Absurd Valuations on Unprofitable Tech Stocks

Absurd Valuations on Unprofitable Tech Stocks | stock-market-economy | Economy & Business Special Interests

The Treasury Secretary chimes in on what any market watcher should know instinctively. Mnuchin talks tech: ‘I don’t understand these valuations’, yet the price on promises and future expectation of earnings has a large amount of the equity speculators and computerized trading in a crisis of sanity. Avoiding the fundamental relationship that a stock value is based upon the ability of a company to turn a profit, has become the hottest investment hoax since Bernard Madoff was pitching his Ponzi scheme. UberSnapchat and Twitter may be high flyers for the smart set, but for rational venture capitalists, plunking down gambles on risky enterprises that only feed on publicity hype is a sure bet on going broke.

While angel funding, seed investment and incubation have a nice ring to their functions, what they all have in common is gaining a piece of the equity action before any IPO is sold to the investment insiders, much less the general public. What is often lost is that any new startup enterprise must develop cash flow well before any earnings can be achieved.

Defying common sense, many of this new generation of cutting edge technology companies are pitching a dream that often turns into a nightmare for the imprudent investor. At least Apple sells, admittedly very overpriced phones, a product that has a functional and utilitarian purpose. But what possible claim of intrinsic worth does a trendy app have when duplication of utility is achieved by a tech giant as Facebook?

Even the most bombastic huckster, Elon Reeve Musk finds himself reliant on the intrepid waters of government subsidies to keep his bubble run on solar cells, alive. Yet his stock price keeps inflating with little financial connection to turning a profit, even when Sparks fly on Wall Street over Tesla’s current valuation.

“For now, Musk and his team have built up enough investor goodwill to buy him time to follow through his vision. Tesla narrowly missed its target of delivering 80,000 vehicles last year and has only reported two profitable quarters in its brief history. Nonetheless, its rapid rise could see it accelerate past Honda and move into the top five most valuable carmakers in the world.

This comes as the finances of Ford and GM are in rude health. GM is expected to earn more than $9bn this year and Ford to rake in profits of $6.3bn; Tesla is expected to lose more than $950m.”

Come on folks, in what mystical world of consumer sales indifference does one accept that in the immediate future buyers will jump from the torque of a four wheel drive F-150 V-8 into the restriction of a Tesla electric cord? In order to make this fantasy work Road and Track contends, The Case for a Tesla-GM Merger. The argument simply comes down to “You put together a carmaker with mojo and a carmaker with capacity.”

“We live in an era where brick-and-mortar companies frequently play second fiddle to apps and platforms and clouds and other entirely ephemeral ideas. It suits the stock market just fine, because the stock market is much like the baseball-card market, or the art market, in that it serves more as a reflection of prevailing views than as any truly prescient or even intelligent verdict regarding a company’s merit. It’s an illusion. Of course, it is an illusion with the power to build fortunes and destroy lives in a millisecond.”

When government motors was bailed out by the Obama administration to save the unions while wiping out the bond holders, GM was given a second chance at the taxpayer expense. Now we are suppose to accept another rescue of Tesla debt to keep the illusion that the future belongs to the driverless “green” vehicle. Hey, why not just go all the way; ban humans from using gas guzzlers on the highways, while taxing a per mile user fee to replace the gas tax? Just keep diesel commercial trucks to navigate the steep grades to fix all the infrastructure that driverless vehicles will use.

The absurdity of this brave new world is as obscene as the stock prices of the technocratic anti-human robot society that is facing an expendable population. Nonetheless, do not take our analysis for the last word. Look to the essay in The Street, From the Absurd to the Ridiculous: When Fundamentals Don’t Matter, where the example of Yahoo is reviewed.

“Yahoo! (YHOO) , which was a highly valued company during the dot-com era.

When looking at Yahoo!’s price and P/E ratio, the fundamentals didn’t really reflect the stock price. Yahoo! was trading at nearly 3,500 times its P/E ratio at one point, which may have been unjustified.

Following that, the markets were quick to realize that the company wasn’t that valuable, and it began to tank once the bubble popped.

