Seeking Alpha

Cashin sees bubble in cloud/mobile tech names

  • "I do worry a little bit that we're beginning to hear things that are reminiscent of the 1999-2000 period—the number of hits, the number of eyeballs," says UBS' Art Cashin, suggesting a new tech bubble is afoot.
  • Cashin doesn't claim all tech names are taking part - many large-caps still go for less than 15x trailing EPS and 3x sales - just some of those with strong cloud and/or mobile exposure. "We're beginning to see a case of old tech/new tech."
  • Though using P/Es to value growth-stage tech firms can be tricky, given how near-term earnings are often depressed by big investments, a look at price/sales multiples makes it clear valuations for many high-growth names have soared.
  • Facebook (FB), LinkedIn (LNKD), Zillow (Z) and YELP now respectively trade at 13.4x, 13.1x, 10.9x, and 14.8x 2014E sales. The story is similar for some enterprise-focused names: Workday (WDAY) and Splunk (SPLK) go for 20.7x and 17.3x FY15E (ends Jan. '15) sales, and ServiceNow (NOW), Tableau (DATA), and FireEye (FEYE) go for 11.9x, 14.4x, and 21.4x 2014E sales.
  • Price/billings ratios for enterprise firms that depend heavily on cloud subscriptions are a bit lower than price/sales ratios, but are still often in the double-digit range.
  • Tech ETFs: QQQ, XLK, QTEC, IGM, IYW, PTF, MTK, XLK, VGT, RYT, FXL, PSCT, TECL, ROM, TECS, REW, TDIV.
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Comments (142)
  • Intangible Valuation
    , contributor
    Comments (613) | Send Message
     
    Most companies won't sell much over 5 times sales long term. The reason being, of course, is that a 10% profit margin on a company selling at 5 times sales is a company with a PE of 50. If the company had a 25% profit margin, a company selling at 5 times sales is a PE of 20. It is tough to maintain a price above a P/S of 5 -- Google successfully accomplished a smooth let down from its above P/S of 5 days... but, again, Google has a monopoly on one of the definitive features of the 21st century.

     

    Even companies whom have good brands with strong profit margins don't sell above 5 times sales. E.g., COH sells at around 3 times sales and it has some excellent profit margins compared to competitors.

     

    Don't forget some others taking part of the bubble: TRLA at a P/S of 11, Zillow at a P/S of 18.9 (!!), or TSLA at a P/S of 11.92 (!!!). It is worth pointing out that TSLA is a particularly bad offender since it is in a segment of industry which typically has low profit margins.
    19 Oct 2013, 03:57 PM Reply Like
  • wyostocks
    , contributor
    Comments (8852) | Send Message
     
    @intangiblevaluation
    The mere fact that stocks sell at a multiple of sales, not earning, is by itself indicative of a bubble.
    19 Oct 2013, 05:00 PM Reply Like
  • Walter P. Chrysler
    , contributor
    Comments (300) | Send Message
     
    You have to be careful with Tesla because they're sporting profit margins in an industry that doesn't have any. in theory their growth is "the whole market" and right now they only have one competitor in Nissan (which is a formidable competitor i might add.) I think the rest of the industry has basically ceded the market to Tesla...one look at Solar City pretty much sums it up to me. Oracle and Intel sport profit margins in the high 70's...same true for Windows i believe...Microsoft is moving higher for the first time in forever. Intel is barely budging and Oracle is well...Oracle. They all have a long way to go to get back to their bubble highs of 2000. Of the three Oracle has done the best interestingly enough. Don't know what to say about the new Brat Pack here...Google, Facebook, Neflix etc. I mean these things are off the charts in a very short period of time. They're not alone either. Commodities especially gold are saying "Code Red" to me and i would be moving strongly into treasuries as a consequence. these things never end well and i find perma-bear Mr. Cashin surprisingly reticent here. I don't recall him ever being bullish these last five years and in fact being the exact opposite over this entire time frame.
    20 Oct 2013, 07:28 PM Reply Like
  • wil3714
    , contributor
    Comments (2097) | Send Message
     
    Not if the company is growing at a tremendous rate, has patents/IP, and no competition in the space.
    21 Oct 2013, 12:57 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (25841) | Send Message
     
    What's that company growing at a tremendous rate?
    21 Oct 2013, 05:58 AM Reply Like
  • wil3714
    , contributor
    Comments (2097) | Send Message
     
    TSLA, FB, LNKD
    21 Oct 2013, 08:56 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (25841) | Send Message
     
    Why do you think TSLA is growing at a "tremendous rate"? Although that might seem like it y-o-y, quarter-on-quarter the growth has been minimal. Sure, now that international deliveries started it should get another push, but U.S. sales seem all but stagnated. A service tallying September U.S. sales even saw a 20% drop on Model S sales.
    21 Oct 2013, 09:11 AM Reply Like
  • wil3714
    , contributor
    Comments (2097) | Send Message
     
    They do close to $2B in sales this year up from $400M in 2012. 400% growth but it seems your looking past.2013-14. The roadster was a huge success but from my friends, they love the model S even more. The parts and design get great praise. I listened to the consumer and they love the car. I continue to see more model S's on the road here in Silicon Valley. With a lot of young money and companies going IPO, people have a lot of money to throw away. Soon Tesla will go into production on an SUV and more mass produced cars. Going into the technology is where most people dont understand that no car can compete vs its design, technology and range. The Leaf and i3 are probably the best examples of electric cars and Tesla just blows them away.

     

    I go by what I see, not by what I hear or read.
    21 Oct 2013, 10:38 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (25841) | Send Message
     
    wil, but last year it was not selling (delivering) the Model S and now it is, so y-o-y numbers would always seem massive. The thing is, quarter-on-quarter it has mostly stagnated since Q1. It should have an uptick this Q but that's because of international deliveries, U.S. deliveries are mostly stuck in the same place.

     

    A true growth company usually grows strongly even q-o-q. Obviously international and then new models will enable further growth, but it's still impressive just how quickly demand seems to have saturated.
    21 Oct 2013, 10:49 AM Reply Like
  • wil3714
    , contributor
    Comments (2097) | Send Message
     
    Totally understand your concerns and there are always concerns with growth stocks. I still think the long term story is intact. $50k isnt a lot for a premium car and US is 50% of that market. My conviction lies with they can easily license the technology but wont destroy the brand and I believe in Musk because in the past is he was faced with a task he struggled in, he would always surround himself with others who could prop him up. Again, they have no real competition and Europe and China, the 2nd and 3rd largest markets, going green is either getting more popular or very popular. Europe is the most green country in the world as many countries are 100% green and China has started initiatives for going green due to large carbon emission deposits causing cancer or poor health conditions.
    21 Oct 2013, 11:09 AM Reply Like
  • lildimsum7
    , contributor
    Comments (601) | Send Message
     
    Even with your story, that doesn't justify Tesla's valuation. Conviction based on the product is the reason why Tesla is trading at a silly valuation. The growth assumptions priced into the stock are ridiculous.
    21 Oct 2013, 10:23 PM Reply Like
  • wil3714
    , contributor
    Comments (2097) | Send Message
     
    Yeah so are AMZN, NFLX, FB. Heard it and ignore it, some of these companies have been expensive for years. No competitor can touch them no matter how hard they try. Believe or dont believe doesnt matter.
    21 Oct 2013, 10:29 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (25841) | Send Message
     
    Well, someone touched AMZN or its earnings wouldn't be zero.
    22 Oct 2013, 06:51 AM Reply Like
  • althegolfer
    , contributor
    Comments (21) | Send Message
     
    While P/S greater then 2 is considered to be cautionary, it is hard to use this metric in a meaningful way. These stocks represent life style changes and eventually come down to the reality of the day to day business concerns of what ever industry there in.
    22 Oct 2013, 09:00 AM Reply Like
  • wil3714
    , contributor
    Comments (2097) | Send Message
     
    LOL AMZN is so diverse that they cant be touched. Are they a retailer, tech, consumer products, content company?

