easy to lose sight of just how big a trillion is – or $9 trillion for just 10 stocks:

Enjoy reading WOLF STREET and want to support it? Using ad blockers – I totally get why – but want to support the site? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.

  134 comments for “The Wild Ride of the FANGMANTIS Stocks v. Rest of Market

  1. TimTim says:

    FANGMANTIS.

    Briliant term!

    Honestly, it doesn’t get better than that. How many are going to get eaten by these stocks !!

    • DeerInHeadlights says:

      Yep. When in a bubble, many struggle to tell they’re in one. Hindsight is 20/20 of course. Just imagine if someone was enough to buy TSLA or AAPL or ZM or any of these raging stocks in Aug. They’re sitting 20-35% in the red and obviously too to know that it really can go down much more and will hold it against all hope. That’s just traumatizing and doesn’t have to be this way.

      Millenials complain about being the poorest generation but they also have the most information available to them in the way of historical data and analysis. Alas, peer pressure and herd mentality are powerful forces. If Newton couldn’t resist it…

      • DeerInHeadlights says:

        He he…my pointy brackets got filtered out. Use your imagination.

      • Thomas Roberts says:

        DeerInHeadlights,

        The fact is millennials do the same jobs as their parents and get paid substantially less after actual inflation. More information isn’t going to change that. You have to be able to save something in order to invest, in some areas in some jobs they can, in others they can’t. The overall selection of places to live and jobs available to young people today is far worse today than in the past in terms of income and standard of living. Some millenials do invest themselves, most boomers got stocks and the like through their job.

    • sunny129 says:

      @TimTim

      How many here, were in Tech boom during late 90s up to 2000?

      I was. CSCO had PE of 50! I was taking my MBA at Univ of South Florida (Tampa) Jan-March 2000, the professor of Financial management expressed his horror about Tech mania at that time.

      He explained CSCO cannot grow more than the economy itself but it keep zooming until March and then started sliding back first slowly and then rapidly. Nasdaq lost nearly 90% by the end of next 22 months! S&P nearly 60%

      No stock can keep on growing when the Global economy is slowly contracting with no sight of pre-covid 19 world, coming back any time soon.

      Like I have said, experience is a good teacher but the tution is usually very high!

      ‘Those who ignore the past are condemned to repeat it’ – George Santayana

      • John Taylor says:

        I was in college during the last tech boom. I was really excited about the stock market, read a motley fool book on investing, tried fake-money investing for a bit cause I didn’t have enough to open an account.

        My grandfather helped me set up an account with Datek, giving me 20 shares of EMC to start with. I was really excited, sold it all at $104/share as soon as I had access so I could decide what to invest in. Shorty after, the stock was down 90% … so a good start for me overall – I sidestepped the crash with blind luck.

        • sunny129 says:

          I was taking MBA for potential 2nd career (after I got retired (MD , diag Radiologist quit -due to politics) but that urge passed as the months by. Politics is worse in business/corporate world.
          Been in the mkt since ’82. This is the most SURREAL mkt of my life time with no underlying fundamentals. If NOT for the Fed’s PUT with 7 trillions+ counting, it couldn’t have survived.

          Now Economy and Mkt mania are worse than in 2000 and Covid 19 will make sure, it(Economy) keeps heading south. At the end of this DOWN cycle, more investors will lose, than ever before.

          ‘Reversion to the mean’ is part of 200 yrs of mkt history, can be delayed but cannot be banned by CBers. Bull and Bear are two faces of same coin. One follows the other just like 4 seasons!

        • John Taylor says:

          I find myself wondering it the stock market will ever fall significantly again just because the government and the federal reserve have never been this obsessed with the stock market in my lifetime.

          I think they (our great leaders) are terrified about a retirement crisis if they allow valuations to approach reasonably fundamental valuations ever again. They are even willing to turn a blind eye to frauds every bit as big as Madoff’s just to avoid having their stocks go down.

          With housing I think they figured out how to rig the market to only go up back in the Obama years, and I wouldn’t be surprised if they kept that going for a long time to come.

          I’m about 18% in puts right now – 80% against IWM and 20% against EEM – and if I get the pre-election dip I’m looking for I’m planning on dumping them and staying mainly long after that.

          I’ll be focused completely on the “store of value” trades of mainly gold miners, some SLV, some Bitcoin, and a splash of Etherium. As long as bonds yield near zero, those assets should do very well as investors look for anything to diversify their portfolios of highly overpriced stocks.

          In the 2009 crisis, many rules were rewritten on the fly, and I expect that to happen on a much bigger scale as things progress. The reactions so far are truly mind-boggling, and it’s just the beginning. We’ll be in a totally different world when this decade is done, that’s one thing I’m sure of.

        • itllcrash says:

          It will still come back to Earth one way or another. Maybe this time they’ll let inflation run wild and prick the bubbles. Or close the $$ spigot when foreigners stop taking them.

        • sunny129 says:

          @John Taylor

          Here is My 2 cents:

          Since I am retired I am nearly 40-50% CASH. This doesn’t bother me, since I have gone thru more than 2 bears and the importance of having enough dry powder at hand! 10-20% bonds(various type and time frame)

          Between inflation, disinflation and DEFLATION, I tend towards deflation although I keep some in gold/gold miners ETFs. Gold tens to get sold around 2000. So I swing trade their options both calls and puts. You can also do the same on FAAGs with FNGU (FDN) vs FNGD. Focus LONG on cloudfare, Robotics, health Tecs and cyber security (all ETfs!)
          Future is de-globalization – hence my focus on various SMALL international Cos especially EM mkts (although they will take hits initially) I have various div paying sector/global ETFs.
          Swing trades on options of dia, spy and qqq. I also use leveraged ETFs both shot and long. very few MFunds, mostly Vanguard with re-investment plans. Most of money in various IRAs. I also manage my family portfolio (over 10 accts+) keeps me busy.
          I am more of tactical (flexible) trader than strategic/structural investor. This got evolved over the years, learning from my own mistakes.

      • Thomas Roberts says:

        sunny129,

        Stocks can grow faster than the economy for awhile (if not super fast, decades), but, not forever. It is technically possible for even longer if they mainly get their money from overseas. The reason stocks normally shouldn’t be able to grow faster than the economy is that their profits and revenue cannot forever outgrow the total economy of a country, this was textbook thinking. In reality, we live in a savings glut and logically overall, new investments should actually give negative returns. Back in college my economics teachers never talked about these possibilities (maybe in another class?). This further extends for how long stocks can outpace the actual economy. But, inflation adjusted, they still cannot outgrow the economy forever. I could even see the stocks crashing soon (between now to 2 years) and an even bigger bubble forming over the next 5 to 10+ years after that, this would be a big way down. It will come down entirely to when retirees and other stock owners eventually take too much out for the system to sustain itself, in spite of the FED’s interventions and last minute risky investing. Retirees are the one to watch, because, unlike others they will start to completely cash-in their savings and investments, unlike, the rich who mostly just roll it over forever.

        I think it’s very suspicious that of the top 10 stocks 8 stocks fell by such a close percentage about 12 to 16%.

    • M says:

      The factor dominating our markets is now a tiny virus. I predict that these stocks will go sky high at least as long as they enable people to work from home and avoid social interaction.

