Guest Post by Simon Black
As you you’ve no doubt seen by now, shares of Facebook plunged around 19% this morning.
In fact it was down as much as 25% in after-hours trading, wiping out $120 billion of wealth in a matter of minutes.
To be clear, that is the largest single-day loss of value ever seen in the history of the world.
(And Mark Zuckerberg’s net worth fell by $17 billion as a result… though I doubt he’s going to be missing too many meals anytime soon.)
The company announced disappointing earnings and slowing growth, which spooked investors.
And while most of the mainstream media is focused on what this means for Facebook and other tech stocks, I’m much more concerned about what this means for -all- assets.
In fact, I think today marks a MAJOR turning point for the “everything bull market” that’s been going on for ten years.
Stocks in particular have been rising for years, led primarily by the most popular “FAANG” tech companies– Facebook, Apple, Amazon, Netflix, and Google.
These companies have been pushed to absurd limits.
Netflix is always a great example: the company loses billions of dollars each year and burns through shareholders’ money, yet the market has constantly pushed its stock to new heights.
Then one day Netflix reported less-than-stellar growth, and the stock tanked. Poof. Billions of dollars of shareholder wealth vanished in an instant.
Now it’s happened to Facebook.
This is an important lesson: when a bubble bursts, there can be a lot of pain… very quickly.
By the way, it’s useful to point out that the FAANG companies have essentially been propping up the entire stock market.
Other sectors, like banking, pharmaceuticals, transportation, homebuilders, etc. have all been struggling.
But because these FAANG companies comprise such a disproportionately large share of a stock index like the S&P 500, the strong performance of just those five companies has lifted the rest of the market.
Now, the invincibility of at least 2 out of those 5 high-flying tech companies has been pierced.
Think about that: investors have lost confidence in 2 out of the 5 companies that have almost single-handedly been propping up the rest of the market.
That’s a pretty compelling sign that the top may be behind us.
It’s not just stocks either: take a look at real estate, which has also been in a bull market for most of the last decade.
Just recently the US Census Bureau and Department of Housing and Urban Development announced that new home prices in the United States continued to slide for the third straight month, to a level not seen since February 2017.
Sales of new homes have dropped to an 8-month low.
Now real estate is extremely local; the market in San Francisco is entirely different than in Tulsa.
But, nationwide, there’s strong evidence to suggest that real estate is either in decline… or grinding to a halt.
This makes sense when you step back and look at the big picture. Nothing goes up in a straight line forever. Not stocks. Not real estate. Not anything.
There always have to be periods of corrections… booms followed by busts.
And when you see so much compelling evidence that a bust is coming, it makes sense to find intelligent ways to sit on the sidelines… because there will be phenomenal buying opportunities to come.
Because… If you live, work, bank, invest, own a business, and hold your assets all in just one country, you are putting all of your eggs in one basket.
You’re making a high-stakes bet that everything is going to be ok in that one country — forever.
All it would take is for the economy to tank, a natural disaster to hit, or the political system to go into turmoil and you could lose everything—your money, your assets, and possibly even your freedom.
Easy come, easy go.
For the love of God, Facebook’s single day $123 Billion dollar loss only amounts to THE LAST TWO MONTHS of Facebook’s absurd increases in market cap.
This is barely a speedbump.
True but, it is the largest single day loss in the history of the market.
Nominal numbers denominated in fiat dollars. What does it mean? Something else besides, beyond, “numbers.”
Philly mainline. Boston Brahmin. Dutch Knickerbocker. Different chapters of the same category. That last Amsterdamned bunch brought their hustle to New Amsterdam.
“Wall Street had long been the gathering place of a hybrid elite, one respectful of traditional order but open to the destabilizing currents of the Atlantic economy. Jefferson once described NYC as a “cloacina of all the depravities of human nature.” Deserved or not, this reputation owed something to the city’s origins as a remote outpost of the Dutch empire in the 17th century. The Dutch invented the rudiments of modern finance: commercial banking, credit, insurance, the stock market. Dealers set up the first exchange to trade in stocks on a bridge over the Amstel River in Amsterdam. There the shares of the United East India Company became a speculator’s favorite. Indeed, such staples of Wall Street argot as “short-selling,” “bear raids,” “pools,” “Syndicates,” & “corners” were already standard practice on the Netherlands stock exchange before there even was a New Amsterdam. Contracts to sell stocks one didn’t own to people who didn’t have the money to buy them quickly became standard practice & were known as “windhandel” or “trading air.”” ~ “Every Man A Speculator: A History of Wall Street In American Life”
Chant it, click those ruby fetishes, 3x: there’s no place like home. But where’s home? Kansas? Nah. The sucking coriolis is home. Up, down, up, down ∞.