     

    People are going to pay up for growth otherwise all the companies wouldnt need a valuation because they'll all trade at the same multiples.
    22 Oct 2013, 09:15 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (25841) | Send Message
     
    Touching = having earnings problems. AMZN does have earnings problems.
    22 Oct 2013, 09:16 AM Reply Like
  • wil3714
    , contributor
    Comments (2097) | Send Message
     
    True they could charge more but dont to maintain loyal customers and volume.
    22 Oct 2013, 09:25 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (25841) | Send Message
     
    Same as any other business facing competition.
    22 Oct 2013, 09:51 AM Reply Like
  • lildimsum7
    , contributor
    Comments (601) | Send Message
     
    Do you know who else had that attitude? Traders of the tech bubble. Look how that turned out.
    22 Oct 2013, 11:57 AM Reply Like
  • wil3714
    , contributor
    Comments (2097) | Send Message
     
    Well the market has spoken, sorry but you cant break them down. I used to think yeah they are expensive but just bought it when it declined long time ago. Been happy with it ever since.
    22 Oct 2013, 06:09 PM Reply Like
  • lildimsum7
    , contributor
    Comments (601) | Send Message
     
    That may be, but you could've said the same thing about Enron, the tech bubble, bitcoins, the China market bubble, China solar companies. I could go on about this phenomena. Just because the stocks are up doesn't make it a smart move. When there's such a huge discrepancy between market price and financial reality, you know irrational speculators are part of it.

     

    Irrational participants have been a part of markets for a long time. "I can calculate the movement of stars, but not the madness of men" - Issac Newton
    22 Oct 2013, 08:18 PM Reply Like
  • wil3714
    , contributor
    Comments (2097) | Send Message
     
    Enron one off case

     

    tech bubble - companies going IPO without a product of strategy & 400% gain opening day

     

    Chinese stocks - dont have same accounting as US

     

    These are easy to spot or pick up on.
    22 Oct 2013, 08:37 PM Reply Like
  • lildimsum7
    , contributor
    Comments (601) | Send Message
     
    Easy for you to say ahead of the facts. Most countries don't have the same accounting as U.S., doesn't mean they're bubbles. If it's easy to pick up on, how are you not picking up on the Tesla bubble? The behavior is consistent with all bubbles: irrational buyers with no regard for financial reality. I suppose ignorance is bliss, until it bites back.
    23 Oct 2013, 06:23 PM Reply Like
  • wil3714
    , contributor
    Comments (2097) | Send Message
     
    Wow really, cant see 400% pop on an IPO? Enron was manipulating the market and cutting production to raise rates. If you lived in California, you would know that this was ridiculous like oil refiners going under maintenance or explosions killing production. California has a special blend for summers and ethanol is a joke since it takes more resources to product ethanol than good it does. Its basically a contract signed to consume more corn, bill backed by ag companies.

     

    TSLA can easily make money by licensing its technology but wants to remain a premium brand. It'll go mass production in a few years and tech companies always go by extreme valuations. Look at Sourefire, they went for like 12X sales and didnt make a profit. you can go the same route for 100s of tech companies because you cant value them the same as others.
    23 Oct 2013, 09:52 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (25841) | Send Message
     
    wil, were you around in 2000?
    24 Oct 2013, 06:14 AM Reply Like
  • wil3714
    , contributor
    Comments (2097) | Send Message
     
    I was around but was more tech oriented back then when I was going to school.
    24 Oct 2013, 10:32 PM Reply Like
  • lildimsum7
    , contributor
    Comments (601) | Send Message
     
    Still, people were buying Enron for the same reason people were buying Tesla. No one cared about the disconnect between market price and value, because they were 'hot stocks.' There's no way to justify TSLA's price. It was riding a wave of overoptimism. How could you expect Apple-like growth in an auto company with low margins, in an industry that's extremely competitive & cyclical?

     

    Look at the stock now! It didn't meet unreasonable growth expectations, and now it's crashing, much like a bubble.
    7 Nov 2013, 11:41 AM Reply Like
  • wil3714
    , contributor
    Comments (2097) | Send Message
     
    If people were buying Eron on hyped energy prices, whats to stop a utility opening up a coal plant, nuclear plant, solar facility, etc to calm energy fears. Do your homework.

     

    Why do people always look at 2 examples based on one stat? Its not the same as one is proprietary and the other is a commodity with headline risk. Just because its a hot stock? TSLA has more growth than AAPL. You need to do your homework first and not follow the crowd.

     

    "Look at the stock now! It didn't meet unreasonable growth expectations, and now it's crashing, much like a bubble."

     

    So what its trading on momentum with short interest @ 33% you can expect volatility, its been trading up for a year, why to time your calls. Its not going to disappear like the bubble your quoting.
    7 Nov 2013, 12:19 PM Reply Like
  • Weighing Machine
    , contributor
    Comments (815) | Send Message
     
    I'm short a basket of this garbage. It's been painful thus far but I'm pretty sure I'm right.
    19 Oct 2013, 04:28 PM Reply Like
  • jeezuz30
    , contributor
    Comments (392) | Send Message
     
    Why not go with the trend instead of fighting it?
    19 Oct 2013, 05:57 PM Reply Like
  • jeezuz30
    , contributor
    Comments (392) | Send Message
     
    Once it's clear the trend is over, then short it if your brave, seems like a bad time of the year to be short momentum stock.
    19 Oct 2013, 05:58 PM Reply Like
  • Zeus2012
    , contributor
    Comments (709) | Send Message
     
    You're fighting the Fed by shorting these bubbles. Just accept that creating "bubbles" is part of the collateral damage by the Fed in its effort to carry out its dual mandate of low inflation and high employment (though one must question how successful the Fed has been at the later).
    19 Oct 2013, 07:06 PM Reply Like
  • alec2003
    , contributor
    Comments (50) | Send Message
     
    I guess being right is more important then making money. Had you bought say fb at that ridiculous share price of say 41 you would be sitting on 25 % return in less then 2 months. Sure eventually you will be right but what do you hope to make ? 25% return ? 30? ...that money is being made just buying the stock right now.

     

    oh and many of these companies are profitable and here to stay.
    20 Oct 2013, 12:59 AM Reply Like
  • Walter P. Chrysler
    , contributor
    Comments (300) | Send Message
     
    this thing isn't created by the Fed. that would be on the DEBT side...something they pushed back against this summer interestingly enough. i think the easy money has been made...i would join the Fed and buy treasuries...just not be crazy about and max out at the 7 year.
    20 Oct 2013, 07:30 PM Reply Like
  • Studioso Research
    , contributor
    Comments (244) | Send Message
     
    There are plenty more cloud names in addition to the ones (WDAY SPLK NOW DATA FEYE) mentioned above: CRM N VEEV ULTI CSOD TXTR RNG
    19 Oct 2013, 04:33 PM Reply Like
  • Sam Johnston1
    , contributor
    Comments (527) | Send Message
     
    LOL.....Another day with more bubble talk. I've been hearing about this since back when FB was 20/share.

     

    If you're short FB you deserved what you get because it's not sophisticated and rationale to short them right now.
    19 Oct 2013, 04:51 PM Reply Like
  • Intangible Valuation
    , contributor
    Comments (613) | Send Message
     
    That is a good point, although FB is a different beast than many of the others mentioned.
    19 Oct 2013, 05:17 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4842) | Send Message
     
    The greater fool theory is not a good investment thesis. It always ends in a crash. Everyone believes they are more nimble than the other guy to get out before the crash but obviously everyone cannot be nimble enough.

     

    I speculate on turnaround plays or under valuations caused by exogenous events but not greater fool theories.

