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Capital bubble letter a9/11/2023 Imagine a market where stocks decline 15% year-over-year, then rise 5%, drop 15%, rise 6%, drop 5%, rise 8% then drop another 12%. But I expect something far worse than a crash: Slow torture. When bubbles burst, even most bears get sucked in, buying stocks too early or getting annihilated in short squeezes due to emotion or leverage.ĭemographics will make the next crash, assuming there is a crash, much worse.The bubble believers think they can escape the bubble, but they cannot.At bubble peaks, most believe there is a “new paradigm” not a bubble.I certainly agree, but here an amusing alternate P/E evaluation as provided on Nasdaq.Com, anecdotes in blue are mine. Kee labels Google’s valuation as “excessive”. I also find it amusing as to what allegedly constitutes a “crash” these days. I congratulate Kee for having the fourth-best-performing strategy in the world in 2016, according to HedgeCo.Īt the same time, I find it interesting to note that Kee knows full well that stocks are in a liquidity bubble that will end, and he is willing to buy the alleged dip in this very real bubble. In between, Apple lacks immediate value, while Netflix is fairly valued, and Google will likely demonstrate an oddity in earnings growth in calendar 2017 that will not be resolved until 2018, distorting its immediate fair value. For example, Facebook has an immediate and relatively exceptional valuation while Amazon is at the other end, and has virtually no value at these prices. Looking at the stocks as a group, their influence on the market is tangible, but they have very different relative valuation metrics. This bubble will burst, but probably not today, and the recent selling in FAANG stocks does not appear to be a precursor to an impending market crash. Kee Jr., a former Morgan Stanley broker and founder of Stock Traders Daily, says quite a bit about market sentiment.Ĭentral bank capital infusions dating back to 2013 are exactly what caused this asset bubble, and the liquidity injections have not stopped.
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