      These stocks (or at least the ones that enable remote work and shopping) will become ever more grossly overvalued if the prediction that this pandemic will last until the end of 2021 is accurate, as I believe that it is. People want to keep the value of their money and the dollar is becoming less and less valuable as more and more are printed, which may not visible initially but will be realized with time.

      Other assets may keep their value, but it is hard to be sure. E.g., suburban homes with modest prices are desirable for those fleeing the cities but may become something to dump once the pandemic ends. I doubt that human nature will change fundamentally and younger people like to live in the middle of big cities, once the virus threat ends by 2022.

      Thus, I will not be investing in real estate, because it is hard to know what will happen over time, since we do not know if some fantastically effective vaccine might not come out by 2021. Some of the vaccines may not be so expensive to make, so making multiple doses per American may not be unreasonably expensive, if reinfection is actually possible.

      • sunny 129 says:

        I am a MD (retired) and been reading voraciously on Covid 19, out there. Frst of all, covid 19 is a type of ‘corona; viruses affecting humans throught their existence – Flu, common cold besides Rhino viruses. There has been NO successful vaccine to ANY OF THE CORONA viruses so far, Not to SARS or MERS!

        At best if there is vaccine, it has to be taken annually just like flu vaccine. Too much hype and hopium by the pro commerce/wall st, Financial press.

        Next 3-4 months will determine the fate of this surreal Bull mkt!
        There are good charts at ‘realinvestmentadvisers’ (free site) to understand the effect of debt, deficit, M2, velocity and Fed’s balance sheet ++ over the decades. Also at ‘oftwominds’ by Charles H. Smith from I got the early warning on the virus in January of this year. Read the comment headed by ‘ Don’t be too sure’. March DIP was NOT surprise to me. So will be the next one within 4-6 months!

        Btw: No country in human history has achieved prosperity by spending debt on debt.
        The same gang at Fed who already brought TWO boom-bust cycles, also created and managing this 3rd largest /everything’ bubble of this century. This will also meet the same fate!

        • M says:

          I agree. I worry most about the reported $200 Trillion plus in Federal liabilities plus the similarly gigantic , state and local liabilities that cannot be met without Federal bailouts. We are the “cleanest dirty shirt” due to our having the world reserve currency so long as the way this pandemic is handled drastically changes.

          If it was not for the foreign investors’ normalcy bias, we might already be in a disaster now. However, we seem to keep walking on air long after gravity should have pulled us crashing down.

          Our economy long ago became irrational and thereby unpredictable in the short term. In the long term, we are probably toast.

  2. Tony says:

    I didn’t know about this company called Docusign until a few weeks ago. Yet a week ago it had a market cap that briefly surpassed that of Honda. Just let that sink in

    • Happy1 says:

      DocuSign is a great product, use it at work for remote signing of documents, no way should that be worth more than Honda though.

      • joe2 says:

        Tested in court? In all states?
        Just wondering. Digitally signed a lot of stuff lately.

      • BlockNerd says:

        Honda cannot be replicated/replaced by open-sourced technologies (or not yet), whereas in software some permission-less (Blockchain) technologies are working towards what DocuSign and others are doing in a trust-less way.

        There are even Document PostQuantum (security) Notarisation available in some such The Quantum Resistant Ledger (QRL)

        I think value of software products should have a different gage of measurement where the support service has the more weight than the product itself.

      • M says:

        I do not speak about any particular company. However, stock valuations have gone nuts.

        In the 1920s to 1930s they admit that “pump and dump” schemes were obiquitous. Now, with “influencers,” such schemes theoretically could get much easier.

        If course, the claimed enforcement efforts of the “society for the enabling of corruption,” prevent such schemes now. ;-) Just ask Bernie Madoff about their diligence. :-)

    • I use it to sign distribution requests from my SEP custodian, and my signature looks like I was on speed for most of my life. The question is: what is the cost of entry for a competitor to take 20% to 30% of Docusign’s sales. NOT VERY HIGH. An online OCR program that the Chinese can duplicate during their lunch break! DIVE, DIVE, DIVE.

    • Just Some Random Guy says:

      “I didn’t know about this company called Docusign until a few weeks ago”

      Seriously? Docusign is almost 20 years old. You’ve probably used it yourself numerous times just didn’t realize it. Every time a document is e-signed there’s a good chance you’re using Docusign to do it. There are billions of documents e-signed every year.

      Let that sink in.

  3. brent says:

    if it weren’t for all the Central Bank money printing, I would be sure that this bubble would end with a huge correction like the Tech Bubble in 2000, but with all the money in the system, where is it going to go. I don’t know if P/E ratios will ever return to 15 range since interest rates are so low..

    • DeerInHeadlights says:

      P/E ratios? What is this P/E ratios you speak of? That has been dead since like 2015. It’s all been flow-based since, i.e. buy what the big money’s flowing into, not what makes sense based on earnings, P/E.

      There’s a generation of people who’ve only seen this type of a market and those are the people who’ve been trained to buy every dip because it’s worked out so well for them over the years. They will ride this tech bubble down to the bottom. The smart and institutional money of course gets out mostly unharmed.

      • brent says:

        I’m sure you’re right. Is this smart and institutional money now (or already) moving into “value” stocks? precious metals? bonds?

        I’ve always seen real investing as value investing, and the momentum/surge investing as speculation/gambling. Reading the animal spirits has it’s utility, and I respect the likes of Robert Schiller, but hesitate to go with the crowd because it can change at any moment and often contradicts value analysis. I’ve always preferred to stick with the P/E and other measures, and it has served me poorly. Plus governments and central banks have distorted the markets and fed the zombies, so pricing risk seems impossible today.

        • brent berry says:

          one big blind spot of many value investors is underestimating future change and new markets that these big tech companies have created. It has been amazing to see the disruption by Google, Apple, Facebook, etc and how dramatic online life and smart phones have sucked up human attention. Since the FANGMANTIS stocks have become central in the economy, and taken from other old line industries, they may be at the top for a long time. The original 2000 tech bubble was the original mania based on the idea, but the actual technology and structural changes in society and finance were not ready.

        • DeerInHeadlights says:

          @brent berry

          You pointed out the critical difference between the original dot-com bubble and this one. The technology this time is real and isn’t going away. So I agree that tech will stay at the top even if valuations come down significantly.

        • Cas127 says:

          Brent,

          “It has been amazing to see the disruption by…”

          But the problem is that while the disruptors may take market share from competitors (Google and Fbook in advertising, etc.) it is much, much, much harder seeing said *industries* grow anywhere near fast enough to justify the goofy growth in disruptors’ valuation.

          Even if Google and Fbook become 100% of the ad industry (and they won’t), it makes no sense for their valuation to grow 20% year after year after year (especially at their current huge size) when the industry growth itself is 2% per year (or negative 2%).

          The numbers are made up but you get the point…huge players cannot perpetually grow faster than the industry they are in…it is mathematically impossible.

          At the end of the day, the insane valuation distortions are infinitely more about 20 yrs of ZIRP destroying the fixed income alternative (thereby prodding savers into the airless cattle cars of equity at bayonet point) than *anything* having to do with the intrinsic valuation of companies whose PEs exceed 20, 25, 30, 90, infinity (over 700 companies in the Russell 2000 have not made even a GAAP profit in over a yr…an outcome that has held for many yrs now…).