     

    Having said that however it may be a good investment thesis to buy a company with 100 million customers that has barely monetized their base. They have a lot of revenue ahead of them. Just need to buy it at the right price.
    20 Oct 2013, 12:39 AM Reply Like
  • wyostocks
    , contributor
    Comments (8852) | Send Message
     
    @SamJohnson1
    I don't know how old you are but believe me when I tell you people said the same thing in 1999 when the nasdaq was close to 6000.
    19 Oct 2013, 04:58 PM Reply Like
  • Tack
    , contributor
    Comments (14120) | Send Message
     
    wyo:

     

    I'm with Sam on this one.

     

    People keep mentioning 1999 and 2008, as if the mere mention should make everyone's eyes glaze over, knees knock and send them trembling to the floor. How could anybody who was compos mentis in the late '90's even remotely compare the current market, or NASDAQ, to that period?

     

    You don't remember daily IPO's for billions for firms with no revenues, no profits, no hope? You don't remember already-IPO'd names having 100%, or even 200%, price rises, or even roundtrips, on a single trading day? You don't remember people literally quitting their jobs to become daytraders? You don't remember neophytes with maxxed-out margin accounts? You don't remember how everybody was going to be "rich?" You don't remember how the Internet was going to change all business and market parameters (it's different this time")?

     

    Today's business environment, performance, valuations and endless expressed doubts don't parallel the '90's in the slightest. Can't even mention them in the same sentence. People looking for 2000 or 2008, all over again, are just engaged in self sabotage.
    19 Oct 2013, 05:10 PM Reply Like
  • Studioso Research
    , contributor
    Comments (244) | Send Message
     
    Tack, you're right, the market environment in 1999 and 2000 was far more frothy, particularly with regards to the quality of IPOs in those years.

     

    Despite this, there are pockets of the market whose valuations raise eyebrows, such those of the the stocks listed above.
    19 Oct 2013, 05:15 PM Reply Like
  • Tack
    , contributor
    Comments (14120) | Send Message
     
    SR:

     

    Debates about whether this or that company is overvalued I have no problem with. Segues into suggestions that the overall market may look like 1999 (or 2008) force me to illuminate the obvious differences.
    19 Oct 2013, 05:27 PM Reply Like
  • Studioso Research
    , contributor
    Comments (244) | Send Message
     
    Tack, I agree
    19 Oct 2013, 05:30 PM Reply Like
  • wyostocks
    , contributor
    Comments (8852) | Send Message
     
    @tack
    I always appreciate your optimism that the market is forever going up, up and away. So far you have been spot on.
    However, I still maintain that one day you'll be shaken out of it when reality hits home.
    As for me, stay invested with what you can afford to take a hit on and take profits when it seems the right thing to do.
    Stay profitable Tack and good luck to you.
    19 Oct 2013, 06:52 PM Reply Like
  • Tack
    , contributor
    Comments (14120) | Send Message
     
    Wyo:

     

    I am not forever optimistic. I respond to facts and conditions, as I see them. Current conditions do not promote overwhelming anxiety for me. In fact, the anxiety of others makes me feel better.

     

    Here's some additional advice:

     

    I have been retired and living on investments for 14 years. You will discover that you need to find a way to stay invested and manage risk because you won't be able to have money in a mattress when you need to produce income to meet your needs.
    19 Oct 2013, 07:42 PM Reply Like
  • Zeus2012
    , contributor
    Comments (709) | Send Message
     
    Tack's optimism is not blind. Rather, it's rooted in the Fed's policy. As long as the Fed's pumping $85 billion a month into the market through POMO, the market will continue to go higher. Remember, lower interest rate reduces cost of capital and helps corporations borrow cheaper. This helps companies with their bottom line even if the top line does not grow. The irony is that this party will come to an end when the economy picks up and we start to see inflation.
    19 Oct 2013, 07:49 PM Reply Like
  • Tack
    , contributor
    Comments (14120) | Send Message
     
    Z:

     

    Nope, not based on Fed, either.
    19 Oct 2013, 09:50 PM Reply Like
  • J Mintzmyer
    , contributor
    Comments (5581) | Send Message
     
    Good back and forth, and I agree with 1999, even if I was only 9 years old then. I remember a neighbor's day with roughly a $50k income quitting his job and becoming a 'day trader,' because he thought he could consistently pull $200k+ a year.

     

    Ended 2 years later with a foreclosure, divorce, not sure if bk or not.

     

    ---

     

    Anyways, I disagree about 2008 though (albiet 2007 was a better year to compare optimism). The market is similar to then. Very similar-- multiples on the broad market weren't out of control, mainly just bank ventures that were way overvalued.

     

    That said about the OVERALL market, I think the current $NFLX, $YELP, $FB, $AMZN, $CRM, $TSLA, $LNKD easily fit into 1998-ish profiles. With the exception of $AMZN, all of those stocks could easily lose 80-90% of their market cap with enough fear and a few 'misses.'
    20 Oct 2013, 05:13 PM Reply Like
  • Tack
    , contributor
    Comments (14120) | Send Message
     
    JM:

     

    "Anyways, I disagree about 2008 though (albiet 2007 was a better year to compare optimism). The market is similar to then. Very similar-- multiples on the broad market weren't out of control, mainly just bank ventures that were way overvalued."

     

    But, the even bigger difference between then and now is that in 2007/2008, private credit and liquidity was exhausted. Now, we're having trouble getting credit to expand and liquidity is massive. This isn't a prescription for any collapse.
    20 Oct 2013, 05:28 PM Reply Like
  • Zeus2012
    , contributor
    Comments (709) | Send Message
     
    The one area that may be of potential concern is the muni market. It started with Detroit's filing of Chapter 9 and now Puerto Rico has been infected as the market has decided not to "roll" their debt even though one can argue that no much economically has changed and that PR's financial troubles and over leveraged conditions have been well documented for some time.

     

    The question is what will happen should Detroit be successful in cramming down the GO bondholders and if PR has a liquidity issue in 2014 and needs to restructure its debt (i.e., Argentina style) as it's not eligible for Chapter 9 as it's a sovereign issuer. Could the contagion spread further to other municipalities (or even states) with weak credit & similar over leveraged conditions? Will they be able to access the muni market and roll their debt in those conditions? Or will they get the cold shoulder not too dissimilar to what PR experience in the last 3 months?

     

    While the above scenario is HIGHLY unlikely as DC is aware of such risk & is conducting active dialogue, the probability is not zero given the political nature. By the way, don't think municipalities have access to the Fed window.

     

    If such scenario were to play out, will the equity markets just shrug it off? I seriously doubt it. I hope it does not happen as I own muni bonds (even some PR bonds).
    20 Oct 2013, 07:10 PM Reply Like
  • Walter P. Chrysler
    , contributor
    Comments (300) | Send Message
     
    interest rates are MUCH lower actually. In many ways this is a far GREATER bubble than that one. What is the economic basis for your analysis? the Flux Capacitor?
    20 Oct 2013, 07:32 PM Reply Like
  • Walter P. Chrysler
    , contributor
    Comments (300) | Send Message
     
    what is it based on then? The sudden appearance of the Ethernet? http://bit.ly/H9kjpZ
    20 Oct 2013, 07:36 PM Reply Like
  • Walter P. Chrysler
    , contributor
    Comments (300) | Send Message
     
    really? M2 is stagnant. jobs growth in the 90's was stellar. now we're talking "negative rates." back then we had pricing power...even post 9/11 we had outstanding growth numbers. i think only the crazy people are all in on this one....at least in the immediate term. i mean you tell me why the yen is doing what it's doing. if your answer is "making a believer!" sorry but i'm hitting the pause button on that.
    20 Oct 2013, 07:40 PM Reply Like
  • Mark Humphrey
    , contributor
    Comments (806) | Send Message
     
    I think Zeus overlooks a potentially big problem. Long term rates--the one's the Fed cannot control forever--have been climbing. This has not hurt stocks yet much, because the rise in rates was from low base. Most analysts think rates went up due to risk of tapering, but they haven't gone back down. I think rates are rising, because the money printing and endless rampant government spending both cause average profit margins to expand. So interest rates get pulled higher, inexorably. Margins have stopped expanding now, but rates have a long way to climb toward parity. No one out there much worries about higher rates, so this is not discounted. When people figure out rates are headed up and the Fed can't stop them, stocks will get toasted. Meanwhile, the recovery is getting weaker, also not discounted. So stocks qare dangerous, because the downturn will happen, when it finally arrives, quickly.
    20 Oct 2013, 09:43 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (25841) | Send Message
     
    The Fed can stop them.
    21 Oct 2013, 05:59 AM Reply Like
  • Studioso Research
    , contributor
    Comments (244) | Send Message
     
    wyostocks, in all fairness the Nasdaq intraday high was 5,132.52, so quite some distance from 6000.