Take a look at how Yahoo!’s market capitalization evolved over time. Prior to the dot-com bubble, Yahoo! had a market cap of less than $1 billion.

However, during the bubble, Yahoo!’s market cap rose to more than $100 billion at its peak. Thereafter, its market cap and share price fell significantly, with the former falling to between $5 billion and $10 billion.”

If such a stable of the computer age as Yahoo could be reduced to the humiliation of a hostile takeover by Verizon at a price not much more than an unknown startup as Team Chat provider Slack with a valuation of about $3.8 billion, what true value does any of these high tech ventures provide over time? Anyone remember one of the scores of services from Yahoo called Messenger? Do the math, plunging down your bucks on such moving targets as superficial fads is most risky.

Google search beat out Yahoo, but will Alphabet retain the preeminent crown of dominance with their imposition of censorship and filtering out of free speech? Stock values are never guaranteed and especially with tech companies, you are only safe if competition is eliminated.


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Tech Stocks Experience Their Longest Losing Streak In 5 Years As Panic Begins To Grip The Market

Tech Stocks Experience Their Longest Losing Streak In 5 Years As Panic Begins To Grip The Market | Bull-Market-Bear-Market-Public-Domain-700x468 | Economy & Business News Articles

S&P 500 tech stocks have now fallen for 9 days in a row. The last time tech stocks declined for so many days in a row was in 2012, and that was the only other time in history when we have seen such a long losing streak. As I have stated before, the post-election “Trump rally” is officially done, and the market is starting to roll over as investors begin to realize that all of the buying momentum has completely evaporated. Tech stocks tend to be particularly volatile, and so the fact that they are starting to lead the way down should definitely be alarming to many in the investing community.

Of course it isn’t just tech stocks that are falling. The Dow was down another 59 points on Wednesday, and the S&P 500 has closed beneath its 50 day moving average for the very first time since the election. For those that have been waiting for a key technical signal before getting out of the market, there is one for you.

The price of gold was up again, and that is definitely not surprising in this geopolitical environment. The closer we get to war the higher gold and silver prices will go, and if we actually get into a major conflict we will see them blast into the stratosphere.

Another key indicator that I am watching very closely is the VIX. On Wednesday it shot up above 16 for the very first time since the day after Trump’s election victory, and many believe that it could soon go much higher. The following is an excerpt from a CNBC report

The VIX measures the size of the S&P 500’s expected moves over the next 30 days, and consequently tends to run just a bit hotter than volatility over the past 30 days. Yet one-month realized volatility is just 6.7, meaning the VIX is at a roughly 9-point premium, which Chintawongvanich calls “highly unusual.”

That said, he notes that implied volatility was also at a large premium preceding the U.K. referendum to leave the EU and the U.S. presidential election. The obvious conclusion is that the market is now similarly preparing itself for the French presidential election, which is set to be held on April 23. Some fear that a populist candidate could prevail, which may cause more problems for the European Union and thus for economic stability.

As noted in that excerpt, the upcoming French election is absolutely huge. If the election goes “the wrong way” according to the globalists, it could literally mean the end of the European Union as it is configured today.

And of course of even greater concern is the global march toward war. It is being reported that North Korea is on the verge of a major nuclear weapons test, and such an act of defiance could be enough to push Donald Trump into conducting a major military strike.

But if Trump does hit North Korea, it is quite likely that North Korea will hit back. The North Koreans are promising to use nuclear weapons in any conflict with the United States, and if Trump bungles this thing we could easily be looking at a scenario in which millions of people end up dead.

Things also continue to get more tense in the Middle East. The Russians and the Iranians are promising to respond to any additional U.S. strikes “with force”, and on Wednesday Trump declared that our relationship with Russia “may be at an all-time low”.

Of course this came shortly after Secretary of State Rex Tillerson used similar language following his face to face meeting with Russian President Vladimir Putin

Secretary of State Rex Tillerson and Russian President Vladimir Putin held more than two hours of “very frank” talks Wednesday in the Kremlin amid tensions over a U.S. airstrike against a Syria air base blamed for last week’s deadly chemical attack.

