Market Madness Again
Here are some interesting facts for you. So, despite the average S&P 500 stock’s earnings down a third on a year ago the index hits a new peak… as the average stock there actually stands at 28% below its peak… Technology now counts for 38% of the value of the whole of that index (let’s say the ‘US market’); it’s so reminiscent of the 1999 froth when technology, media and telephony counted for 40% of the world’s market value…
The frightening thing is that the advent of ‘cheap’ index trackers means most investors are full of this stuff (even deceived ‘socially responsible’ ones) – well done on what you have achieved but when are you shuffling across to undervalued sectors? We aren’t full of tech at the moment whatsoever and we are in the minority… Apple Inc hits $2trillion – that’s only increasing by a ‘mere’ $1trillion since the March low and a bigger sum than the value of all the FTSE100 companies put together. Something will have to give sometime soon – I suggest you don’t want to be anywhere too near when it goes. (This just shows – I wrote that ‘last week’ and since, the tech bubble has been spiked – is the correction permanent or temporary but it has a long way to fall. Sadly lots of novice investors using things like ‘Robin Hood’ in the US especially who perceived that the likes of Tesla and so on only ever go upwards could be in for serious shocks and especially as so many have bought ‘geared’ plays so every Dollar reflects many dollars’ worth of stock on margin. Tesla is down around 36% since 1 September. It will soon be TFAANGs for the memories. My personal Tesla ‘short’ wasn’t beefy enough but I mustn’t complain…)
Rolls Royce
Strange times indeed. If I remember correctly and without being too bothered to check but my memory for such things isn’t bad, Rolls Royce Plc (the aero and marine engines’ giant) floated on the Stock Market in 1987 and its shares were around £1.85 a piece. Covid19 has impacted its trade but its shares now trade at not far above that level, some thirty-three years later and I don’t recall any share splits or anything. Of course, the business is different and yes, it has been affected and whilst we don’t own any, surely something is wrong with the market’s valuation of this Company now, even with all the unfortunate news within… after all, even high-riding US tech executives need Rolls Royce engines to jet about the world and on their boats…!