     

    While Facebook may have a high P/S ratio, it is profitable.

     

    Which is in stark contrast to many unprofitable cloud names listed in the article, and above in this comments section.
    19 Oct 2013, 05:09 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5855) | Send Message
     
    Recent commentary from my instablog post today :

     

    Since the "headlines " haven't taken down this market the "bears" will roll out the "Bubble & overvaluation talk" as a continuing cry for a "crash". The naysayers play that theme and make comparisons to 1999 which is absurd... The facts don't support that at all..

     

    In 1999 the S&P finished at 1469, earned $53 per share, and paid out $16 in dividends. The 2013 S&P 500 is earning double that amount - over $100 per share. The index will also be paying out double the dividends this year, more than $30 per share, and returning even more cash with record-setting share repurchases. So one would think we are paying a big premium for the doubling of earnings & dividends.. Quite the opposite , we're paying a discount. 50% off. The current S&P 500 trades for a PE of 15 - 16 versus 33 in 1999. So double the fundamentals for half the price.

     

    That isn't frothy , overvalued or bubbly to me ..& this certainly ISN'T 1999.
    Lets not use 6 stocks as a proxy for this bull market. 
    19 Oct 2013, 05:26 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (25841) | Send Message
     
    The bubble is not in the S&P...
    19 Oct 2013, 07:48 PM Reply Like
  • Placebo Investment Advice
    , contributor
    Comments (3470) | Send Message
     
    Greed:

     

    The trailing as reported P/E is roughly 18 according to the WS Journal Data Center. It's dishonest for historical comparison to fudge the P/E with bogus adjusted earnings or hoped-for future earnings. A P/E of 18 is in the upper tier of market valuations in the century prior to the internet bubble. (I'll ignore for the moment that single year P/E's have no predictive ability for future market returns.)

     

    A less malleable metric, trailing Price/Sales, is currently higher than in any year prior to the internet bubble going back to at least 1940. How will you rationalize this measure of very high market valuation? My guess is that you'll claim that we we are in a new era of permanently higher profit margins. That's a risky belief with no historical precedent.

     

    When you talk up the market's alleged cheapness relative to 1999, it reminds me of an overzealous realtor who lists a home for sale with this advertising pitch: "This bargain house is 30% cheaper than it was in 2006!!" The realtor does not mention that the house is currently 150% higher than the price in 2003.
    20 Oct 2013, 11:03 PM Reply Like
  • Tack
    , contributor
    Comments (14120) | Send Message
     
    WSD:

     

    Is there something wrong with a house being 150% higher than it was ten years ago? Are you suggesting that home (or stock) prices should revert to some 2003 "norm?"
    20 Oct 2013, 11:17 PM Reply Like
  • Placebo Investment Advice
    , contributor
    Comments (3470) | Send Message
     
    Tack: The point is that a discount of 30% is no bargain if the prior decade experienced a massive bubble of several hundred percent. Gold bugs currently use the same "discount" sales pitch to promote the idea that gold is cheap--conveniently ignoring the immense prior run-up in the price of gold (that makes a 30% "discount" rather trivial).

     

    Obviously some locales can have a dramatic permanent shift higher real estate prices for a number of reasons. But in aggregate in the US, a huge increase in real estate prices far above the rate of inflation and median income has never endured in the long run.
    20 Oct 2013, 11:56 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5855) | Send Message
     
    Wall street ,
    I don't have an "advertising Pitch" ALL can "choose" what they want to believe and invest accordingly . Just presenting factual data that your reply doesn't address.. Comparing my 1999 equity analysis to an overzealous realtor is blatantly absurd . & certainly don't try to "guess" my stance on anything.. Very presumptuous from someone that apparently has been wrong on the markets ( my presumption on your position from the commentary here and elsewhere.. )

     

    Any thoughts on where the equity market is headed? any wish to share your advice , ideas on alternatives ? .. Have u been on the sidelines ? invested in equities , short ?

     

    Please provide some context to show a conviction or lack thereof to your position on the equity market , I have stated mine ...
    21 Oct 2013, 08:44 AM Reply Like
  • Placebo Investment Advice
    , contributor
    Comments (3470) | Send Message
     
    Greed,

     

    Short term market moves are a guessing game. It's fun to do and offers some distraction, but it's useless because short-term market direction is based on the whim and madness of the crowd.

     

    My conviction is that many people are poorly-informed about historical metrics that are bandied about to promote their market desires. Anyone who is objective and rational will not see the broader US market as "cheap". Not all stocks are overpriced but there's a surprisingly large number of stocks that are clearly experiencing huge speculative gains that will likely turn to staggering losses in the next bear market.

     

    By the way, I was "wrong" in 1999 when I avoided all tech stocks. I again was wrong in 2005 when I sold a house a year before it peaked. I was wrong in 2007 when I sold Fannie Mae stock at $60/share before it rose to $70 (later it went to to nearly $0). So yes, I often get things wrong from the perspective of short-term speculators.

     

    Please feel free to tell us how your portfolio performed in the bear markets of 2000-2003 and 2008-2009, audited results if possible, as you are an investment advisor.
    21 Oct 2013, 01:56 PM Reply Like
  • Jay Schembs, CFA
    , contributor
    Comments (141) | Send Message
     
    NYSE margin debt reaches record in Sep 2013. Excess cash lowest (most negative) since Aug 2000.

     

    http://bit.ly/H6ELaL
    21 Oct 2013, 01:57 PM Reply Like
  • Tack
    , contributor
    Comments (14120) | Send Message
     
    WSD:

     

    Your complaint here is disingenuous. What you are saying isn't that the historical metrics are flawed or that market timing is merely "fun." What you really are claiming is that you are a master of market timing, and that's superior to the outcomes of other longer-term investment strategies based on more mundane metrics.

     

    The problem with this assertion is that statistics demonstrate that the vast number of investors/traders fail at market timing. In fact, most of those who even attempt to achieve it are so biased by their downside fears that even after huge market declines they fail to re-enter, simply because the declines confirm to them, at least in their thinking paradigm, that the end is near or that the markets have further to fall, no matter how much they already fell.

     

    Of course, if you set up the example of the perfect market timer, he'll always outperform the longer-term investor, who occasions temporary setbacks during bear markets. It's just that the person you describe is a very rare bird, indeed. The more likely sets of investors to be compared are those that stay invested and manage risks against those that always see the next downturn and find themselves rarely, if ever, invested. It's rather clear, both from a statistical and common-sense point of view who prevails in such a comparison.

     

    It isn't the long-term investor, who's the "speculator;" it's the market timer, whether the results obtained by any specific individual are favorable or not.
    21 Oct 2013, 02:19 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5855) | Send Message
     
    Wall Street,

     

    I am not here to provide audited results for your benefit. I also get things wrong ,more times than I care to discuss. Its part of the business of investing and comes with the turf. When did I state that I never made a mistake ?