In remarks to reporters after the meeting, Tillerson said he told the Russian leader that current relations between the two countries are at a “low point.”

If the Trump administration conducts any more strikes on Syria, it is quite likely that the Russians and Iranians will make good on their threats and will start firing back.

And once U.S. aircraft or U.S. naval vessels come under fire, the calls for war in Washington will become absolutely deafening.

Unfortunately, Trump is not likely to back down any time soon because the recent missile strike in Syria has dramatically boosted his popularity. According to every recent survey, the American people overwhelmingly approve of what Trump did…

A Morning Consult/Politico poll released Wednesday found that 57% of Americans supported airstrikes in Syria, 58% supported establishing a no-fly zone over parts of Syria including strikes against Syria’s air-defense systems, and 63% of Americans thought the US should do more to end the Syrian conflict. Even more, 66% of respondents said they supported the Trump administration’s strike last week specifically.

This mirrored results of another recent poll from CBS News in which 57% of Americans said they approved of the US strike. A Pew Research Center survey from this week showed a similar level of support, with 58% of Americans approving of the strike.

Sadly, this is a time when the majority is dead wrong. Many of those that are supporting military action against Syria now were vehemently against it when Barack Obama was considering it.

Even Donald Trump spoke out very strongly against military intervention in Syria in 2013, and he was quite right to do so, and so what has suddenly changed that now makes it okay?

There is nothing to be gained in Syria, but we could very easily end up in a direct military conflict with Russia, Iran and Hezbollah which could ultimately prove to be the spark that sets off World War III.

And of course a military strike on North Korea could also potentially spark a global war. The first Korean War resulted in a direct military conflict between the United States and China, and the second Korean War could easily result in the exact same thing happening again.

Do the American people really want war with both Russia and China at the same time?

It has been said that you should be careful what you wish for, because you just might get it.


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Source: Alternative news journal

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Dot-Com Bubble 2.0 Is Bursting: Tech Stocks Are Already Down Half A Trillion Dollars Since Mid-2015

Dot-Com Bubble 2.0 Is Bursting: Tech Stocks Are Already Down Half A Trillion Dollars Since Mid-2015

Do you remember how much stocks went down when the first dot-com bubble burst?  Well, it is happening again, and tech stocks are already down more than half a trillion dollars since the middle of 2015.  On Friday, the tech-heavy Nasdaq dropped to its lowest level in more than 15 months, and it has now fallen more than 16 percent from the peak of the market.  But of course some of the biggest names have fallen much more than that.  Netflix is down 37 percent, Yahoo is down 39 percent, LinkedIn is down 60 percent, and Twitter is down more than 70 percent.  If you go back through my previous articles, you will find that I specifically warned about Twitter again and again.  Irrational financial bubbles like this always burst eventually, and many investors that got in at the very top are now losing extraordinary amounts of money.

On Friday, tech stocks got absolutely slammed as the bursting of dot-com bubble 2.0 accelerated once again.  The following is how CNBC summarized the carnage…

The Nasdaq composite fell 3.25 percent, as Apple and the iShares Nasdaq Biotechnology ETF (IBB) dropped 2.67 percent and 3.19 percent, respectively.

Also weighing on the index were Amazon and Facebook, which closed down 6.36 percent and 5.81 percent, respectively.

LinkedIn shares also tanked 43.63 percent after posting weak guidance on their quarterly results.

Overall, LinkedIn is now down a total of 60 percent from the peak of the market.  But they are far from the only ones that have already seen their bubble burst.

Many of the biggest names in the tech world have gotten mercilessly hammered over the past six months of so.  Just look at some of the famous brands that have already lost between 20 and 40 percent of their market caps…

Yahoo (YHOO) shares are off 39%, and Netflix (NFLX), the best-performing stock in the S&P 500 last year, is now off by 37% from its 52-week high.

Likewise, Priceline.com (PCLN) is off 31% and eBay (EBAY), 22%.