        • Happy1 says:

          @brent berry,

          There is no fundamental change. This is today’s version of the “nifty fifty”. Check back in 10 years and see how FANGMANTIS returns are from 2020 to 2030. Some of us already know the answer.

        • Tom Pfotzerf says:

          Brent:

          Doesn’t appear to me that institutional money is not moving into value stocks. I’m not seeing the evidence of that, yet. For ex, see Wolf’s recent article on the binge of junk-bond sales. Who’s buying up that junk just to earn 4%? It sure isn’t the little retail “investors”.

          To the point about FANGMANTIS being a legit foundation for an economy, I’m not convinced it is. Amazon is really good at retail and distribution, and has fatally disrupted traditional brick-and-mortar retailers. So, that one’s probably a foundational element.

          NVIDIA’s main product is used for bitcoin mining; their core product is graphics boards, and that’s all about gaming. Intel and AMD CPUs ship with pretty good graphics support on-chip – NVIDIA is serving a niche market. NVIDIA’s not an economy-foundation company.

          Goog is a mechanism to snoop on people in order sell things people don’t need to people that can no longer afford it. Facebook same thing. Neither Goog nor FB can find any fundamentally new (maybe even useful?) revenue models, even though they’re swimming in cash.

          Netflix serves the passive couch potato in all of us.

          The economy in 10 years is going to look very different than the one we have today. Consumption post-crash is going to be replaced by investment in (again, very different) new productive capacity. A good bit of our current (obsolete) economic infrastructure is going to have to get rebuilt, and rather quickly.

          To generalize: most of FANGMANTIS serves a consumer-entertainment addict who is looking into the depths of their mug and swirling the dregs of the debt infusions about, wondering how much longer the party’s gonna last.

          And the Fed is presiding over the summation, the roll-up of all those tapped-out consumers, trying to find a way to keep the consumption party going. The volatility and the extreme behaviors from the Institutions are “tells”.

          I like Tesla because it kick-started electric vehicles. I like Amazon because it made retail and distribution cheaper to do. Intel makes good hardware. Microsoft found cloud computing, and saved the company from it’s dead-ended bloatware OS.

          The rest of them are consumption-fueled-by-debt players, and that story is demonstrably tottering toward its well-deserved demise.

        • td says:

          Tom Pfotzerf:

          Just a couple of comments. Nvidia’s processors are used widely in many applications, including cloud storage, because they are more efficient than general-purpose cpu’s. The stock price is still excessive, granted, but the technology is just as foundational as much else. Tesla is a stock promotion with a subsidiary that makes a few cars. It’s all based on whether Elon Musk is a prophet of the ages. Other people can and are making EV’s that are as good or nearly as good.

        • RightNYer says:

          The problem with the “Tech is the future” argument is that it ignores the fact that tech doesn’t, itself, make money. What it really does is facilitates OTHER companies selling their goods and services, meaning that it still needs a robust economy around it. To use the most obvious example, no one will pay Google and Facebook for their advertising services if it won’t help them sell anything.

          Tom P. summed it up well.

      • Continuously Researching says:

        When the PE is high, simply switch over to the PEG ratio to justify the insanity of the the overvalued stock you are about to buy :-)

    • rhodium says:

      “all the money in the system” could go into the stocks that aren’t nearly as overpriced for one. Fangmantis isn’t an inflation hedge, it’s a grade A classic bubble. Just plot revenue growth to infinity, it’s not priced in yet bro.

    • It will go into cash buried in a National Park with a GPS marker, into silver and gold, into rare gems and colored diamonds, and into ammo and ammo launchers to deal with the hungry unemployed that are coming via Soros funded vans to a neighborhood near all of us. You may even want to stockpile bread, freeze it in your new Whirlpool freezer that you purchased after a 90-day wait due to the Pandemic.

      • Wisdom Seeker says:

        This is off-topic, but bread’s a terrible use of freezer space. Too much volume & not enough calories. Just store flour and other bread ingredients in a pantry or closet – then make tons of bread as needed.

        Use the freezer for high calories-per-volume, high-protein, or higher-cost perishable stuff that will be hard to get in the next big COVID wave (or other crisis). Meat, cheese, special frozen veggies, butter… and of course ice cream!

  4. DeerInHeadlights says:

    And of course, the non-FANGMANTIS will also be pummeled if things go further south. Tis a sad world we live in. Damned if you do, damned if you don’t. Cash + hard assets are the only safe options. I’m staying away from PM’s as well because I think they’ve also topped.

    • brent says:

      Agreed, although I’m uncomfortable that my cash’s purchasing value of assets will continue to dwindle. Since property in my city (Toronto) is so expensive, I’m investing in Apartment and Healthcare REITs. Because it’s low maintenance, I’m also considering a few empty lots in places I might want to retire.

      • DeerInHeadlights says:

        I’m also uneasy on getting into RE at this point. Inflation isn’t going to jump 10-20% in a year, i.e. if we don’t see net deflation instead, which I think is the more likely outcome, at least w.r.t. asset prices. So the way I see it, cash is still your best friend and you’ll be in a terrific shape if the market makes new lows. It’s also a bad time IMO to get into PM’s timing-wise because *everything* tanks at the same time in this type of a super-inflated market. If you don’t care about timing as much, then PM’s is one place I’d park my cash.

        Canada’s RE situation is super bubble-icious IMO but its major urban centers always seem to have RE demand.

        • Doubting Thomas says:

          Given the monetary and fiscal stimulus going on around the world, I am more worried about inflation than I have ever been since I became a working adult in the 1980s. But strangely, following on DeerInHeadlights comment above, I am also starting to think that a deep market crash is possible, and that the resultant loss of paper wealth could cause deflation not only in financial asset prices but also in the price of goods and services in the real economy. What do the great minds here assembled on Wolf Street think? Also, if/when the great deflation comes, will it be best to have parked your wealth in cash (U.S. Dollar?), or gold/precious metals, or real estate or something else?

        • Harvey Mushman says:

          Back on March 14th Wolf talked about cash. I saved the info and pull it up and read it every so often. Here it is:

