tech stock bubble

Major Stock Crash; Bonds Improve

    Stocks crashed today, thus rescuing bonds, since yields dropped because of the stock crash. The 10 year Treasury yield dropped 1.6 basis points; in after-market trading the yield dropped even more (a total of 3.5 basis points), like a stone in water. The SP stock index dropped 3.3%; NASDAQ declined 4.08%. The VIX exploded up 44%, making it too hard for speculators to buy put options thus forcing sales of stock out of the hands of short term speculators. Much of the world’s stock indexes have been negative for the YTD. Looks like the U.S. market is moving towards a global stock bear market, as are bond yields. This morning the PPI inflation data was released showing inflation YoY

2018-10-10T14:00:35-07:00October 10th, 2018|mayflowercapital blog|Comments Off on Major Stock Crash; Bonds Improve

Will Apple be the First $Trillion Company?

  If Apple reaches $203 (only 1% higher than today’s price) it will be the first U.S. $Trillion Company, however, the first global one occurred in October, 2007 in China when PetroChina (PTR) reached a peak of $262 a share. Now PTR is at $74 a share, a decline of 72% from the peak of a decade ago. I bought PTR in March, 2005 at $62 and sold it November, 2006 at $116. I sold because I was worried (too early) that oil and PTR were going up too far and might plunge suddenly. Instead oil went higher, peaking in July, 2008. I don’t regret getting out too early because the downside risk of a volatile oil stock is great.

2018-08-01T16:06:39-07:00August 1st, 2018|mayflowercapital blog|Comments Off on Will Apple be the First $Trillion Company?

Tech Giant Plunges 23% Is This the Top?

Today’s 23% plunge in the price of Facebook stock is no surprise since it is one of the high priced tech stocks in the FANG index. If this can happen to a company with decent earnings then imagine how much riskier are the razor thin earnings companies like Amazon or money losing tech companies like Netflix. What has been propping up the entire market are the ten FANGS companies, so when they start to drop steeply in price then the momentum will soon be or now has been broken for the entire market. Already the broad market has failed to make a new high for six months.    The ECRI leading index peaked before every recession in 50 years. It

2018-07-25T17:08:43-07:00July 25th, 2018|mayflowercapital blog|Comments Off on Tech Giant Plunges 23% Is This the Top?

Tech Meltdown: Will It Be The Needle That Bursts The Stock Market Bubble?

    Today’s news of the Meltdown and Spectre flaws in computer hardware and software are a stunning defeat for the tech industry in a way that reminds me of the Lehman crisis of 2008 that started the crash of 2008.   It may be that chip makers will need to rush production of millions of new chips, and then device manufacturers will have to retrofit devices, possibly creating a year-long backlog. If prominent tech companies (the FANGs companies) are the vanguard of the current stock boom then if they suffer a sharp drop in profits on top of a high PE ratio perhaps that will trigger a much needed stock market correction. The top 50 companies, (mostly tech or pharma),

2018-01-03T23:22:55-08:00January 3rd, 2018|mayflowercapital blog|Comments Off on Tech Meltdown: Will It Be The Needle That Bursts The Stock Market Bubble?

Will Tech Companies Create Inflation That Damages Stocks and Bonds?

     Recently the biggest and best of the tech industry (powerful oligopolistic companies) have had some spectacular security breaches that are of truly gigantic proportions, potentially affecting almost every consumer of tech. I feel these must have happened because tech companies are trying to move too fast without spending resources to ensure software security. It may be that the red hot nature of the industry means it can’t hire enough people at this rather late stage of the economic cycle. Typically at the end of a cycle the economy expands too fast, creating expensive labor shortages which employers may respond to by engaging in a bidding war for talent. The resulting inflation acts to raise interest rates, thus bursting the

2017-12-06T15:17:40-08:00December 6th, 2017|mayflowercapital blog|Comments Off on Will Tech Companies Create Inflation That Damages Stocks and Bonds?

