Something’s Not Right With The Markets On This Blood Moon Eclipse
We had a Hunter’s moon today. It is also known as the Blood moon. We also had a lunar eclipse earlier today just around moon set time at dawn.
Eclipses are supposed to create unease and tension and that is perhaps how I feel today, about what is happening in the markets.
S&P
I have a conspiracy theory that the shutdown occurred for the stock market to continue its rally. There is no stopping it even in the face of a mixed bag of earnings.
Nasdaq
Last night, Google set an all time high record price, closing at $1011.4. For a tech company with P/E between 23-28, it is not a bubble and so Nasdaq closed at its highest level since 8 Sep 2000.
“According to dot-com theory, an Internet company’s survival depended on expanding its customer base as rapidly as possible, even if it produced large annual losses. For instance, Google and Amazon.com did not see any profit in their first years. Amazon was spending on expanding customer base and alerting people to its existence and Google was busy spending on creating more powerful machine capacity to serve its expanding search engine. The phrase “Get large or get lost” was the wisdom of the day. At the height of the boom, it was possible for a promising dot-com to make an initial public offering (IPO) of its stock and raise a substantial amount of money even though it had never made a profit—or, in some cases, earned any revenue whatsoever.In such a situation, a company’s lifespan was measured by its burn rate: that is, the rate at which a non-profitable company lacking a viable business model ran through its capital served as the metric.” Source : http://en.wikipedia.org/wiki/Dot-com_bubble
Start ups are the hottest thing in town and you are uncool if you do not have your finger in at least 1 pie. http://www.usatoday.com/story/money/business/2013/10/18/venture-investments-3q/3007255/
People cannot live without the web these days and surveys show some people are willing to fore go many a creature comfort for the sake of Wifi.
Just a wake up call for these companies which were worth millions and billions back then and mostly, do not exist now. http://www.businessinsider.com/where-are-they-now-the-kings-of-the-90s-dot-com-bubble-2013-10#
US Real Estate
China continues to buy with the latest acquisition by Fosun of JP Morgan’s Chase Building in New York, setting a record price for a Chinese buyer. http://www.bloomberg.com/news/2013-10-18/jpmorgan-tower-sale-sets-record-for-chinese-in-new-york.html
On the same note, Fed’s Fisher is reported as saying he sees signs of US re-entering a housing bubble which is not a bad thing because American home ownership rate is still on a decline.
“The share of privately owned U.S. homes in the first quarter dipped to its lowest since 1995” http://www.huffingtonpost.com/2013/04/30/us-home-ownership-rate_n_3185458.html
Example of What Happens When You Cannot Borrow ?
Parent of one of Canada’s largest private Reit has filed for bankruptcy protection after it failed to IPO.
It seems that the trick is like Nasdaq, to list and then rally, and keep passing the buck around for continued capital appreciation till the music stops.
Positivity Tempered With Clauses
I am reading this JP Morgan report that is generally positive for global growth coming from developed market economic policy. I notice the entire length of it is peppered with disclaimers and clauses and what ifs and nots. Kicking the growth can down the road is good for equities because it is future pricing and we will have stronger growth in 2014 but 2013 will end up not so hot which is why the rally to a new record is only right ?
Risks
* fiscal consolidation to start in Japan next year with the consumption tax
* credit conditions to remain impaired in Europe after prolonged recession and the banking and sovereign crises
* EM dependency on foreign inflows has led to ineffectual domestic policies
* EM tightening labour and credit conditions will lead to corporate margins being squeezed
* China – overheating property markets, overcapacity and credit imbalances
Now it does not look so rosy.
It is confusing and I am not the only person, I think, who thinks perhaps nobody has any idea anymore ?