          Wolf Richter
          Mar 14, 2020 at 11:54 am
          Andre,
          I think you’re raising two points (if I understood you correctly): 1. The shitty income generated by bank deposits. 2. The safety of bank deposits. So let me address both of them.
          I’m not “comfortable” with earning 0.02% at the bank when inflation is 3.0%. You’re right, it’s a rip-off. Many banks offer higher yields, but they’re still low. T-bill yields are also low. Right now, cash just doesn’t earn much, and earns a lot less than consumer price inflation. But that’s what it is.
          The other option is putting your money into riskier assets. So you want to get the 10.7% dividend yield that Ford offers on its stock. You buy the shares to earn that yield, and three weeks later, Ford cuts or eliminates the dividend, and your yield is gone, and the shares plunge by 25%. If you invest in an investment-grade bond portfolio, you might get 2.5% or 3%, depending on how much higher-risk stuff is hidden in it. If you invest in an index fund, your investment might plunge 20% or 50%. These are among the choices and possible outcome you have to struggle with. And that’s why there are no simple answers.
          In terms of safety of your bank deposits, in the US, I’m not worried about deposits that adhere to FDIC limits and rules. The FDIC is part of the US government, and the US government is backed by the Fed’s printing press.
          You can have brokered FDIC-insured CD’s of $250,000 each (FDIC limit) from 10 different banks, and thus get $2.5 million in FDIC insured deposits. You can own these CDs like others own stocks, and you get a lot of money under the FDIC umbrella that way, if that’s what you want to do.
          If you have cash that exceeds FDIC limits – a lot of companies have billions of dollars in “cash” – you would put those funds in Treasury securities, such as T-bills. But the amounts you need for your operations (payroll, paying vendors and creditors, etc.), are in a bank, and the amounts over the FDIC limits are at risk.
          In the US, when a bank fails (4 banks failed last year), shareholders get bailed in first, then preferred stockholders. There are a lot of assets in every bank, and only the amount by which a bank’s liabilities exceed its assets is at risk. This is usually a fairly small amount. So the FDIC steps in, pays off the insured depositors, sells the assets, and the proceeds get distributed to the rest of the creditors (including uninsured depositors), and the FDIC itself, to cover part of the funds it paid the insured depositors.
          In practice, normally, when a bank fails, the FDIC sells the assets and in return, the buying banks take the deposits (liability) as part of the deal. I’ve been through three bank collapses like this, and it’s smooth, usually happens over a weekend, and on Monday, your money is in a different bank, readily accessible.

      • Zantetsu says:

        brent those are my thoughts exactly. I am playing the market to try to maximize the amount of money I have to invest in plots of land after the crash in the economy drops land prices (my assumption is loss of jobs will make a lot of people holding bare plots of land eager to sell). I have had decent success playing the market and am still up reasonably well for the year (15% or so total), but I can’t shake this feeling that I have to maximize my returns all the time to get ahead of this game and be able to afford the assets I want in the future.

        My plan/hope is to buy a small plot of land in four or five regions of the USA and then work out where I want to live later. Possibly even living a nomadic lifestyle travelling between places.

        • David H says:

          Gents – just to flag up one risk to your plan: it is entirely conceivable that the stock market , like it did between 1996-2000, more than doubles from here. I disagree with the opening statement – it’s very obvious we are in a bubble. The problem is it’s impossible to predict the top. By staying out of the market now you are trying to do the impossible. Better to stay invested in stocks and real assets and hold them long term. Sell stocks if we move out of the primary linear trend (we did briefly during March sell off) and sell in the distant future when the fed removes some of the easy money policies they have put in place. But selling and shorting now – it might work for you – but the odds and facts are stacked against you. There is too much bearishness in the market for this to be the very top

        • DeerInHeadlights says:

          David H,

          You call call/put ratios at a six-year low bearish? Valuations coming right back up to pre-correction levels and then exceeding them by a huge margin, that’s bearish? People piling into the markets like their lives depend on it, that’s bearish?

          I think I understand the term ‘bearish’ slightly differently than you do.

        • Cmoore says:

          That’s a good plan. You could also move from one spot to the other. Just curious what parts of the country are you picking?

        • Paulo says:

          Zan and above re: property havens

          Some considerations to factor for prospective safe haven land buyers from someone who did this years ago In fact, my parents did this when they moved north in ’68. I moved out of ‘town’ to a safe haven almost 20 years ago.

          Many choices to make in planning that goes far beyond the property, itself.

          rural vrs ________

          If you go rural you will not be able to remain anonymous. This carries a whole bunch of implications. Will your ‘stuff’ be safe? Will anyone really care for you or your property if there is an emergency or if you travel? The list is too large to consider.

          If you stay in towns/cities many of the same questions apply, but there are more expenses to live there (taxes).

          Do you have the skills to relocate rural vrs urban?

          If you do buy in a smaller centre, or go rural, it is wise to make an effort to become part of the community. Hire local people as required. Buy local products. Try and become friends with neighbours. Donate to local fire department or health centre. Greet and wave when you drive around (People wave). If your land is basically a squat that you sometimes visit, be prepared to be ripped off. There is always a thief or two around.

          I could go on and on (and won’t) but in tough times everything is harder. Resentments build. The same applies to me. If I moved to a city, (not a suburb but a true city) I would be vulnerable in all kinds of situations. In a suburb people could hire an alarm company. In a smaller centre, neigbours are both your strengths and potential threats/problems. If you have a shitty neighbour all bets are off.

          In blue collar areas (like mine) you have to be blue collar yourself or at least have the same skills. A retired doctor could make it okay if they helped out a bit, but someone who parachutes in will never do well.

          But it’s all moot. If you don’t fit in you won’t be happy, anyway. Around here many many new buyers last about 2 years. Then the for sale signs go up. Again.

          Good luck with your plans and decisions.

        • Definitely wait until early 2021 before putting money into any asset related to real estate. Home prices bubbling higher this summer because of the Cost of Money, not because the buyers have incomes that could not be compromised in the months ahead. If you buy a home, let’s say, will there be a legal monkey wrench because of the Mortgage Forbearance Program where the loan is technically in default and you have to buy like it was a Foreclosure??? Banks are definitely going to be in deep doo-doo by this time next year.

          I like the Nomad prospect: Buy the land in summer of 2021, buy an RV when the prices come back down to earth and repo’s flood that market, live in the RV on the land until you can get a 30% to 40% discount on the new build, paying off a local official if need be, and get out of Dodge via RV if things get too hot in that Neck of The Woods! Brilliant!

        • The Original Colorado Kid says:

          Most land that’s worth living on you’ll find has zoning that won’t allow you to live in it in an RV, even short term. Even those wide open spaces out West here usually have zoning. And if you build a little shed or whatnot to store things in while you’re out living elsewhere, well, be prepared to find them ransacked when you get back. I’ve RV’d all over the West and know lots of fulltimers and your idea is not sustainable. Figure out where you want to live beforehand, then go there instead of buying up a bunch of pieces of land.

        • @DeerInHeadlights, @David H:

          One data point I can think of to support the bearishness thesis is https://ycharts.com/indicators/reports/aaii_sentiment_survey. The persistent bearishness we’ve seen over the last months is very rare.

        • Zantetsu says:

          Cmoore: pacific northwest, as close to the Canada border as I can comfortably get is #1.

          Northeastern Ohio is #2 as it’s where most of my family live.

          Somewhere in the middle of the country (Kansas?) as a bridge point between the two is #3.

          Southeast, maybe near Atlanta, is #4, although I have never been there so this is a guess on whether or not it would be a good choice.

          If I can afford it, I would then choose two more spots: far northeast like Vermont, and lastly, far southwest like New Mexico or maybe Nevada. These last two are my last choice because dry hot climates are my least favorite.

        • Zantetsu says:

          So Colorado Kid, your point is that any property not lived in full time will always be ransacked?

          I don’t know if I believe that, but thanks for the warning. My ideas are mostly just ideas but I was thinking of building structures intended to act as receptacles for a small RV. Like, a big garage with a small 1 bedroom unit attached, something minimal. Take the one big $750,000 house that one might otherwise own and split it up until 3 or 4 smaller structured scattered geographically, and then travel between them. That’s the concept.

