The divergences in the technology sector are “epic” and 64% of Nasdaq Composite (COMP.IND) annual growth can be tracked in just five companies (Microsoft, Apple, NVidia, Alphabet [Google] and Tesla), which match approximately 3,780 points across Nasdaq (15,630 points).
Notice below for inconsistency when sticking only to Nasdaq Total Index, SP 500 and others. General indices become “virtual” as they do not actually represent the strength and strength of the market. As we delve into other companies, it is clear that the vast majority of them have been suffering declines in their stocks since March 2021, but overall indices continue to hit record and higher record.
This is because the cash flow is inflating the main assets bombarded by social media: the five technology companies cited.
REAL VS VIRTUAL
The graphic below shows the Real Nasdaq (GREEN) vs Virtual Nasdaq (RED).
If the top five or six companies (MSFT, AAPL, TSLA, FB, GOOG) had prices or close to their actions, the Nasdaq Index would be at 12,500 points.
As macroeconomic problems continue to arise around extreme financial leverage, as well as the obsessive greedy behavior of individuals in the markets, the Green Line (Nasdaq Real) have been decaying over 2021. However, the Red Line (Virtual Nasdaq) continually hits new highs.
This makes the great mass active in the markets to continue to faithfully believe in a strong market and in the ease of making money.
SPX VS HY
The moment of market irrationality (SP 500, NASDAQ, DOWJONES) being demonstrated in the Yellow Line (SPX) is so absurd, it has completely taken off this year from the current HY pricing (sovereign bonds) Blue Line (HY).
What are high yield bonds (HY)? These are debt securities generally issued by companies. Therefore, investing in high yield is investing in fixed income. The differential of this product is the fact that it pays more interest than the average of the segment’s investments. This is because it is an investment in which there is a risk of default.
In other words: The market (large investors) is already seeing a lack of monetary liquidity in the economy (also due to the possible increase of the American interest rate), causing a correction in the variable income market and advances in investments in Fixed Income. walk close to each other. Thus, pricing the SPX at approximately 3800 points at the current juncture.
Consumption-Index vs S&P 500
The image below demonstrates the intoxication that the current generation is experiencing. The alcohol level matches – or surpasses – the.com bubble in 2000. There is exactly the same narrative circulating among investors, but now it is widely pulverized by social media.
There are thousands of visions converging on a single one point: disruption! “This time is different” said previous generations when they reached the same point. The lack of creativity even in the justifications they elaborate are easily recognizable when we look to read the books and articles that report the previous bubbles.
Always the same characteristic: the future; cryptoactives; the internet of the future; the virtual economy in NFTs and Metaverse. A future that obviously doesn’t exist. One day it will exist, but the price will always be converged by the productive and profitable capacity of the company. Nothing to justify what is happening.
Ratio: S&P 500 vs. Real-earnings Yield
Real earnings (Black Line) are increasingly negative, meaning it is much more difficult and time-consuming to profit from anything in the stock markets. Since 1993, negative returns – or losses – have only been detected, again, in three crucial moments that preceded major corrections in the markets.
The years 2000 and 2008: the two biggest recent corrections than the market American experienced.
Believe: The damage was painful for the “unwary”. In 2022? 2023? I don’t know what proportion it will take, but it will be the biggest bloodletting ever experienced in nearly a century. An entire generation over the past 100 years is about to do something terrible in terms of liquidity, losses and deep financial shakeouts across the economy.
S&P 500 Returns vs. Recessions
Observed time: 1871 to 2021
Blue Line: Price of the overvalued S&P 500.
Black Line: Adjusted Price/Profit Cycle of the S&P 500.
strong>Dotted Blue Line: Price Real of the S&P 500 according to the profits of the
As signaled by the Red Arrows, the historical tops of the S&P 500 suggest a strong correction in the markets, in which there should be a retraction until, approximately 2050 points. Currently the S&P scores 4700 points.
A ~50% correction.
Another historical index indicating the severity of the bubble-of-everything (when shopping following the crowd), please note: since 1905 , the individual who acted irrationally and emotionally, fatally went headlong into overvalued assets – famous at the time – with a high expectation of quick and fantasy profits. However, the median growth trend demonstrates that the S&P 500 should correct by approximately 2000 points. It is obvious that there is a distortion potentiated by the excess of liquidity generated by the Central Banks; through social networks; for easy access to markets by smartphones and computers with internet access.
Easy access has enabled everyone to enter markets anywhere in the world. However, individual emotional, psychological and behavioral behaviors, added to educational deterioration, lead to these absurdities experienced.
Price/Sales vs. Bubbles
The Price/Sale (Price/Sell) ratio is a valuation ratio that compares a company’s stock prices with its earnings. It is an indicator of the value the financial markets have placed on every dollar of a company’s sales or revenues.
Like all indices, the P/S ratio is most relevant when used to compare companies in the same industry. A low index may indicate that the stock is undervalued, while a significantly above average index may suggest an overvaluation. In the chart below, the P/S of 3.11 has surpassed all limits observed since 1964.
Dark Blue Line: Current price of the S&P 500 breaking records.
Light Blue Line: Expected Price/Earnings performance of the same S&P 500.
Since 1991 os markets have experienced absurd size, where the S&P Price is abusively higher than its expected earnings – outperforming the.com bubble. At these Price/Profit levels, the S&P 500 should still approach a maximum of 3000 points.
Below you can see the dangerous moment that the FED (Central American Bank) is causing, by “normalizing” its monetary leverage to absurd levels ever seen, along with the inexpressive rate US interest rate (Black Line).
Since 1955, the Fed has never been as leveraged as it is today. Note that after the same FED started the deleveraging process, along with raising the interest rate, the markets underwent long and hard corrections.
SOME consequences: Massive impoverishment of the population due to equity loss, increased interest rates that raise prices in the general production chain and weakening of underdeveloped countries’ currencies due to lack of investments due to the rush to the strong currency: dollar.
Valuation vs. Deep Recession
In particular, these latest graphs make me a little more concerned about the future of the world economy. This is verified by the most turbulent points in world economic history signaled by the Red Arrows and their respective circles.
Since 1929, moments of extreme recession have been observed, not only in the United States, but all over the world. Many of these extreme recessive moments were followed, or occasioned by, by major geopolitical problems (wars or rumors of wars) as economic cataclysms have the power to deeply shake all nations.
These cataclysms lead to several generalized difficulties, especially in emerging countries. The loss of the value of the local currency is just one of the problems: I consider the political, ideological and social “invasion” as the main historical agents that the deep recessions produced in these countries.
CURIOSITY ABOUT THE MARKET TIME
THE WORLD’S LARGEST COMPANY (BY MARKET VALUE) HAS A 12.3% HIGH LAST WEEK, EVEN AFTER THE COMPANY ALERTS ABOUT SERIOUS PROBLEMS IN THE CHAIN SUPPLIES; REDUCING THE PRODUCTION OF IPHONES AND IPADS.
WHILE THE COMPANY INCREASES THE MARKET VALUE IN ITS SHARES, THE COMPANY ITSELF DISCLOSES THAT IT IS EXPANDING PRODUCTION DIFFICULTIES.
IN VULGO POPULAR: THE BUILDER HE INFORMS YOU THAT HE WILL ONLY DELIVER THE WORK 5 MONTHS AFTER THE AGREEMENT AND EVEN THEN YOU MUST PAY MORE FOR IT.
BEAUTIFUL TIME TO BE ALIVE AND WATCH THESE THINGS