     

    In addition , I have stated many time here and elsewhere that I believe we are in a secular bull market , Hardly A SHORT term "guess" , my friend.

     

    As far as my performance back in the latest financial crisis. I can assure you I used the risk management advice that i documented here in my blog. If u manage the risk the profits will take care of themselves..

     

    Suffice to say your convictions on the present market are completely opposite of mine. I note from your comment when you use the word "staggering losses" in the next bear market , you show your true colors with the preconceived notion that the folks that have made money in this Bull market on what you describe as "speculative gains" will all melt away. (that sir is the ramblings of all of the frustrated bears, along with "you're all going to lose everything" ) -- That is nonsense --I suggest you can start by debunking that myth.

     

    Now if one chooses not to practice risk management they may do just that , but for those that follow prudent advice of taking profits along the way and using that risk management I mentioned, that will not happen..

     

    So you don't have an opinion on today's market but to warn all of us uneducated folks of the next impending bear market.. Instead you choose to make generalized statements debunking the Secular bull theme....Believe what you wish but as I have stated here : following advice from those that are in denial or are frustrated bystanders with plenty of rhetoric about how its all "going to end badly" is harmful to one's financial health.. and further suggest those that have professed your view are not acting rationally and certainly not objectively when it comes to this equity market..

     

    Better luck with you next house sale ..& thank you for the "warning"
    21 Oct 2013, 03:04 PM Reply Like
  • Placebo Investment Advice
    , contributor
    Comments (3470) | Send Message
     
    Tack, it seems that you are jumping to conclusions again (sigh). I'm not advocating market timing nor am I dismissing it. I'm pointing out that those who claim that market valuations are cheap are biased and misinformed. Based on historical valuation metrics, those who buy index funds today are unwise to have great expectations on total returns 10 years out, but anything is possible.

     

    If it makes you feel better, I'll confess to buying stocks, for instance, TJX, at or near the Nasdaq peak in 2000. (I did not buy any tech stocks.)

     

    Most Wall Street money managers are closet market timers as evidenced by the fact that they raise and lower cash at various points in the market cycle based on macro expectations. Actually, John Bogle (Vanguard) is probably one of the only people in existence who 100% truly never engages in market timing. Oh, and you too.

     

    The 100% on/off market timers are rare. They exist among newsletter writers and some macro hedge funds. Some of them have market beating track records. Many hugely successful hedge funds are greatly influenced by market valuation metrics. In your mind, I'm pretty sure that they fit into the market timer category. So again, a little more research and you won't need to jump to conclusions and make grand statements that are incorrect.
    21 Oct 2013, 03:25 PM Reply Like
  • Placebo Investment Advice
    , contributor
    Comments (3470) | Send Message
     
    Greed: I didn't give you advice, but if you want my advice, here it is: Sell everything you own and put the proceeds in 10 stocks with the highest valuation metrics from these sectors: social media, biotech, cloud computing. Strive for the stocks from those sectors that are losing the most money and that have the highest market returns since the bull market began in 2009. Use as much margin as possible to leverage your potential gains as much as possible. Make sure you buy a ton of Tesla stock too, because an overly caffeinated 21-year old valet told me two nights ago that Elon Musk is like Iron Man, and Tesla stock is the new Apple.

     

    If the bull market in speculation continues endlessly, you'll be the toast of the speculator trading world and so rich that you won't need to work as an investment advisor. If not, the next bear market might burn so much of your money that you'll be eligible for food stamps, fake disability, housing subsidies, Obamacare, and a free Obamaphone that you can use to cancel your brokerage account. You can supplement the government handouts by starting a new blog called SeekingWelfare.com.

     

    It's a win-win situation. Good luck.
    21 Oct 2013, 05:22 PM Reply Like
  • wyostocks
    , contributor
    Comments (8852) | Send Message
     
    Guys
    Time for a deep breath. Markets are now closed so it might also be bourbon on the rocks time.
    21 Oct 2013, 05:30 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5855) | Send Message
     
    wallstreet ,

     

    that's exactly what i expected from you ,, all headlines no context..
    You have now shown your true colors..

     

    Many that are frustrated have the same daily thoughts. I have discovered that frustrated bears can be a very dangerous breed.

     

    Good luck to you also
    21 Oct 2013, 05:36 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5855) | Send Message
     
    wyostocks,

     

    i like the way u think ;)
    21 Oct 2013, 05:37 PM Reply Like
  • Tack
    , contributor
    Comments (14120) | Send Message
     
    WSD:

     

    I keep asking myself, what does the fact that there are some selected stocks that may be substantially overvalued have to do with the overall market, itself? There are overvalued stocks every day of the year, even in the depths of a bear market. In fact, so what if the entire market is slightly overvalued (it isn't)?

     

    The overall market is not wildly valued, not obviously undervalued. What's an investor -- not a trader -- to do, sell everything and hide in the corner? Your comments always make it sound as though anyone who is long or finds a new position to add is certifiably nuts. I'm long 24/7 365 days a year, for almost forty years, now, through every kind of market imaginable. Does that mean I buy and hold with my eyes closed? No, I am always adjusting the portfolio to harvest my previous winners and redeploy cash to new underpriced value plays, and I adjust sectors and equity/preferred/bond holdings based on overall economic conditions and interest-rate trends.

     

    The foregoing behavior is how I have achieved and maintain a very prosperous retired lifestyle since I was 50 years old. You seem very confused about the difference between investment and speculation, as well as the long-term results of each..

     

    What is it that you would recommend to other young investors, who seek to attain financial security? You can't make money watching.
    21 Oct 2013, 05:51 PM Reply Like
  • Placebo Investment Advice
    , contributor
    Comments (3470) | Send Message
     
    Tack: Most investment money is made by "watching"--good companies grow into large companies. The trick is when to buy good companies and at what price.

     

    I use Ben Graham's explanation of speculation versus investment, so you can read his books for details.

     

    A young investor should read Jack Bogle's "Common Sense on Mutual Funds" followed perhaps by Peter Lynch's two books and Ben Graham's "Intelligent Investor" for those who want to understand basic security analysis. Index funds (or say, Berkshire Hathaway stock) are appropriate for most investors.

     

    Young investors should avoid hot media-hyped stocks. Lynch and Graham give this advice, but young people seem to gravitate to such stocks because it seems like an easy way to make money during a long bull market.

     

    Finally, patience is the most valuable investing attribute. The best time to invest in stocks is typically about 8-14 months into a bear market when momentum speculators are forced sellers--and regretting that they margined their accounts up to their eyeballs.
    21 Oct 2013, 10:52 PM Reply Like
  • Robert Duval
    , contributor
    Comments (6757) | Send Message
     
    Yes, by these metrics we could see an SPX of 3000. Perhaps we will. We are no where close to 1999, although there are tiny pockets of froth.
    19 Oct 2013, 06:33 PM Reply Like
  • Tom Au, CFA
    , contributor
    Comments (6788) | Send Message
     
    The problem with valuing "new tech" on "special" metrics, is that "new tech" always becomes "old tech" eventually.
    19 Oct 2013, 07:24 PM Reply Like
  • SharkDude
    , contributor
    Comments (734) | Send Message
     
    What are you supposed to do when the government forces you to buy stocks? FED printing forever. Govt spending 5 bucks for every 3 they take in taxes.
    19 Oct 2013, 07:30 PM Reply Like
  • Placebo Investment Advice
    , contributor
    Comments (3470) | Send Message
     
    To deny the presence of severe excess in many parts of the market today by comparison to 1999 is like hearing an old Vietnam Vet tell an Iraq war veteran "That's not a war--Vietnam was a war!"

     

    There are plenty of bubble stocks--social media, cloud, biotech, futuristic tech (e.g., 3D Printing), and even mundane IPOs like Potbelly restaurants. The vocal commenters who can't see the presence of such bubble stocks will be taken by surprise when the current market cycle completes--and their current euphoria will be replaced by silent despair.