          I guess maybe one would have to factor some kind of security service into the equation according to your statements? I don’t know what kind of security would be effective though.

        • Just Some Random Guy says:

          If you want to check out different options for where to live, rent a furnished house for a month or two in each of the areas. It’s a lot simpler and carries a lot less risk that buying land in all corners of the country. And I’d suggest going to each place in the bad weather timeframe, ie July in the SE, February in Vermont, etc.

        • VintageVNvet says:

          Zan, et alia:
          Having ”gone to the country” 3 different times in the last 50 years, I can testify that what works for ”security” is neighbors.
          Remembering the one and only time we were ripped off of tools, the only valuable thing we left on site, the nearest neighbor was over 5 miles away by a 4×4 track, plus a 1/2 mile walk only path; other than that, we have left homes with all the usual ”stuff” except guns, sometimes for months, with neighbor (s) watching our dead end road, and coming over to check on the place between our visits, working out while paying off the place.
          Our best neighbor ever was such a good person that when I had to leave my wife home for biz travel, I would tell her to first call him, then call the sheriff, though it was never needed.

        • Concur and there is a whole lot more cash in the global monetary base than there was in the late 90s. US economy has been poorly managed relative to ROW, and I would expect global demand to pick up sooner. US was also mostly service economy, and took a hard hit on that account. 00′ was Y2K, which like Covid was a front loaded event, both had the post crisis effect of seeming benign in retrospect. The 2000 crash was given by a push by 9/11 and programs like the “Home Ownership Society” which along with the sinkhole DOD spending in Iraq caused GFC. We should have figured everything out, while spending shifts from consumer disc to social prophylaxis. Then money as a store of value is going to disappear.

        • Lisa_Hooker says:

          Excellent plan. Just be sure to sell out just before everyone else decides to leave the party.

      • td says:

        The bubble in Canadian RE is mostly in the areas surrounding Vancouver, Toronto and Ottawa. The same applies to some regional centres like Halifax. There are many smaller cities and towns where the price trends are much less exciting and that have adequate services but they are typically in unromantic locations far from water features and mountain vistas.

        The problems with rural properties have already been pointed out, notably by Paulo. You can only live in an RV in a few unzoned areas or on cottage properties with existing structures, which are typically being bid up anywhere within three or four hours driving distance of the bubble cities or near water or mountains.

        There is no security that can take the place of being on good terms with your neighbours and being resident on your land most of the time. In rural Ontario or Alberta (which I know) there are not enough police to keep an eye on every garage or boathouse. Even active farmers have issues with interlopers. Urban escapees often have fantasies or defending themselves with firearms that turn out to be a trap in this country. I think even in the rural US, if you shoot a local to defend your ATV, you’re likely to end up in deep doo-doo.

        • VintageVNvet says:

          Re RV parking on property:
          Don’t know about all states, but there are many states where the Mobile Home Industry has spent a ton of treasure to ensure that what we used to call trailers, now RVs of various kinds are allowed to be parked and lived in most places.
          Especially when ”subdivisions” are zoned ”recreational” to avoid mandates that usually cost the developers money, sometimes tons; the lots can be smaller, there can be less water volume and sometimes none at all, there are differences between states for sure, with the westernmost the most restrictive in general, with some exceptions as one gets farther from big cities.
          I have also seen expensive areas with private rules that include MHs set up on permanent foundations, some with them right next to very large and very fancy houses.
          Folks saying that ya cannot park a RV on land are generalizing on the basis of insufficient information.

        • td says:

          VintageVNvet: My reference is to Canada. In most parts of Canada, zoning is hostile to mobile home parks and the ones that exist are slowly disappearing. When I worked in Michigan, I saw far more mobile homes than I was used to in Ontario.

    • Old School says:

      High stock prices are a mark to market of wealth. The big mistake in my opinion is that zero rates make stocks more valuable. Yes in theory, but let’s see if it works out in practice for the next decade or two. Zero rates are sugar that will kill you if that is all you eat.

    • Will bet you 100 rotting Federal Reserve Notes that the PM’s, esp. Silver, are just getting started. $5000 Gold and $160 Silver is my seasoned forecast by 2025 as King Dollar becomes Serf Dollar in the wastebasket of currencies. This depression is just getting started I am saddened to report and all central banks without exception are printing their domestic currencies without regard to supply on nuclear-powered printing presses.

    • S says:

      >>I’m staying away from PM’s as well because I think they’ve also topped.<<

      You, like me, are a victim of your past experience with gold being pummeled in price after 2011. This time is different because when the democrats take full control this election, they will bail out in 2021 all the democrat cities and states in violation of the constitution. IMHO that will accelerate the end game.

      I think "the powers that be" will try and crash the stock market one more time before the election. Then Trump will have no success to claim for his past 4 years. So that *might* be a good entry point for those on the sidelines of precious metals investments.

      • Fat Chewer. says:

        Trumps biggest success was creating conditions that require the introduction of MMT simply due to their incompetence. Same goes for Boris Johnson and our TardLord whatshisface.

        • eg says:

          MMT has been in effect since the collapse of Breton Woods. There is no need to “introduce” it (except to those who don’t understand fiat monetary operations).

      • DeerInHeadlights says:

        I understand what you’re saying and agree with it to a large extent. My thesis on PM’s is that they are cyclical like anything else. In the last two major crashes, they followed equities down to the very bottom before bouncing back up with the equities. I expect this time to be no different. AFTER that, can they do 2500 or more? Absolutely. I didn’t get in at 1500-1700 and I’m not about to start now until there’s a major pullback which could happen in the next six months. That’s the time to get in IMO for those like me who’re still on the sidelines.

    • Bobber says:

      Gold has topped? I’m not so sure? The US just printed a $3T deficit this year. The US dollar is headed down. Inflation is going up. That will continue to put upward pressure on gold.

      In my opinion, gold will drop in a deflationary spiral, but how to you get to deflation when the Fed is printing like mad to fund fiscal deficits? The Fed will only back down if there is real threat of hyperinflation. By the time we get to that point, gold will be a lot higher.

      As Wolf notes, the Fed hasn’t printed for a few months, but I think there is little doubt the Fed will fire up the printing money again, in order to fund huge annual deficits.

      • DeerInHeadlights says:

        I’m with you but the current volatility doesn’t bode well IMO for any asset class. Gold right now is trading in a very tight range and could go either way. I’d wait to get into PM’s when equities are down hard because PM’s I believe will follow suit. After that, it could be to infinity and beyond.

      • Thomas Roberts says:

        Bobber,

        Many thought it would be deflation then inflation later on, for the then upcoming recession. This was my train of thought as well, prior to the pandemic, now that work from home is happening, all bets are off. It could still easily switch from deflation to inflation at any time though, if deflation happens.

    • eg says:

      All of my Mom’s investments are in bonds and cash, as are the savings set aside for my teenage children’s education. I sleep at night.

  5. MonkeyBusiness says:

    This time it’s different. Make sure to load up guys!!!

  6. MonkeyBusiness says:

    My canary in the coalmine is Shopify. It’s been bouncing between 900 and 1100. If it breaks down below 800, it’s probably over.

    • roddy6667 says:

      Is Shopify Webvan redux?

