Nasdaq collapse. Is this a "Minsky Moment?" Is that what's going on with PMs as well?
dpoole
Posts: 5,940 ✭✭✭✭✭
What do you make of the sudden dive in tech stocks and PMs?
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Profit taking....it was over due. Seen it a hundred times before over the last 50+ years. No different now, then what it was in the past.
Money is moving into US Treasuries.
Wouldn't classify it as a collapse. Just a pullback, and well needed. Nasdaq has outperformed, with good reason, the broader market for over a year or more. Sector rotation and profit taking are part of the program.
Very little investor interest in treasuries, thus the increasing yields. Give it a couple more months.....yield curve control on the way to keep rates in check (i.e., artificially low). That will be good for gold.... Obvious inflation, no yield.
Yep... market movement is shuffling funds.... Looks like a few interesting months ahead. Cheers, RickO
I'd hardly call a one-day decline a "collapse". The NASDAQ and US stock market are in mania.
Agree, what is the P/E ratio now for its component companies, only some multiple of high hundreds. Probably take 300 years of current earnings to = the stock's price and MV. Everybody wants to believe this stock will be the next Apple in some short time period.
Worse than even the P/E ratio makes it look. Predominantly fake economy running off of artificially cheap money and the loosest aggregate credit standards ever. Even prior to COVID, take away the increase in government deficits since 2007 by reducing it to the same level of GDP and any "growth" would be near zero or negative. Same description applies more or less to much of the rest of the world.
For individual companies, the most overpriced should be worth a very low faction of current value or never should have been funded at all. The absolute worst are SPAV which are no better than the one IPO mentioned in Kindlenberger's book, "an undertaking of great advantage, but no one to know what it is".
Moral hazard induced speculation running wild in spades.
what collapse - you mean the one day micro drop?
Leave interest rates at 0% and keep pumping $2 trillion in new USD in the system every year like we have for 13 straight years. It will recover nicely.
The future might require $3 trillion/year but with The Fed and D.C.? What's another $15 or $20 trillion to keep stocks grossly overvalued? No worries.
We know that there's a 1.4 trillion $ stimulus coming down the pike. I wouldn't worry about the market until that has been digested... of course, then at that point they might pump in some more stimulus.
As for the article talking about the UK market diving 10% since the start of the year, there is a little detail the article didn't mention, e.g. Brexit, the largest economic change for the UK in roughly 50 years, so of course there are going to be some issues there.
U.S. Type Set
Stimulus and even QE is hardly a guarantee of rising prices. Take a look at foreign stock markets. A few have broken out to new highs recently (like Taiwan finally above 1989 peak) but most are below the pre-GFC 2007 peak or even 2000. (Some are much higher due to a crashing currency.) In Japan, the BOJ has even been buying stocks and last I knew, purportedly was the largest shareholder in most of the major Japanese companies through ETFs.
The difference with the US is manic psychology. US equities are on an island entirely alone in deep outer space. It certainly isn't the economic fundamentals which were mediocre even pre-COVID and even with accommodative monetary and fiscal policy.
The nearly $40 trillion and exploding Fed balance and national debt are far greater than any nation on earth has ever attempted. To keep equities at double their true value (where they currently reside) 0% interest rates and trillions of USD/year in "fresh" currency (read debt/Fed balance sheet growth) will be required.
Turn off, or even dial back, the free money and watch what happens. Thing is that won't happen, not this year, not next year, not ever. That is until we cannot sustain it which is likely several decades away.
The Fed balance AND National Debt combined were at $8 trillion in 2008. Now they sit at darn near $38 trillion. Within 25 years they will be well over $100 trillion USD. All in the interest of greed and entitlement.
US stocks are more than double "true value". There has been noticeable P/E multiple expansion due to rampant speculation, FOMO and TINA.
Earnings are also hugely inflated from reduced interest expense, companies have gutted their balance sheets through stock buybacks to inflate EPS, and the artificial economy inflates revenue by enabling customers to spend more than they can otherwise afford.
If the stock market fell in half today, it would only be "cheap" or at "fair value" if earnings remained unchanged.
My benchmark for what's in store is a comparison to prior manias such as 1929. Recent experience is a much bigger one and only someone in denial or ignorant of history will think otherwise. Or, supposedly "it's different this time" because like Buffet recently said, "don't bet against the US economy." There is nothing unique about the US economy which exempts it from reality. It's a question of when not if.
Since this mania is larger than 1929, the subsequent "correction" should also be noticeably worse, though it's presumably going to take a lot longer as governments and central banks continue to prevent it.
I don't think it is decades away. I don't believe in trigger events but for those who do, reality is going to intrude from somewhere else in the world because global fundamentals aren't nearly as good as most believe.
https://www.hussmanfunds.com/comment/mc210201/
http://www.currentmarketvaluation.com
Too much new money sloshing around. now in equities, will move to bonds.
FED, Biden, Congress, WallStreet will not let the market collapse...they will print..print..print.
Only sharp increase in the Feds fake interest rate (plebes live with the real interest rate 8% and climbing, check oil,lumber, Wendy single combo) will shake things up.
Loves me some shiny!
I really hope it all collapses.
Most of us would benefit if the markets moved naturally!
IMO ... profit taking.