     

    A good indicator of speculative excess is the number of IPOs that double or more on their first day of trading. There have been *many* recently. The average first day IPO pop this year has been 17%, the highest since the internet bubble. There were only 39 IPOs that doubled (or more) on the first day of trading in the 25 years prior to 1999. There were over 100 in 1999 alone.

     

    Clearly the stock market has become a boom-bust speculative casino since the late 1990s. Since at least 1975, the overwhelming majority of IPOs that had huge first day booms were long term busts. Ahh, but this time it's different.
    19 Oct 2013, 07:46 PM Reply Like
  • the_value_vulture
    , contributor
    Comments (245) | Send Message
     
    Debunker,

     

    Totally agree here. Speculative excess is huge in the markets today and the ipo craze is a telltale sign. The problem is that there have been signs for over a year now that the real economy is still plagued with issues. It's just hard to tell when the market will come in line. I've burned quite a bit of money betting for that correction but you can imagine how that went. All I know is that when this all comes crashing down, the stampede in momo stocks will be epic.
    19 Oct 2013, 09:51 PM Reply Like
  • designshoe
    , contributor
    Comments (919) | Send Message
     
    there are still hundreds of profitable smallcaps and microcaps trading well below book value, or PE<9. until those are gone, there really is no real general bubble to speak of
    21 Oct 2013, 12:30 AM Reply Like
  • BAHAMAS1
    , contributor
    Comments (3140) | Send Message
     
    Arthur Cashin hasn't had any press notice in 20+yrs and now he's got his 15 minutes.

     

    WOW, just shows you UBS must be Really getting hammered on their shorts if they shuffle this antique out to "warn" the market.

     

    I Remember Cashin was warning people on cnbc with his "face of gloom", when the DOW hit 10,000 ,11,12,13,14,000 and said it was "stretched" out too far at each 1000 point increment.

     

    And here he is again today with the same "warning".
    He's old school who actually should retire as the world is passing him by.
    Yes, some stocks are greatly overvalued, but most companies like FB,LNKD,GOOG, etc, represent a new type / era of marketplace.

     

    Believe me, a free market will settle out all the "fluff" as it always has done. Art Cashins aren't needed to do this for the market.
    Yes, a broken clock and all that...but please.

     

    He Must have had a goiter when GOOG passed 1,000 yesterday.

     

    Sell it all Art , take your money and leave quietly.

     

    Go away and retire ,or at least leave...whatever.
    Maybe then you could even manage a smile.
    19 Oct 2013, 08:06 PM Reply Like
  • Fracjob
    , contributor
    Comments (1645) | Send Message
     
    That has to be one of the most ridiculous comments ever posted on SA.
    20 Oct 2013, 09:49 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (25841) | Send Message
     
    What free market, the one with the actor buying $85 billion per month using newly-minted money?
    20 Oct 2013, 09:54 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5855) | Send Message
     
    @paulo,
    "it may just be more convenient to blame Bernanke as the master market manipulator than to own up to your mistakes."

     

    The S & p is now up 22% this year @ 1745,, I heard that same "fed" rhetoric @ s & P 1400 , 1500, 1600 , 1700 .. & suspect we will hear it at 1800 in to 2014..

     

    Folks don't need to follow those that have sounded the wrong tune during this secular bull run ..
    20 Oct 2013, 10:37 AM Reply Like
  • SharkDude
    , contributor
    Comments (734) | Send Message
     
    Dude get real. FED hinted just hinted twice about a modest tapering and the market dropped sharply. Just think what would happen tomorrow if the FED announced the end of QE immediately because they should not have a QE program 5 years after a recession. That is embarrassing.
    20 Oct 2013, 11:33 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5855) | Send Message
     
    Sharkdude ,
    Sir, I'm perfectly real and I can assure you the profits garnered in this bull run are perfectly real also ..

     

    You may be surprised what happens when the Fed starts to slow down their asset purchases. Real surprised...
    20 Oct 2013, 12:03 PM Reply Like
  • Zeus2012
    , contributor
    Comments (709) | Send Message
     
    I guess we will see. That's certainly not the case after the last 2 QEs ended. Maybe this time will be different.
    20 Oct 2013, 12:22 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (25841) | Send Message
     
    Well, if he doesn't make any difference, then PLEASE can he stop printing? I mean, it doesn't make any difference, so there's nothing to be afraid, RIGHT?
    20 Oct 2013, 12:56 PM Reply Like
  • designshoe
    , contributor
    Comments (919) | Send Message
     
    yeah, I think this old fuddy duddy needs to retire.
    he addes nothing to intelligent valuation analysis
    21 Oct 2013, 12:31 AM Reply Like
  • wil3714
    , contributor
    Comments (2097) | Send Message
     
    "Just think what would happen tomorrow if the FED announced the end of QE immediately because they should not have a QE program 5 years after a recession."

     

    If they were going to taper they would of done it last month. Now its not going to happen probably this year, December at the earliest. If not more like April.
    21 Oct 2013, 01:07 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5855) | Send Message
     
    wii,
    given any thought that Bernanke foresaw the debacle in Washington and wasn't about to add more controversy & possible disruption to the overall picture ?

     

    It can be amusing to listen to all that profess they are better suited than all of the central bankers around the world in managing the global economy ..
    21 Oct 2013, 08:49 AM Reply Like
  • Fracjob
    , contributor
    Comments (1645) | Send Message
     
    Art Cashin smelled a rat yesterday, 11/6, and we are seeing some very strange price action today.
    7 Nov 2013, 10:32 AM Reply Like
  • leopardtrader
    , contributor
    Comments (2166) | Send Message
     
    Art Cashin needs to retire lol Does he really understand what he is talking about?? He may not still get it the a big revolution is in play and these mentioned stocks are drivers of this disruptive revolution
    19 Oct 2013, 08:08 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (25841) | Send Message
     
    Wow that really sounds like 2000.

     

    Were you around then?
    19 Oct 2013, 08:35 PM Reply Like
  • Placebo Investment Advice
    , contributor
    Comments (3470) | Send Message
     
    "disruptive revolution"

     

    I think you mean that Mr. Cashin is too old to understand the "new paradigm". Oh wait, you're right. The phrase "new paradigm" was the trendy jibber jabber that bubble blowers in 1999 were repeating endlessly before the crash made the phrase seem idiotic.
    19 Oct 2013, 09:02 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4842) | Send Message
     
    "this time it is different" was bandied about in late 1999 constantly. That language is nuts. It makes people lazy and starry eyed.

     

    I really question concepts like FaceBook to really last for 20 years. LinkedIn is tied to the business world and has business function which helps a person make money. FaceBook only costs people time and money. How long is that going to last?
    20 Oct 2013, 12:46 AM Reply Like
  • dnorm1234
    , contributor
    Comments (1075) | Send Message
     
    >Were you around then?

     

    Were you? A couple of euphoric individuals on a message board spouting "new paradigm" nonsense is nothing, NOTHING like it was in 1999.

     

    Maybe things are frothy, I don't know. But the analogy to how things were during the tech bubble is ridiculous. We have a long way to go.
    20 Oct 2013, 08:58 AM Reply Like
  • dnorm1234
    , contributor
    Comments (1075) | Send Message
     
    >How long is that going to last?

     

    People choose to use Facebook; it's entertainment.

     

    LinkedIn, on the other hand, purports to fill some business function, but in practice doesn't work that well. It's spammy, filled with fake information and creates an arms race between users that is counter productive ie you can pay to be placed high on recruiter lists. Does that convey smarts, or desperation?