    • DeerInHeadlights says:

      I’ve been watching Shopify too. Gold’s been doing something similar. Despite its label as a ‘safe haven’ asset, it follows equities very closely actually.

      The important thing IMO to keep in mind is that the market doesn’t have to crash hard and fast like it did in March for one to know that it’s not going to make a new top again. It can take 1-2 years or longer to reach a bottom and you’re still screwed if you keep holding the bag from here on out. Not taking your profits at *some* opportune time during the bull run is one of the biggest mistakes people make.

      • adrian Jowett says:

        That (plus concentration of the white stuff with bad actor) is probably the biggest thing keeping retail silver and gold bugs up at night.

        But, see, f*CK it, their shiny…

    • MCH says:

      How dare you, using Canadians like they were some canary in a coal mine, I will have you know that this is not 2008, and SHOP is not RIMM.

      SHOP is the next AMZN….

      😂

  7. Island Teal says:

    Reading this article and the comments are constant reminders of the LT value of AG and Au. 🏦😀
    Right Frederick?

  8. Jenny H says:

    It would be interesting to see total FANGMANTIS earnings (or revenue) on the same chart as share price. (In your copious free time, Wolf ;-) )

    The price chart is so steep post-March, is there anything fundamental to support that? Is it based on projected future earnings? If the answer to both questions is no, it’s hard not to see a bubble.

    • Wolf Richter says:

      Hahahahaha… “fundamentals” hahahahaha… that made my day 🤣

      • Lisa_Hooker says:

        Unfortunately, the madness of crowds is quite fundamental. Hope and belief are not strategies.

    • Rosebud says:

      Hope and wishes are fundamental to the Art Banana, works well with faith, belief and speaking your truth.

      20 years ago, yes, we had no bananas, the market of stocks peaked and eaten… Do you remember the Giant 5?

      “The combined market capitalization of Alphabet (ticker: GOOGL), Amazon.com (AMZN), Apple (AAPL), Facebook (FB), and Microsoft (MSFT) is 22% of the S&P 500. That’s a lot. In fact, it is more than the 18% share that the five most-valuable companies commanded at the tech bubble peak in March 2000. Back then, Microsoft, Cisco (CSCO), General Electric (GE), Intel (INTC), and Exxon Mobil (XOM) were the top dogs by market cap.”
      Barons

  9. Anton says:

    Just thinking about this from an economics perspective, the thing that keeps values going up is more buyers entering the market to buy. This makes existing owners of the stock richer, but only if they don’t sell. The minute they rush for the door, the price collapses. So in fact, the paper wealth created in stocks is an illusion because it is dependent on not selling. A lucky few can take their gains and run, but the overwhelming majority of stockholders will be consumed by the collapse when the buying stops and the selling starts.

    • DeerInHeadlights says:

      Everyone thinks they can run for the exit faster than everybody else.

      • VintageVNvet says:

        Good analogy dih:
        That’s EXACTLY why so many deaths, destructions, and serious injuries occur when there is any kind of exiting panic, physical and/or markets.
        Why it keeps happening over and over and over in spite of clear rules and regulations mandating exiting sizes, paths, and policies is just one more indication of the herd or mob mentality still being SO powerful in our species.
        I’ve been out of the SM for decades after participating for about 30 years, and now we don’t go to any kind of ”contained” mass events…
        The last one for me was the Altamont Pass concert, 1969 IIRC.

      • And Americans are so overweight these days that the exits are going to get jammed pretty quickly. With high speculative leverage operating today, RobinHooders, and algo’s running the show, things will happen very quickly in this next collapse where we have just seen the proverbial shot across the bow in the high-fliers. Don’t wait for the market to have to hit you in the head with a Louisville slugger! Most overvalued and dangerous market in the history of equity investing. Oh, and bond market there also.

      • sunny129 says:

        Just study the charts of previous BEAR mkts in history!

        RISK happens suddenly and many a time faster than one can think. You will hear the sien song from the financial industry that ‘this time is different’ AGAIN!
        Without ‘enough’ tail insurance, no one should be invested in this surreal mkt.

  10. YuShan says:

    What many “investors” don’t get is that in the VERY long run, total stockmarket returns are equal to the sum of all profits. (Not only is this common sense, you can check it yourself with historical data).

    So when the stockmarket goes up by means of P/E expansion, all this does is pull returns forward. Hence, expected future returns will be lower as a result. (Could be even negative).

    Also, somehow these profits have to be created in the real economy by real wealth creation. There is no magic here.

    Disruption will shift profits from one company to another, so there are winners and losers. But looking at the total market, eventually it has to match the real wealth generated in the economy.

    For example, Facebook and Google are essentially advertising sellers. They are fishing in the same pool, which size is limited by the amount of money that wealth creators can spend on advertising and is a fraction of the wealth created in the economy.

    Another thing that is often overlooked is that a “growth” stock with a justifiable high P/E eventually morphes into a non-growth stock, because it reaches the natural limits of a certain market. And by that point a much lower P/E is justified.

    • Nate says:

      in the real world the only ways to get rich are to invent something new (increased utility/faster/cheaper) or to take it from somebody else, preferably via goods and services so they get something out of it too in the short run. The first is real wealth creation and the second wealth redistribution.

      The Fangmantis stocks have done well on the ‘new’ and ‘utility’ front but what happens to the price when the sellers outnumber the buyers shows the paper profits for what they are.

    • polecat says:

      Yeah. They’re both sh!tting in that yuuuuuge ad ‘pool’ of captive rubes .. telling everyone that the water’s fine!

      When those finally floaters rise, watch out below!

    • RightNYer says:

      Yep, exactly. Apple is a great example. It is (even after the correction of the past two weeks) priced like a growth stock, but its revenue and profit have been basically flat for 5 years now. That’s not to say Apple is a bad company. Obviously, generating $50 billion in profit per year is incredible. But I think it’s become a “stable” stock, not a growth stock, much like Coca-Cola or 3M.

      Put another way, there’s only so many people you can sell iPhones to. I liken it to losing weight. It’s a lot easier for a 500 pound person to lose 100 pounds than for a 300 pound person to do so. Same principle applies. It’s a lot easier for a $100 million tech company to become a $200 million tech company than for a $2 trillion tech company to become a $4 trillion tech company.

      But “investors” are not thinking that way.

    • rahulgd says:

      Technology and disruption are deflationary by essence. So is QE and ZIRP. Only the government can create inflation for the poor people in daily goods and services. It will take a lot of MMT and UBI to get it. Neither Party really wants it, because it goes against the establishment. Maybe the next Bernie will make it happen, but by then it’ll be like Zimbabwe and Venezuela.

  11. John says:

    Wolf,
    Fang mantis, good one. The predators!

  12. Halsey Taylor says:

    Tech companies that make primarily real products don’t seem to have suffered as much.

    Of the stocks listed, only Intel focuses on physical products you can buy in a box. Although they have physical products, Tesla, nVidia and Apple are valued for their ‘invisible’ products and don’t really fall into the ‘itb’ category. Elsewhere, TXN, at 8%, is on the lower end of the spectrum. It, too, gets most of its revenue from ‘itb’ products.

    It’s not real surprising that volatility goes with hype.

