2022/2021 Tech Bubble Thread

Is the bubble bursting?

  • Yes, ALL IN SARK

    Votes: 4 57.1%

  • No, BTFD ARKK

    Votes: 3 42.9%
  • Total voters
    7
T

TazTheLaz

Hi everyone.

I can confidently say that this recent drop in the NASDAQ is some sort of tech correction. It isn't quite clear if this will be a dotcom-bubble magnitude crash, or if it will recover. The earnings in the next weeks should give a rough idea. There seems to be so much going against the market. So that brings up a question: What happens when you have a year of growth-at-all costs sentiment, and then said sentiment faces adversity?

I have already made up my mind, but am still interested in what ET users think.
 
Well, there are certainly dangers in owning many stocks. If you own tech stock trading at $100B market cap, $2B in annual sales, and $-200M in annual earnings that is a foolish bet under any circumstances....but it is particularly foolish bet in a world with sustained 6% inflation.

But on the other hand, let's say you dump all of your stocks....then what? You sit in cash that is being depreciated 6% per year by inflation? Or do you move to US govt bonds that yield 3%, so your real return is only -3% per year due to inflation?

All else being equal, that tech stock trading at 30X earnings is still a better deal than the 3% yielding US government long bond (stock offers higher earnings yield, ability to reinvest earnings, ability to grow earnings, ability to reward investors in other ways like buybacks, etc).

So yes, there are many stocks that are grossly overvalued, but at the same time there are others that are not.....inflation is bad for stocks generally speaking, but it is even worse for bonds whose real yields are substantially lower than current inflation.
 
SteveM said:
Well, there are certainly dangers in owning many stocks. If you own tech stock trading at $100B market cap, $2B in annual sales, and $-200M in annual earnings that is a foolish bet under any circumstances....but it is particularly foolish bet in a world with sustained 6% inflation.

But on the other hand, let's say you dump all of your stocks....then what? You sit in cash that is being depreciated 6% per year by inflation? Or do you move to US govt bonds that yield 3%, so your real return is only -3% per year due to inflation?

All else being equal, that tech stock trading at 30X earnings is still a better deal than the 3% yielding US government long bond (stock offers higher earnings yield, ability to reinvest earnings, ability to grow earnings, ability to reward investors in other ways like buybacks, etc).

So yes, there are many stocks that are grossly overvalued, but at the same time there are others that are not.....inflation is bad for stocks generally speaking, but it is even worse for bonds whose real yields are substantially lower than current inflation.
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Yes, but no. Why not short NQ futures? That will no doubt outperform inflation.
 
I see a normal trend correction ... still a lot of room for a normal swinging. It was kinda "overbought" for long ...
trend.png
 
You mean funny-mentals? :) Until the system radically changes its base structure how it operates which very likely won't happen in our lifetimes ... it is still going to be hikes, cuts, hikes, cuts, inflation, deflation yady yada yada ... and corrections. Sooner or later QQQ will be back above 400
 
TazTheLaz said:
Yes, but no. Why not short NQ futures? That will no doubt outperform inflation.
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Plenty of doubt on that even if we agreed NQ is not the area to be in. In fact, there have been numerous recent years where the NQ corrected early in the year then rallied later in the year. In fact, in 2016, we had a similar situation where interest rate hikes had started.
 
Nine_Ender said:
Plenty of doubt on that even if we agreed NQ is not the area to be in. In fact, there have been numerous recent years where the NQ corrected early in the year then rallied later in the year. In fact, in 2016, we had a similar situation where interest rate hikes had started.
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We didnt have the fed saying they may raise rates 3-4 times in 2016. We didnt have the fed saying inflation is a persistent problem in 2016. Consumers didnt complain about inflation in 2016 but they certainly are now. We also didnt have a bunch of over valued tech stocks either.
Stocks are getting re priced based on expected interest rates and also the expectation that the economy is starting to slow. I do see more downside and as I said last week, eventually they bring them all down, including “ value stocks”.
We havent even seen margin calls and fund redemptions yet. The fed created an asset bubble and its popping. Its that simple and after stocks fall, real estate will get hit albeit not as bad as 2008. Do you know how many people are over leveraged because of home equity loans? A lot !
 
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