     

    My money is on Facebook (metaphorically).
    20 Oct 2013, 09:06 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (25841) | Send Message
     
    Yes, I was around. There are things happening now that are similar to what happened then. Back then it was more aggressive, but the overall behavior is similar (IPOs are doing around 100% first day pops, back then it was around 150%).
    20 Oct 2013, 09:30 AM Reply Like
  • Zeus2012
    , contributor
    Comments (709) | Send Message
     
    U.S. equity markets will continue to levitate as credit continue to expand via Fed's policy (as well as that of other central banks around the world). Stock markets only enter into bear markets when credit contracts, which we are not going to be seeing for quite some time.

     

    I would not be surprise to see p/e ratio expanding further in 2014 (if not sooner) to around 18x forward.

     

    One of Merrill's macro strategist came out with an interesting piece last week. The Fed will not taper (let alone tighten) until there's sign of inflation, which he thinks we may start to see in mid to late 2014 as the economy starts to pick up steam.
    20 Oct 2013, 11:44 AM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4842) | Send Message
     
    I was also around then and heavily in the market. Things may be frothy in certain stocks. The FB IPO had people buying that had no idea why they were buying except trust. Then it dropped like a rock and they took losses or hung back on to get where it is now. People still don't know why they are buying it.

     

    LinkedIn works pretty darn well and is worth the ROI in my experience.

     

    FB on the other hand has a negative ROI. They might still do better as long as Americans are not working or valuing their time.
    20 Oct 2013, 02:51 PM Reply Like
  • Walter P. Chrysler
    , contributor
    Comments (300) | Send Message
     
    again..."interest rates were much higher then." that was a form of protection that is missing this time around. I would agree the Fed was in a tightening cycle starting in 2000 which is not true this time around. Shall we use Japan as our example then?
    20 Oct 2013, 07:47 PM Reply Like
  • designshoe
    , contributor
    Comments (919) | Send Message
     
    gotta give the new paradigm at least 4-6Q's to become absurdly overvalued, we'll about 2Q's into it now
    21 Oct 2013, 12:34 AM Reply Like
  • robvelez87
    , contributor
    Comments (81) | Send Message
     
    The article did not mention LNKD, and they are the ones with the highest PE, Do you think LNKD is part of this bubble?

     

    Berto
    19 Oct 2013, 08:15 PM Reply Like
  • J Mintzmyer
    , contributor
    Comments (5581) | Send Message
     
    Biggest miss IMO is $NFLX.
    20 Oct 2013, 05:17 PM Reply Like
  • Placebo Investment Advice
    , contributor
    Comments (3470) | Send Message
     
    Rob, Nobody here or elsewhere can know which (if any) of the bubbly stocks, including LNKD, will beat the market in the long run. If history repeats similarly to the Nifty Fifty era, fewer than 1 in 7 will beat the market in the long run.

     

    There was only one stock in 1972 with a P/E exceeding 60 that outperformed the market in the next 30 years: Johnson & Johnson.

     

    Do LNKD, FB, NFLX, or even GOOG or APPL have the same long-term brand power, defensive nature, and competitive moat as Johnson & Johnson had in 1972? Don't bet on it. (And "bet" is exactly the right word here.)
    21 Oct 2013, 12:21 AM Reply Like
  • robvelez87
    , contributor
    Comments (81) | Send Message
     
    Nm I didn't se LNKD, disregard my comment.
    19 Oct 2013, 08:16 PM Reply Like
  • TruffelPig
    , contributor
    Comments (4077) | Send Message
     
    2000 was a bubble because most of the internet companies didn't make any money. All those mentioned now do make money and are rapidly growing. FB P/S is 10 and earnings is growing >30%. Pricey? YES! Bubble? No!
    19 Oct 2013, 08:16 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (25841) | Send Message
     
    That's not correct. In 2000 you had profitable companies like MSFT or CSCO also participating in the bubble.
    19 Oct 2013, 08:36 PM Reply Like
  • TruffelPig
    , contributor
    Comments (4077) | Send Message
     
    True. But they were in the minority. I wrote most - so how can that be incorrect?
    19 Oct 2013, 08:42 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (25841) | Send Message
     
    Well, most in terms of number is certainly correct, but in terms of market value/capitalization, I doubt it, even though there was some really crazy stuff going on.

     

    And indeed, I don't think there was a single instance of a profitless company trading over $100 billion in market capitalization back then. And we have one like that now.
    19 Oct 2013, 09:19 PM Reply Like
  • Jay Schembs, CFA
    , contributor
    Comments (141) | Send Message
     
    "All those mentioned now do make money"

     

    YELP, Z, WDAY, NOW, FEYE, DATA - none of those are profitable; most not even close.

     

    Also, FB EV/revenue is 20x, not 10 - but that's a rounding error these days.
    19 Oct 2013, 11:42 PM Reply Like
  • TruffelPig
    , contributor
    Comments (4077) | Send Message
     
    Jay - point well taken; was FB forward data. That with profit you point out is also correct.
    20 Oct 2013, 12:53 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5855) | Send Message
     
    So with that comment , u are saying this is 2000 all over again... ?
    Please !!
    Cherry pick all of the names u wish ,, but this insn't 2000
    Those that look at the facts and sentiment around us , realize that.
    20 Oct 2013, 08:57 AM Reply Like
  • C.N
    , contributor
    Comments (230) | Send Message
     
    1990 ish.com bubble- 100's of bubble stocks and it took 3-4 years to pop the bubble, the mm's able to manipulate for 3-4 years before it collapsed.

     

    2013- only few stocks in the bubble territory, so they should be able to hold/control these bubble stocks much longer.

     

    In order for these stocks to collapse, you need a market crash, which is not going to happen, you need earnings/rev miss- which is not going to happen( amzn not included) or growth slows down, which is not going to happen in the near future. Only short these stocks as a hedge against your other longs in your portfolio. It will take another 3-4 years to make short $$$$ on your bubble stocks.
    19 Oct 2013, 08:32 PM Reply Like
  • Brian Bobbitt
    , contributor
    Comments (2044) | Send Message
     
    It's late and without too much thinking or reading all the comments, I would say that any time anything is 'up' more than average, or anything else, since "The Bubble", lots of folks like to use that watch word to draw attention and boy ain't fear fun. Well, yeah, maybe we are pushing it a bit, but look around you. Toys are rampant. and not likely to subside for anytime soon. Sure, I say be careful, use your protections, sell stops and profit sensors, but don't sell too early either. Remember, to ride those winners and cut the losers and you will beat the crowd. I say, "No bubble in here, just makin' money".
    Capt. Brian
    The Lost Navigator
    19 Oct 2013, 09:41 PM Reply Like
  • Placebo Investment Advice
    , contributor
    Comments (3470) | Send Message
     
    After at least three substantial bubbles in the last 14 years, it's surprising that people STILL can't see a bubble until it pops.

     

    "Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball the giddy participants all plan to leave just seconds before midnight. There's a problem, though: they are dancing in a room in which the clocks have no hands."

