“But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade? And how do we factor that assessment into monetary policy?”
— Alan Greenspan 1996 speech as the dot.com mania caught hold
Last week Facebook, now Meta, was trading at $400. Mark Z. announced the first ever dividend of $2.00. The stock jumped $60 that day and is now $471. The dividend yield is .43%. Netflix in the same time frame jumped from $500 to $540 and is now $561. It does not pay a dividend and has nothing to do with Artificial Intelligence.
Alphabet (google) gapped down but is already coming back. Amazon joined the gap crowd and went from $160 to $170. Apple’s $3,500 headset has not helped the stock price which now appears to be sideways. After going nowhere for years under Gates’ successor CEO Balmer, Microsoft is a tech darling again trading at $418. Once Nvidia broke through resistance at $500, it has raced to $714 since the start of the year. Tesla is the sole Magnificent Seven in a downtrend from the $300 high last summer, now at $190.
The price earnings ratio for the SPX is about 20. The Magnificent group is mostly in the 30s with AMZN the exception at a whopping 59!
An old Wall Street adage is that the markets can remain irrational longer than one can remain solvent and that is where we are now. March 2000, the top of the dot.com mania, and summer 2007, the top of the mortgage mania. I recall reading an analyst comment years ago, ‘market in vertical position, further analysis not possible.’ That describes where we are now.
Earnings season is mixed. ExxonMobil and Chevron are doing quite well. Danish shipping giant Maersk fell 15% Thursday on lower earnings. It also suspended its buy-back program. The shipping business has slowed. China is beginning to look like Japan circa post 1989. China is experiencing deflation, lower prices for near everything, especially real estate. Real estate has been the savings vehicle for most Chinese citizens. French farmers are protesting in the streets blocking traffic with tractors and sheep.
Energy companies are doing well. And for once oil prices are stable which helps a great deal. Crude has traded in the lower $70 range since last November. How long can that last?