  13. Michael Engel says:

    1) Traders have the right to take profit in a bullish market.
    2) The good : SPX closed > Feb gap / NDX closed > July 13(H).
    3) The bad : SPX & NDX weekly with a cloud : T&K are too far apart / SPX & NDX are way too high > the cloud.
    4) Oct/ Nov vaccine will send the markets higher.
    5) The ugly: our leaders cannot concede defeat will send the markets
    lower.

    • Oh, yeah, Michael, this is just a prelude to the downward spiral that we are going to see after polls closing on November 3rd. THIS WILL UNDOUBTEDLY BE A CONTESTED ELECTION, NO MATTER WHO WINS. Supreme Court justices are herein instructed not to go on any holidays after 11/3/2020 because their jurisprudence will be needed to TRY TO keep the peace in Washington.

  14. Tom Stone says:

    Investors are forward looking rational actors according to the economics textbook i looked at the other day…Written by a PHD from Harvard no less.
    Since that’s the case there’s NO RISK that hasn’t been priced in !
    Tesla stock will go to the moon!
    Or maybe it will miss the moon and hit Mars.

  15. Just Some Random Guy says:

    When FB went public my brother in law bought a lot of it at the IPO. And then if you recall the price fell for a short period of time. And my BIL was mocked as a dummy because FB was a fad and he didn’t know what he was talking about, blah blah blah. All the cool kids (like posters here I’m sure) knew there was no way FB would ever be worth anything because duh, it’s just an app for posting cat pictures and there’s no way that can ever make money.

    The price of FB is up only about 800% since then.

    • The Original Colorado Kid says:

      And it’s still a worthless piece of crap designed to waste time and propagandize, in spite of its stock “value.”

      • Just Some Random Guy says:

        You won’t get an argument from one on that. Social media is a cancer. But as an investor, you have to ignore that aspect of it and focus on what can make you money.

        • two beers says:

          Allocation of scarce resources to worthless pieces of crap being one of the hallmarks of our economic system…

      • MCH says:

        Still worthless is a matter of opinion. If someone took profit, then the results aren’t so worthless. Same with someone who took profit and did something else productive with that profit.

        If you are talking about Facebook as a useful contributing component of society, I wouldn’t completely disagree.

  16. John V says:

    ” the insane valuation distortions are infinitely more about 20 yrs of ZIRP destroying the fixed income alternative (thereby prodding savers into the airless cattle cars of equity at bayonet point)”

    If THIS inn’t the truth then there is none!
    I believe Jay Powell was trying to fix this by raising interest rates
    when he was blind-sided by The Donald, who now controls the FED.

    • Fat Chewer. says:

      Yes, exactly. I am not sure Trump could have done it alone. He has been aided and abetted by the increasingly militant right wing establishment.

  17. c1ue says:

    The question is if we’re in another “Nifty Fifty” situation as in the early ’70s – with a multi-year stock market death ride to come.
    That particular death spiral was basically ended only when Nixon took the US out of Bretton Woods; I don’t believe there is any similar comparable action possible today.
    Some counterpoints: the Nifty Fifty period was where the US was bleeding cash due to Johnson’s twin Great Society and Vietnam war actions (gun and butter), but the rest of the world was more or less fine.
    Today – the malaise is worldwide, at least in the West

  18. Brant Lee says:

    Point being is that the wealth of America is now narrowed down to ten technomania stocks? Everything financial could collapse if these guys fall?

    Even more alarming is no one here seems to know what to do with the cash they could pull from the markets. We’re all clueless. Buy some land in the boondocks to look at?

    • Just Some Random Guy says:

      I’m doing some reno work on a house of mine and was talking with my contractor. He has a a few rentals himself and is thinking of selling them, take the money from the appreciation he’s had. But then he’s thinking what do I do with my money, there’s nothing else to invest in.

      And that mentality is why real estate and stocks will do well for the foreseeable future. Your options are take a risk on 10-20% year gains or take a safe 0.5% guaranteed return in a govt bond. It’s a no brainer which way most people will go.

      • Bobby Dents says:

        Sounds like capitalism is in crisis and central banks don’t know what to do outside letting debt rise. The

        Sounds like the 1920’s all over again going on 12 years since 2008.

        This is going to lead into a nationalization of investment. Then the money will go into something. But not likely have until they can’t prop it anymore.

    • MonkeyBusiness says:

      Well you’ve pointed out the problem. People nowadays have no “life skills” other than trading stocks. A bunch of jobs out there are meaningless and will be useless once the economy collapses. Marketing, accounting, coding, all sorts of jobs will just go poof.

      That’s why most people don’t know what to do with their cash other than engaging in more consumption.

      Farmers, etc will be fine.

      And no I am not saying everyone should be farmers, but our economy is so specialized, most people can’t see beyond their own profession. In IT/engineering, we often talk about not having a single point of failure. Ironically, most IT folks don’t have any other skills other than coding.

      • Just Some Random Guy says:

        Specialization is a good thing.

        I’m one of those people with no “real” skills since my skills are in the white collar world, which in our view are somehow not real.

        OK fine. I mentioned in another post I’m doing some renovations on a house I own. Part of it is installing new doors. My contractor has been doing this type of work for 25 years. He could frame a door in his sleep. His worst framing job is 10X better than my best framing job. That’s because that’s what he does every day, vs me watching a YouTube video and trying to fumble my way through it. I could do it sure. Framing a door ins’t rocket science. But I will never do as good a job as he will because that is his speciality…along with all other aspects of home building/renovating. And I will happily pay him to do that for me, knowing it will be done right. Same goes for a plumber, an electrician, etc.

        What you’re suggesting is we get rid of specialization and go from everyone does one or two things really well to everyone does a lot of things but poorly. And then everyone can do their own door framing and all door frames will be poorly done. Thanks but no thanks. I prefer a world where if I want a job done right be it a door frame or an accountant or a mechanic, I have an expert in the field do the work, instead of someone fumbling around trying to figure it out.

        • Tom Pfotzer says:

          Well done, JSRG. You’ve “framed” the issue well. :)

          As long as your specialization is in demand, doesn’t come under pressure from automation, globalization, covid or other surprise, you’re good to go. Specialization delivers most income, highest quality goods, best aggregate std of living.

          That’s the ol’ Comparative Advantage theory we all learned in Econ and Intnl Biz.

          But the world’s a fast-changing place. The sanctity and security of one’s specialization isn’t a given, and the velocity of change is accelerating while the degree of impact-of-the-change is expanding. Ask any U.S. based I.T. practitioner how things have changed in the past 10 years.

          So, I’m not as wowed by specialization as I once was.

          There’s another aspect to this that bears mentioning. The cycle time from newbie to proficient is much shorter these days than heretofore, and today’s internet makes the inputs nec to produce high-Q goods on the first few tries…a lot more feasible.

          For me, the the specialist .vs. generalist debate (between me and myself) is heating up a bit. and Mr. Specialist ain’t as smug as he once was.

          Just to play devil’s advocate, and take the other side of the debate for a sec…all these proponents of “buy local” are, in fact, arguing to buy from a producer that isn’t the best, or most efficient, or even cheapest available.

          Interesting times.

          Last card before I go: Isn’t it fascinating…in a very perverse sort of way…that someone sitting on a pile of cash can’t think of a place to put it.

