Despite all the propaganda and cheerleading by CNBC and the rest of the MSM faux journalists, the stock market has been stuck in neutral for the last year. The S&P 500 stood at 2,089 on December 26, 2014. It presently stands at 2,089 on November 22, 2015. It is trading 2% below its all-time high, reached in July. It’s up a measly 3.5% since the day the Fed turned off the QE spigot in October 2014. And that’s the good news.
Without the ridiculous “internet bubble like” ascension of Facebook, Amazon, Netflix, and Google, the stock market would be deep in the red this year. Three of these companies barely make money. They are all overvalued by at least 70%. Most of the stocks in the S&P 500 are trading in the red this year. When the breadth of advancers narrows to a few over-hyped Wall Street superstar stocks (think Cisco, Dell, Microsoft, Enron, Worldcom in 2000) the bull market is on its last legs.
Wall Street is luring more muppets into these FANG stocks before the slaughter commences. These stocks will be trading at least 50% lower in less than two years. Book it.
Facebook, Amazon, Netflix, and Google created over $440 in value over 2015
In the sixth year of the bull run, the U.S. large cap market has had its ups and downs. The S&P 500 peaked at 2134.7 in the early summer months, and promptly collapsed to 1867 points during the August flash crash.
Today, it’s back in black, but only trading just over 1% higher than it started the year.
The only reason that has made this possible is the legendary performance of four tech stocks: Facebook, Amazon, Netflix, and Google (now called “Alphabet Inc.”). Together, the “FANG” stocks have created an impressive $440 billion in market capitalization since January.
For comparisons sake: that’s over 2/3 the size of Apple’s current market cap.
The FANG stocks comprised just over 3.5% of the weight of the S&P 500 index at the beginning of the year, and now they make up 5.1%. They’ve carried the market, and without them the S&P 500 would surely be in negative territory today.
Looking at these companies individually, probably Amazon (AMZN) has been the most impressive over the course of the year. While it didn’t shoot up the 143% that Netflix (NFLX) did, Amazon had a similar performance despite being over 6x the size of Netflix. Amazon is now bigger than Facebook in terms of market cap, and achieved a gain of 116% through the year.
The only problem is that it is now the most expensive stock on the index, at a seemingly ludicrous P/E ratio of 966. The other stocks are expensive as well: Netflix and Facebook are trading at 329 and 108 times earnings respectively. Google is the lone palatable company from that perspective, trading at only 35 times earnings.
This raises the question of how long the FANG stocks can carry the load, and if their work is done.
If so, who will step up to the plate?
Given how awesome everything appears to be, judging by stocks and the tidal wave of FedSpeak of the last week confirming that rates are rising in December, we found it at least marginally ‘odd’ that out of the blue, The Fed would announce an ‘expedited, closed’ meeting on Monday…http://www.zerohedge.com/news/2015-11-20/fed-hold-expedited-closed-meeting-monday
A reevaluation will be coming. Woe to those in debt.
Woe to all earners/middle class people.
They will be hampered and ruined by the massive number
of non-producers that will be harnessed to their backs.
“turn on, tune in, drop out” (Timothy Leary)
rather: wake up, get a clue, then drop out…
disengage/resist/go rogue/live below your means,
I suspect our “means” are going to shrink soon enough.
The (stock) market
is overvalued…smells like a looting
to me. The politicians and the bankers will make a
killing.
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