But there are other very big tech companies that have seen stock collapses that completely dwarf those numbers.  Here are some more absolutely stunning statistics from USA Today

Twitter and Groupon are the biggest dogs of this boom, both off 70% from 52-week highs and well below their IPO prices.

FitBit shares have collapsed 70%, while Yelp’s valuation has shrunk by two-thirds.

Box, which has the distinction of posting quarterly net losses in excess of revenue, is down by half.

Match.com, the holding company for dating sites owned by parent Interactive Corp. that went public late last year, is down 39% from its high.

When your stock loses 70 percent of its value, that is a complete and utter collapse.

In the past, I have specifically singled out Twitter, Yelp and LinkedIn as tech stocks that were irrationally priced.

Hopefully people listened to those warnings and got out while the getting was good.

At the top of this article, I mentioned that tech stocks have already fallen in value by more than 500 billion dollars.  The financial crisis that began in the middle of last year is now greatly accelerating, and Wall Street is starting to panic.

As stocks crash, many hedge funds are being absolutely pummeled.  The following are just a few of the high profile names that are experiencing massive losses right now

Some of the biggest names to get trounced include:

►Pershing Square Capital Management, the publicly traded investment vehicle of billionaire hedgie Bill Ackman, fell 11% last month following a 20% decline last year, data from the web site shows.

►Larry Robbins’ Glenview Capital, famous for picking stocks that could benefit from Obamacare, dropped 13.65% in January following a decline of 18% last year, according to data from HSBC’s Hedge Weekly report, a copy of which was obtained by USA TODAY.

►Marcato International, a well-known activist fund run by Ackman protege Mick McGuire, fell 12.1% last month following a 9% loss last year, according to HSBC.

When you lose more than 10 percent of your money in a single month, that is not good.

And if I am right, this is just the beginning of our troubles.

And of course I am far from the only one warning that big problems are on the horizon.  In fact, analysts at Citigroup just made international headlines by warning that the global economy was now trapped in a “death spiral”

Some analysts — including those at Citi — have turned bearish on the world economy this year, following an equity rout in January and weaker economic data out of China and the U.S.

The world appears to be trapped in a circular reference death spiral,” Citi strategists led by Jonathan Stubbs said in a report on Thursday.

Stronger U.S. dollar, weaker oil/commodity prices, weaker world trade/petrodollar liquidity, weaker EM (and global growth)… and repeat. Ad infinitum, this would lead to Oilmageddon, a ‘significant and synchronized’ global recession and a proper modern-day equity bear market.”

Signs of a significant economic downturn are all around us, and so many of the exact same patterns that played out during the last two stock market crashes are happening again, and yet most people continue to refuse to acknowledge what is taking place.

If you are waiting for this new dot-com bubble to crash, you can stop waiting, because it has already happened.

When your stock falls by 50, 60 or 70 percent, the game is already over.

But just like 2001 and 2008, many people out there will end up being paralyzed by indecision.  Once again the mainstream media is insisting that there is no reason for panic and that everything will be just fine, and once again millions upon millions of ordinary Americans will be wiped out as the financial markets implode.

This is now the third time this has happened since the turn of the century.

How clueless have we become?  The exact same thing keeps happening to us over and over and yet we still don’t get it.

Only this time around there isn’t going to be any sort of a “recovery” afterwards.

This is essentially our “third strike”, and the years ahead are going to be extremely bitter and painful for most people.

But if you want to believe that one of these politicians is going to come along and save America, you go ahead and keep on believing that.

Most people believe what they want to believe, and the capacity that many Americans have demonstrated for self-delusion is absolutely remarkable.


Michael T. Snyder is a graduate of the McIntire School of Commerce at the University of Virginia and has a law degree and an LLM from the University of Florida Law School. He is an attorney that has worked for some of the largest and most prominent law firms in Washington D.C. and who now spends his time researching and writing and trying to wake the American people up. You can follow his work on The Economic Collapse blog, The Most Important News, End of the American Dream and The Truth Wins. His new novel entitled “The Beginning Of The End” is now available on Amazon.com.

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Source: Alternative news journal

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