A Massive Warning Of Un-Sustainability


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Authored by Sven Henrich by means of NorthmanTrader.com,

Raising warnings during a bubble is a thankless task. The crowd happily cheers the momentum and as tops are procedures anybody voicing contrarian reservations seems incorrect while the bubble profits.

I’m a big boy I can handle it. I was confronted with the exact same problem late last year into Q1 this year as they kept going after stocks into the high heavens before the 35% crash. Oh however it was Covid, nobody could’ve seen this coming. Rubbish. Covid was the trigger but the technical and excess were long building and now we’re in such phase again, other than this one might be worse.

I understand, we live in the age where trillions are considered candy by central banks and federal governments and everyone’s eyes simply glaze over as the numbers defy context and comprehension.

However let me toss a little reality into the mix and it’s definitely mind boggling.

5 stocks have simply included over half a trillion in market cap in just 6 days. 6 days. Ponder that:

And they’re even greater on the open today.

I ran the numbers:

5 stocks now have a combined market cap over $6.5 trillion.

These really same stocks have added over $1.6 trillion in market cap in 2020:

That would be an accomplishment throughout any booming market throughout times of terrific development, however in a historical recession?

So some of these stocks grabbed some market share during the shutdown, however do not inform me $AAPL sold more phones during this.

It gets worse. Considering That 2019 these stocks have included over $3.2 trillion in market cap:

Now, if you can persuade yourself to believe that these stocks have incomes development stories to support market cap growths anywhere near these figures I expect you can persuade yourself to think anything.

During bubbles individuals will encourage themselves of anything. And this is absolutely nothing brand-new. Individuals persuaded themselves that tech’s assessments versus the rest of the economy were justified prior to.

How did that work out?

Folks, we’re witnessing the greatest market cap growth in human history making the year 2000 look like kid’s play. The mix of outrageous liquidity thrown at markets, the mechanics of automatic ETF allotments, retail and FOMO thirsty funds going after these couple of stocks all aim to add to the best market cap bubble in history.

And we continue to look at the mom of all increasing wedges:

The most vertical, the majority of narrowest one way wedge I can recall seeing.

And they keep stacking into this valuation expansion like their lives depended on it:

$ AAPL has a PEG ratio of 2, $AMZN a PEG ratio of 3 with a combined market cap over $3.2 trillion.

Bubbles will run until they burn themselves out. You understand my views on the bifurcation and the bubble (See also DOW Gargoyle and the Bubble).

I’ll let the market cap expansion figures speak for themselves.

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