‘When and how it ends is impossible to say. But as the Fed chased down a grubby asset purchase and softened ever again to its 2% inflation target, the bubble is firmly one of the largest in stock market history. ‘
He is the founder and chief investment officer of Andrew Parlin, investment advisor Washington Peak, who has recently been involved in a growing chorus of recession pundits in op-eds for the Financial Times.
The piece caught the attention of the economist Albert Edwards of the Société Générale, who is known to offer some gloomy markets:
As an investor who navigated the historic bubble in Japan decades ago, he said he is “facing dejua vu” in the current top-heavy climate.
“Then again, anything with a verge of real estate exposure was at the center of speculation,” he explained. “Now, the hottest regions in the US are almost all disruptive technologies. Real or perceived stock, exposure to the cloud, digital payments, electric vehicles, plant-based food, or anything to do with a stay-at-home economy has meteorologically shot. ”
As Parlin sees it, the stories surrounding the “hottest disruption” are as unrealistic as the frantic real estate investment of Japan’s frenzy.
“Bubbles are formed around individual stocks and sectors. As it gets wider, more and more stocks become infected, ”he said. “The wildly exaggerated stock stories bind a compelling between fundamental analysis and shared prices.”
Tesla TSLA, he said
There is an example of “additionally these pods” which will eventually have a destabilizing effect on the broader market.
In the late 1980s, as price-to-book ratios indicated large-scale speculative risk in Japan, where assets were all the rage, so did the total of realism embedded in extremely high price-to-sales ratios in the US today Shortages highlight the most growth stocks, ”Parlin wrote.
This metric, he explained, tends to be fairly stable, and it is rare to see stock trading at a price-to-sales ratio more than 10 times. But these days it is not so.
According to Bloomberg data cited in the op-ed, listed out of 513 out of 5330 US trades, there are more than 10 times the common stock listed on sale. Parlin pointed out that only once in history have we seen a larger percentage of shares in 10 times more sales.
When was that? You guessed it: March 2000.
“The point is that while the price-to-sales ratios in the Stratosphere do not remain there, anyone over a tulip bulb in 17th-century Holland was able to maintain a $ 100,000 price,” he wrote. “It becomes a disturbing thing about bubbles. They do not undergo smooth and endogenous shrinkage only until they disappear. Instead, they continue to expand until they burst. This is why their burst is not shocking, spectacular and disorderly.
Tuesday’s decline may not have been “shocking”, but key indices, at last check, were strongly in the red. Dow Jones Industrial Average DJIA,
Was down more than 400 points, while the S&P 500 SPX,
And the Nasdaq Composite Comp,
Hit even harder on a percentage basis.
For Tesla, the stock was taking a beating down around 14%.