Post by Dave on Sept 9, 2020 1:57:50 GMT -8
At last, we have a green morning with the pre-market at +$4.16. Hopefully we have seen the bottom and are headed to some new highs.
Let’s find out.
2 reasons fears of a dot-com style tech bubble are overblown
Let’s find out.
2 reasons fears of a dot-com style tech bubble are overblown
Tech firms are delivering on fundamentals
As Jones writes in a research note, one of the key differences between the dot-com bubble and the current Big Tech market leaders is that, unlike many of those first-generation websites that took off, firms like Apple, Amazon, Facebook, and Microsoft have solid fundamentals.
“While options market shenanigans may have contributed a bit lately, the main catalyst for their rally is simply the fact that their businesses have done extremely well, in both absolute and relative terms, during the coronavirus crisis. That has not changed in the past week,” Jones wrote in note.
The tech firms aren’t just making money — they’re doing so on a sustained basis and cruising past their prior year earnings even amid a global pandemic crippling other parts of the economy.
“Bears will start to make comparisons to the [dot-com bubble] of the late nineties,” David Nelson, chief strategist of Belpointe Asset Management, wrote in a note Tuesday. “As a veteran of that war I can tell you there's little resemblance. While valuations are stretched most of the big cap secular growth stocks are profitable. That was not the case in 2000.”
Take Apple. In the second quarter of 2020, the pandemic shuttered production facilities in China and then forced it to close stores around the world outside of Mainland China. The company still managed to increase revenue year-over-year by 1% to $58.3 billion. In Q3 2020, the company saw revenue grow 11% year-over-year to $59.7 billion.
The tech industry has been a bright spot despite recent volatility
As Jones explains, there’s little else for investors to be excited about outside of Big Tech. According to his note, there’s been no surge in call options for equity indices, indicating investors were willing to buy, while there has been a slight increase in put volumes, indicating investors are willing to sell if the price is right.
“This suggests that investors’ primary concern has been protecting themselves against broad-based weakness, the opposite of the caution-to-the-wind behavior you might expect to see in a bubble,” he wrote.
In other words, investors have likely been looking at tech as a safe haven while other industries struggled amid the pandemic. Now, they’re looking to claim the profits they’ve earned in the interim.
So don’t break out those Pets.com sock puppets just yet.
As Jones writes in a research note, one of the key differences between the dot-com bubble and the current Big Tech market leaders is that, unlike many of those first-generation websites that took off, firms like Apple, Amazon, Facebook, and Microsoft have solid fundamentals.
“While options market shenanigans may have contributed a bit lately, the main catalyst for their rally is simply the fact that their businesses have done extremely well, in both absolute and relative terms, during the coronavirus crisis. That has not changed in the past week,” Jones wrote in note.
The tech firms aren’t just making money — they’re doing so on a sustained basis and cruising past their prior year earnings even amid a global pandemic crippling other parts of the economy.
“Bears will start to make comparisons to the [dot-com bubble] of the late nineties,” David Nelson, chief strategist of Belpointe Asset Management, wrote in a note Tuesday. “As a veteran of that war I can tell you there's little resemblance. While valuations are stretched most of the big cap secular growth stocks are profitable. That was not the case in 2000.”
Take Apple. In the second quarter of 2020, the pandemic shuttered production facilities in China and then forced it to close stores around the world outside of Mainland China. The company still managed to increase revenue year-over-year by 1% to $58.3 billion. In Q3 2020, the company saw revenue grow 11% year-over-year to $59.7 billion.
The tech industry has been a bright spot despite recent volatility
As Jones explains, there’s little else for investors to be excited about outside of Big Tech. According to his note, there’s been no surge in call options for equity indices, indicating investors were willing to buy, while there has been a slight increase in put volumes, indicating investors are willing to sell if the price is right.
“This suggests that investors’ primary concern has been protecting themselves against broad-based weakness, the opposite of the caution-to-the-wind behavior you might expect to see in a bubble,” he wrote.
In other words, investors have likely been looking at tech as a safe haven while other industries struggled amid the pandemic. Now, they’re looking to claim the profits they’ve earned in the interim.
So don’t break out those Pets.com sock puppets just yet.