Displaying items by tag: bubble

Thursday, 28 June 2018 09:42

There is No Bubble in Tech

(San Francisco)

Many investors are currently worried about the potential for a tech bubble. Between high valuations, data breaches, and a growing call for more regulation of the sector, it is easy to feel bearish. However, Barron’s is telling investors to not be too worried. The opinion is based on analysis of tech price movements and outperformance against a new Harvard study. Historically speaking, a bubble can be referred to as at least a 100 percentage point outperformance of a sector versus the market as a whole over a two-year period, followed by at least a 40% drop over the following two years. By that metric, the tech sector isn’t even close, as it has only outperformed the market by 36% over the last two years.


FINSUM: So this was a valuation-based study, but it could theoretically also be applied to individual stocks. When you do that, both Amazon and Netflix look vulnerable, as both have satisfied criteria for a bubble.

Published in Eq: Tech
Wednesday, 14 March 2018 13:55

Allianz Says Bitcoin Bubble Will Burst Soon

(New York)

Allianz, the global financial firm, says that Bitcoin is worthless and that the bubble is about to burst. While the firm may be better known in its native Europe, Allianz is a major player speaking out against the cryptocurrency. “In our view, its intrinsic value must be zero … A bitcoin is a claim on nobody – in contrast to, for instance, sovereign bonds, equities or paper money – and it does not generate any income stream”, says Allianz, Europe’s largest insurer.


FINSUM: We thought the bitcoin bubble had already burst! Allianz really seems to think it will go to zero. We do not, as we believe it will slowly develop into a digital value store as the regulatory regime surrounding it gets harmonized.

Published in Eq: Tech
Tuesday, 13 February 2018 11:16

Stocks Look Like the Definition of a Bubble

(New York)

Well the stock market finally stabilized yesterday with a solid rally (who knows where it will end up today), which may let many breathe a sigh of relief. However, one of the most prominent names in investing, in his typically unemotional way, says that stocks are currently very dangerous as they look like the definition of a bubble. Investors are still buying the market even though they think it is overpriced, saying Schiller. According to him, “that's almost the definition of a bubble. If you think it's overpriced but think it still has time to go, that's the definition of a bubble”.


FINSUM: So our view is that there is still a good deal to be positive about, but that if you really think we are in for a correction, then what just transpired was not nearly enough to “correct” the market.

Published in Eq: Large Cap
Friday, 02 February 2018 10:21

Bitcoin’s Run is Officially Over

(New York)

Okay, we are calling it. Officially. While some had been holding out hope that Bitcoin might regain ground back up to its peak of around $20,000, the bottom appears to have officially fallen out. The cryptocurrency is now trading under $8,000, down around 60% since its peak. The currency continues to suffer setbacks from regulatory efforts in various jurisdictions, and it has put bears firmly in control.


FINSUM: Bitcoin and cryptos will be around for a long time, but the price discovery for a realistic level is going to be painful.

Published in Eq: Tech
Thursday, 25 January 2018 11:07

There is a Dangerous Bubble You Don’t Know About

(New York)

Many investors are constantly on the look out for the next bubble. Well there is a new one right before their eyes, but many are not seeing it. Leave stocks and bitcoin aside for a moment, and look at private equity. Many say the current market is just like the Dotcom bubble, with valuations way too high and way too much optimism on growth and business models. “It is quite amazing that there is no collective memory that goes beyond five years” say an Oxford professor. Part of the problem is that fundraising has been really strong, which has led to more money flowing into companies, pushing up multiples. The other is the broad availability of debt funding for buyouts, with one industry specialist saying “These are unashamedly incredibly attractive conditions to borrow money. Will that debt be available to buyers in five years’ time? Probably not. Buyout groups are bullish to take the risk in 2018. It’s a ’risk-on’ environment”.


FINSUM: Aside from the reasons cited, the valuation of the stock market is another factor that is pushing up valuations. The sector looks likely to have a reckoning.

Published in Alternatives
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