This has been on my mind as of late, enough so it will be the topic of my first blog post to this platform.
Let's say you own SPY; and let's say the rest of your holdings are value stocks but in order to capture the insanity that has been quantitative easing driven value appreciation (shiller PE above 30 and still rockin'!) and herd style ownership-society-group-think you exposed yourself to the overall american stock market for some bull-riding; you've done well, congrats.
But as i write this before heading to san francisco for outsidelands music festival (which is fantastic and you should go before you die or it gets too crowded like other festivals) the Frankenstein behemoth ETF SPY's top ten holdings include Apple,microsoft, facebook, and amazon as the top 4 holdings, and alphabet class A and C as the 9th and 10th top holdings. Or put otherwise, the top 10 holdings in the instrument are comprised of 6 FAANG stocks (including microsoft).
The main issue here is the valuation for these stocks are absurd. I personally consider myself a value investor, and not just a value investor, but a scrooge investor. "Blood in the streets" is when i buy, and there is no blood in technology. The more money that goes into the ETF (and all the others that hold these stocks in their top 10) the more overinflated the valuations for these companies grow.
it's a vicious, value destroying cycle designed to passively take anyone willing to throw their money at the instrument for a ride until someone decides the ride is over.
I refuse to be made into a fool of a top caller- because this market eats top-callers for each meal and snacks in between - but i can say with certainty this market isn't worth what everyone is paying by my own valuation metrics.
Onto the moral purpose of this post- the terminology is inappropriate because people who do just want some equity exposure have no idea that they are paying a PE of ~247 (Cough *ridiculous* Cough) for amazon and PE ~18 (not terrible) for Apple.
Apple and Microsoft are the only FAANG stocks to pay a dividend. Bezos liquidated an absurd amount of his personal exposure not long ago.
I don't want to call a top I can't see but I'm willing to try and help someone avoid a huge financial loss when I can't see the top of a house of cards.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.