     

    W. Buffett, in 2000 Letter to Shareholders
    19 Oct 2013, 10:35 PM Reply Like
  • TruffelPig
    , contributor
    Comments (4077) | Send Message
     
    Well, for these large guys a bit difficult to eliminate positions fast but for us small investors it just takes the stroke of a key on the computer.
    19 Oct 2013, 11:10 PM Reply Like
  • C. Guivi
    , contributor
    Comments (127) | Send Message
     
    Short $GOOG since Friday. The implied perpetual growth for the prices of many tech stocks is simply not sustainable. There is too much competition, changes are fast and disruptions can occur every day.
    20 Oct 2013, 05:34 AM Reply Like
  • Romello1996
    , contributor
    Comments (2) | Send Message
     
    All these analyst who came out to upgrade these stocks, came to create a tech tsunami whose clients are riding high, but not too long
    Watch, few weeks if not months later, you will start seeing similar analysts downgrading , thus creating another momentum for shorts who happens to another set of clients

     

    All in all, these garbage stocks soo volitile to competition is manipulated by hedge funds mgrs n Analysts. Short on Yelp, zillow & LNKD.
    20 Oct 2013, 11:16 AM Reply Like
  • Mark Krieger
    , contributor
    Comments (4668) | Send Message
     
    are the bulls in denial or what? it almost like they are putting their head in the sand, so they don't have to think about the dire consequences of the party ending.
    20 Oct 2013, 11:26 AM Reply Like
  • Tack
    , contributor
    Comments (14120) | Send Message
     
    MK:

     

    Many people, who spend much of their lives thinking about "dire consequences," ensure their own dire outcome by not making any money over their investment lives. By the time they discover that fear isn't a good investment strategy, it's often too late.
    20 Oct 2013, 11:35 AM Reply Like
  • Mark Krieger
    , contributor
    Comments (4668) | Send Message
     
    TacK: good point..thanks!
    20 Oct 2013, 11:59 AM Reply Like
  • Placebo Investment Advice
    , contributor
    Comments (3470) | Send Message
     
    Mark,

     

    You are right that there is plenty of denial--and it comes mostly from those who own the most absurdly speculative stocks. When even momentum-loving Jim Cramer derides some stocks as "cult stocks," you can be certain that there is a problem of excess permeating some parts of the market.

     

    If history is a guide, 80% of the current bubble stocks will fizzle out and severely underperform the market in the long run from this day forward. In aggregate, stocks that trade at over 100 times next year's earnings are almost certain to do worse than an S&P 500 index fund in the long run--and most will see declines greater than 70% in the next bear market.

     

    The best investors in history have always been risk averse. They outperform in the long run because they outperform in bear markets.
    20 Oct 2013, 03:06 PM Reply Like
  • AllStreets
    , contributor
    Comments (1227) | Send Message
     
    Don't forget Netflix (NFLX). P/S is 5, forward P/E 99, PEG 18.3, and recent insider selling -45% of positions.
    20 Oct 2013, 11:39 AM Reply Like
  • jamesingram32
    , contributor
    Comments (565) | Send Message
     
    @allstreets, who sold NFLX? thanks
    I had a conversation with a very senior and talented manager at a world class content provider and TV channel. His view was that NFLX had been able to get content very cheap, when they were unknown, and took the market by surprise by making money from that. now they are known, they have become like every other channel, and have to pay full price for their content. Hence they are no longer different.
    20 Oct 2013, 04:05 PM Reply Like
  • wil3714
    , contributor
    Comments (2097) | Send Message
     
    30M+ subs, quite different.
    21 Oct 2013, 01:11 AM Reply Like
  • Sam Johnston1
    , contributor
    Comments (527) | Send Message
     
    Too much bubble paranoia which is warranted in certain situations but IMO not this one.

     

    Watch out for blockbuster 3Q earnings with Facebook 200/share or more this time next year.

     

    Google just gave us a good hint for what to expect.
    20 Oct 2013, 12:44 PM Reply Like
  • Zeus2012
    , contributor
    Comments (709) | Send Message
     
    Take a look at the following blog by Aswath Damodaran. He's a finance professor @ NYU. The blog deals with the macro picture of online advertising expected growth and how that relates to the valuation of the various social media / internet companies who make their living from online advertising. Something does not quite jive.

     

    http://bit.ly/17XPiun
    20 Oct 2013, 01:05 PM Reply Like
  • kata
    , contributor
    Comments (839) | Send Message
     
    What do you think this kind of talk will do to Twitters IPO?
    20 Oct 2013, 02:01 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (25841) | Send Message
     
    Nothing, it will go up 50-100% in its first day in the markets, like bubbles almost always do.
    20 Oct 2013, 02:12 PM Reply Like
  • alec2003
    , contributor
    Comments (50) | Send Message
     
    Yea like google and visa when they started to trade... Just another bubble stock. Give me a break.
    20 Oct 2013, 03:11 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (25841) | Send Message
     
    Those didn't go up 50-100% in their first days ... they weren't bubbles.
    20 Oct 2013, 03:25 PM Reply Like
  • Atkins
    , contributor
    Comments (1046) | Send Message
     
    You're correct, Paulo. It will then drop a bit, and regardless of the content of its first report, it will then skyrocket -- Double, triple, whatever.

     

    That said, Twitter is hugely popular among the highly coveted 20-somethings and older teens. I wouldn't short this stock. It is an almost-certain winner in my opinion, and the fact it will lose money for awhile is irrelevant. Profits are now irrelevant and have no effect on the valuation of stocks. No sign of that ending anytime soon.
    20 Oct 2013, 03:30 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (25841) | Send Message
     
    I won't short Twitter at first either. But it promises to attain some ridiculous market capitalization, like $60 billion or so.
    20 Oct 2013, 03:41 PM Reply Like
  • vandeley
    , contributor
    Comments (122) | Send Message
     
    goog and visa also weren't IPO'd at an already frothy price like Twitter
    21 Oct 2013, 02:43 AM Reply Like
  • Atkins
    , contributor
    Comments (1046) | Send Message
     
    I bet you're correct, Paulo.
    21 Oct 2013, 10:59 AM Reply Like
  • 10966361
    , contributor
    Comments (59) | Send Message
     
    This is a bubble and too much of the money in the market is on margin
    too much debt everywhere.The house of cards is about to come down hard and my prediction is about to unfold within the next few weeks
    Once AMZN LNKD and PCLN and NFLX release earnings, the truth will come out and they are in for a big haircut.
    Short it !! and stay short!!
    20 Oct 2013, 02:55 PM Reply Like
  • Atkins
    , contributor
    Comments (1046) | Send Message
     
    10966361, have you noticed that earnings have very little effect on the price of a high-flying equity? The high-flyers fall a bit and then quickly recover their pre-earnings price, and momentum then propels them even higher. This has been readily evident throughout 2012-2013.
    20 Oct 2013, 03:32 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5855) | Send Message
     
    10966361,
    house of cards coming down in a few weeks ? The 'doubters' that have had that view are being carried out feet first ...

     

    Anyone listening to that advice may suffer the same fate .....
    20 Oct 2013, 05:39 PM Reply Like
  • musicmaker
    , contributor
    Comments (256) | Send Message
     
    i didn't realize that idiot cramer could move stocks as big as NOW. he uses the wrong p/sales metric (fails to account for like 35 mn dilutive shares - p/sales on next year's projected rev is like 16x not 11.5x). not surprising though.
    21 Oct 2013, 11:47 AM Reply Like
  • nutech
    , contributor
    Comments (5) | Send Message
     
    But..but....but...it's different this time....isn't it?
    21 Oct 2013, 11:56 AM Reply Like
  • Placebo Investment Advice
    , contributor
    Comments (3470) | Send Message
     
    Fear&Greed writes:

     

    "I have discovered that frustrated bears can be a very dangerous breed."

     

    Really? Have bears taken money from you?

     

    Euphoric bull speculators are the dangerous ones. Nearly every time euphoric speculators have gotten wiped out in recent decades, the crony capitalist/socialists in the U.S. government pick the pockets of non-speculators to bail out the speculators:

     

    --Savings & Loan Junk Bond bailout of the 1980s & 90s.
    --Long Term Capital Management hedge fund bailout
    --The Internet bubble (Fed interest rate suppression)
    --The real estate bubble and related bailouts of realtors, homebuilders, banks, insurance companies, etc.

     

    If the greed of euphoric bulls had been curtailed during the incipient stage of the prior bubbles, the American economy would not be wearing Ben Bernanke's QE diapers in the fourth year of an economic expansion. Nor would 1 in 7 Americans be receiving food stamps.

     

    Think about that the next time someone shills yet another speculative profitless bubble stock that might be extinct within a decade of so. Think about the financial debt burden that foolish, greedy speculation has already piled onto future generations.
    24 Oct 2013, 09:54 PM Reply Like
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