For those who remember the market in the dot.com bubble days, the actual reigning status quo seems more like a déjà vu of those wild and preposterous valuation days, but on steroids. I mean, 19 years ago there were a lot of companies with outrageous PE ratios, but nothing compares to a $1 trillion market valuation with a PER of 84, like Amazon has right now, or the 130 PER currently hold by Netflix, a $160 billion company.
On top of that, there is a record liquidity in the world, record debt at negative yields, and a lot of capital stuck in illiquid assets, an issue that Mark Carney, the Bank of England governor, already warned to, twice, for example when he said, “these funds are built on a lie, which is that you can have daily liquidity for assets that fundamentally aren’t liquid,”.
From China we have a giant “shadow banking” hole with unknown extension and depth, which complements a total bogus official data, like the GDP growth, which no one really believes, due to its “steadiness”, even if it’s at a 27-year low. The main point is, in 2000 we knew the dot.com sector was a fake, a bubble ready to pop. Seriously, when you have a market when you can close your eyes, select a few stocks to buy and always make money you had to know that was a fake, but everything else was pretty reasonable.
Photo by Yu Kato.
But today, traders cannot really trust a lot of things, because there are bubbles everywhere and a lot of needles ready to pop them, like the trade war. So, watch out for “quicksand”, if not you will fall into one, it’s just a matter of time.