Movement is home. Not where it “ends” according to Nostradumass prognosticators. It doesn’t end. Plant a flag, capture the flag then, is sowing wind, reaping whirlwind. More counter-intuition.
Windhandel•icious makes me ☻.
Absolutely stunning synopsis, I forget. Not being facetious!
I wonder does the author get tingles when authoring last paragraphs, as he had?
Thanks, sea in thee. “Authors,” shell to ear, hear the ocean, & transcribe. The listen is horse, the write is cart. As for the tingler, special effects have come a long way:
Yes and the bag holders got fucked, again…..
Carry on.
The largest single-day stock market drop was Black Monday.
Sure, Facebook set a record for most market cap of a single company erased in one day, but in inflation-adjusted dollars, they probably didn’t.
Only 19%? Only 81% to go in order to reflect it’s real worth. I’m hoping to see Zuckerberg shopping with an EBT card. Never happen, but one can dream. 🙂
Is TBP under attack again? It keeps crashing on me. I’m on an iPhone
Working fine on my desktop.
Value is subjective. That’s even before fraudulent, rigged, “markets” stamp numbers onto things.
Loss of valuation, loss of respect or admiration, loss of fad or trend because the herd stampeded off in some other direction.
Beanie babies tiptoe thru the tulip bulbs, tie pet rocks to their ankles & submarine. Because lots of value’rs crib “the answers” from whoever is proximal. Or whoever is propagandizing, conning, them.
Cheating – emulation, conformity, authority worship – is de rigueur. Social specious species. Sssss-ibilant ouroboros.
Greetings,
The markets are broken and price discovery is an archaic term. This is the result of free money having no place to go. Frankly, I’d like to see that 120 Billion put into the economy as a whole rather than into a social media site that is more than 1/2 bots.
I’m still a fan of metals – gold, silver and lead but I’m old fashioned that way. My friends that “invest” in crypto all sit around drinking $9 craft beers while discussing this or that mining rig look at me as if I were Rip Van Winkle and I’ve missed the revolution. I get at least one repost a day from them about some genius that is blathering on about Bitcoin going to 65k, 100k or one million depending on, I guess, how much coffee and adderall the author has in his system.
“My expectation for a -57% loss in the Nasdaq is also somewhat less than I expect the S&P 500 (-64%), Russell 2000 (-68%) and Dow Jones Industrial Average (-69%) over the completion of this cycle.”
John Hussman
this link is about netflix,not facebook–
it talks about the insane valuation of netflix & how they are about to have their lunch eaten by disney–
it is by an outfit called riskhedge & they may or may not be pushing disney for their own ends,but the article still makes sense to me–
netflix–don’t buy the dip
https://www.riskhedge.com/
There are some interesting rumblings going on with Zuckerkike Et Al. and their selling of their personal stash of Facebook stock, and already people are suggesting that the Securities Exchange Commission needs to haul them up and ask some questions. It has been long rumored that Facebook is nothing but another psyop division of the CIA, and that they secretly provided the seed money to get it started. Wouldn’t it be interesting if this is true? Facebook would drop to $0 if that is the case, and can you imagine all of the lawsuits coming out of this?
These FAANGs or whatever they are called are “valued” based on enormously optimistic projections of growth and future profitability. I mean, no one values anything at hundreds of times earnings, even the most dim-witted of analysts. The value is based on hope of incredible growth and profit expansion.
Anything that bursts that bubble of hope, as just happened with Facebook, will result in enormous collapse back toward more realistic valuations.
This has not yet begun to bite. There will be a mighty collapse in shareprices. The one I am not sure about is Amazon, as they are in fact best I can tell a real business, and they are expanding mightily. The Facebooks, googles, etc., of the world do not look like real biz to me, but what do I know. Netflix does not seem to have any big barrier to entry, so they are likely to get screwed. Apple is a marketing company in the end, so it is doubtful they can keep that going forever.
Everybody has a plan until they get zuckerpunched in the facebook & loose a FAANG or several. ~ tike myson