Yahoo Sold To Verizon: Lessons For Investors

Yahoo sold its core business today to Verizon for $4.8Billion. Yahoo was worth $125Billion at the top of the 2000 tech bubble. The company still retains assets worth $40Billion, most of which consist of stock in Alibaba, a Chinese internet company and Softbank in Japan. This implies Yahoo dropped from $125Billion to $40 Billion, a 68% drop. It would be lower if taxes were paid on the appreciation of Alibaba stock. Assuming that Alibaba experiences the fate of many tech companies and drops significantly in price the same degree as Yahoo or AOL did then Yahoo basically is worth about $4.8billion for the core, $4Billion for Alibaba, after tax, and another $5billion for Yahoo’s shares in Softbank, and a Billion

2016-07-25T15:05:24-07:00July 25th, 2016|mayflowercapital blog|Comments Off on Yahoo Sold To Verizon: Lessons For Investors

Failed Central Bank Policy Will Lead To Bear Market

Keynesian deficit based fiscal stimulus and extreme monetary policy such as Quantitative Easing and ZIRP are based on the assumption that wealthy people mistakenly hoard cash instead of spending and investing and if they can be tricked into spending then the economy will get out of stagnation or depression. The problem is that the object of the manipulation doesn’t want to be manipulated and is searching for evidence that such a policy might make him or her worse off. Thus these policies are less likely to work the more aggressive they become. During a time of runaway inflation accompanied by price controls consumers and merchants know they mast plan ahead for that. Merchants react during inflation by withholding artificially low

2016-05-11T14:31:56-07:00May 11th, 2016|mayflowercapital blog|Comments Off on Failed Central Bank Policy Will Lead To Bear Market

Stock Crash Intensifies

Today LinkedIn crashed 44%, down 62% from its peak and is now at same level as the pre-bubble era of mid-2012. Many NASDAQ listed companies also went down significantly today. The main thing propping up stocks have been a few glamorous NiftyFifty FANG tech stocks. The slaughter of LNKD shareholders made other tech investors nervous. I feel they will lose faith in momentum investing, which advocates buying simply because others are buying, and this will trigger a massive rout in tech stocks. Then dramatic losses in tech will inspire caution in investors of more traditional stocks, causing them to awaken to the high PE ratios. Thus broad market indexes will decline significantly. The Federal Reserve can’t cut rates any more

2016-02-05T15:17:29-08:00February 5th, 2016|mayflowercapital blog|Comments Off on Stock Crash Intensifies

Tech Doesn’t Hurt Employment But Tech Stocks Can Be Dangerous

Technology creates new layers of complexity that require more experts, trainers, inspectors, etc. Technology creates totally new types of jobs such as a Search Engine Optimizer, etc. An amazing article in the New York Times about how consumer who use Google’s search system are fooled by dishonest businesses that create phony office locations and how honest businesses are fighting back shows the importance of human work to fight back against marketing fraud. The article mentions someone hired a private detective to research this problem and another hired an attorney to subpoena records. Thus non-tech jobs were created. I’m a tech optimist regarding the idea that tech will create jobs and growth. Tech allows the opportunity for new, more complicated things

2016-02-01T13:57:30-08:00February 1st, 2016|mayflowercapital blog|Comments Off on Tech Doesn’t Hurt Employment But Tech Stocks Can Be Dangerous

Nikkei Stocks Up A Lot: Should You Buy?

The Nikkei stock exchange in Osaka went up lot tonight and was up a lot in the past three years. Should you buy it? The problem is the PE10 ratio is roughly 22 versus a recent high of 27 in the U.S. before stocks went down in the U.S. A fair PE10 is around 15 and a good buying opportunity is around 10 or even better at 8. Thus Japanese stocks are too high. Additionally they fail to meet the very important Buffett-style standards of quality of earnings, return on equity, return on sales, etc. Many Japanese companies can’t even make 5% return on equity and many U.S. companies get over 10%. I believe the ratio of return on equity

2016-01-21T19:13:18-08:00January 21st, 2016|mayflowercapital blog|Comments Off on Nikkei Stocks Up A Lot: Should You Buy?