          All the options have big negatives. Even putting it in cash has a high likelihood of loss (of purchasing power).

        • SwissBrit says:

          Tom,

          “all these proponents of “buy local” are, in fact, arguing to buy from a producer that isn’t the best, or most efficient, or even cheapest available.”

          Better and best are terms defined by values that can change wildly depending on who uses them; for a cash-strapped parent, best probably relates to price; for an eco-conscientous, less cash constrained buyer, maybe it’s more to do with the carbon footprint or ecological impact of the product; for a chef it’ll be more likely taste and texture, closely followed by cost.

      • DeerInHeadlights says:

        Lol, I hear you but it’s not that bad IMO. A knowledge-based professional doesn’t just become useless if the economy goes south. They may not be able to maintain the exact same standard of living but they can still be useful IMO.

        The technology revolution and the role of computers in human affairs today has been a cumulative process. EVERYTHING now depends on it and it isn’t a switch that we can turn off and decide to just go back to pre-modern-tech days just because we want to. Just like you depend on turning the knob on your stove-top to be able to cook food, we depend on many of these technologies today to do stuff we just can’t otherwise.

        This is by no means a justification for the “fluff” that many of the tech players “produce” (social media [FB], entertainment [Netflix] etc.) which IMO we CAN live without. However, anything to do with hard gadgets like phones, IT hardware, any infrastructure that e-commerce and communication networks rely on is simply indispensable. Even if we were to experience a Carrington Event like event today, we’d just need to re-build things again and harden them much more going forward.

        Big economic shifts like the one we’re going through today have a way of re-shaping the landscape with regards to demand/supply, sector rotation, asset repricement etc. but not obviating the needs for some of the structural foundations of the economic engine.

      • c_heale says:

        Not so sure farmers will be fine. Many of them are loaded up with debt. And many farms are run by farm managers working for some investment company. The big CAFO operations have had enormous problems with COVID, from the sudden change in the logistics networks, the closure of many restaurants, and their workers getting COVID on the production lines.

        Finally, the Great Depression wasn’t a good time for farmers.

    • Bet says:

      Buy me a nice van to go boondocking
      Doing my first conversion now. Which when I am done will be NICE Next time pay a pro.

  19. andy says:

    The problem is most people do not grasp easily what a trillion is. A trillion stars. A trillion atoms. A trillion dollars.

  20. NoFreeLunch says:

    ESG investing also has something to do with it. Peek into the ESG fund holdings and you will see FANGMANTIS. Yes, software is a very clean industry, duh. The problem is that the raw materials are being divested with the ESG investing scheme. Copper mining companies are rated worse than oil companies for ESG, yet copper is essential for FANGMANTIS. Chile has under invested in its copper mines by $40B, since diverted capital can buy more votes (think oil in Venezuela for an analogy). The raw material piper will want to be paid, along with blue collar service people. How about an HVAC visit with a minimum charge of $600? Supply and demand. Apple gets as much as they can for an iPhone, and the plumber will get as much as they can. The great gains will be eaten one day by the bottom.

  21. Most of these companies are Media companies. Real tech is AI, and bitcoin mining. Tesla might become the leader in the internet of things. Everything that bespeaks of parabolic rises in stock prices is consumer based. B2B never had a second life, after the groups brief rise in the arena of glamour stocks. Bitcoin has some appeal, Blockchain does not. Post 9/11 remembrance, we should see the writing on the wall. 43 was hugely negligent, but he got a pass, 45 is not so lucky with Covid. America that youthful and invulnerable nation, is now maturing.

  22. andy says:

    Obviously prudent decision is to sell the car and bet it on 12-month out of money puts.

  23. MonkeyBusiness says:

    Looks like SoftBank is selling ARMS holdings to Nvidia for 40 billion dollars.

    That should allow them to buy even more call options.

    SoftBank to the rescue once more!!!

    • c_heale says:

      If NVIDIA keeps ARM as it’s own operation just under the NVIDIA umbrella, this could work out really well for them. Softbank look screwed imo.

  24. Bobby Dents says:

    Over confidence and poor planning. Stick to your core.

  25. Lou Mannheim says:

    Let’s play “Where Are We In The Dotcom Bubble Timeline”

    I’m guessing late 1998. LTCM and Russia collapsed earlier in the year, and the cheap money is really starting to reignite the bubble.

    • sunny129 says:

      @Lou Mannheim

      See my comment (way above) re CSCO having PE of 50 during early 2000 (dot com)
      It never bothered no one until March and later!
      Now it is worse than dot.com!

      • sunny129 says:

        Wondering, how did I recover after dot com!?

        Invested heavily into European stocks of all types. Euro was around 0.80-85 cents US! When the mkts recovered I had more than 25% gain in currency alone!

        There is always new way of investing in this changing world. As they say there is always bull in the BEAR World and vice versa!

    • Shiloh1 says:

      I seem to recall the 3Com / Palm spinoff as somewhat of a mania top.

      • Lou Mannheim says:

        Yup. I was trading tech at a hedge fund (how dated does that sound?), and we received a generous allocation of the PALM IPO. The first print valued it at 100X revs, which I used as the rationale for blowing out the entire allotment on Instinet. :)

  26. sierra7 says:

    (Nice article Mr. Richter)
    (Right now in the foothills of the Sierras all we want is breathable air!)
    So many experts!
    So many investment strategies!
    Wow!
    Tick-Tok, Tick-Tok, Tick-Tock………………..

    • Tom Pfotzer says:

      Sierra: We all hope you, your neighbs, rest of the West comes thru OK. Tell all your friends that we’re thinking of you.

      So many investment strategies, and none look any good. If I wasn’t almost bawld (as George Costanza would say), I’d pull my hair out.

      Why am I “almost Bawld”? Because my wife cut my hair, and she’s a newb at it, and so I got the Militry Man special.

      Fortunately, I won’t be off-campus for many days, and there’s time for redemption.

      • andy says:

        Remember that confident guy who shaved his head for years. And on Elaine’s request stopped shaving. Learned his was balding and got all depresses. The irony.

  27. Michael Engel says:

    If u sell : FB, AAPL, NVDA, GOOGL, MSFT, AMZN…. the gov will “Make America Great Again”, keep u safe from anarchists with
    “Law & Order”, and promise “Economic Expansion” like never before
    ==> If u buy “Liberty Bonds”.

  28. Rosebud says:

    Fangmantis is funny, and 10 is a solid count.

    Giant 5 is a meme that has Microsoft doing a two step with itself from 20 years ago.

    If I prepare an inventory, and check with today’s bunch of bananas:

    Apple; I have an iphone, phone number and pay a telephone bill.
    Amazon; I have a silk tablet, and Jeff is a good guy with same birthday.
    Facebook; I have a profile here with Messenger app.
    Goog; has search engine, that I use with
    Microsofts; search engine. And this way people can find me and never get lost.

    That’s it, 5 Trillion reasons why duct tape is funny.

  29. Reader says:

    FANGMANTIS – nice. May I suggest as alternatives FAGMANSNIT (not so politically correct), ANGSTAMFIN
    (German-French for “fear at the end”) or FANMATINGS.

Comments are closed.