“With the FANG stocks faltering lately investors are starting to become concerned about their impact on the broader market. And there is certainly something to this.”https://app.hedgeye.com/insights/69386-it-s-more-than-just-fang-stocks-investors-should-be-worried-about?type=guest-contributors …
It’s More Than Just FANG Stocks Investors Should Be Worried About
What investors really should be worried about then is the possibility that the reappraisal of the FANG stocks is representative of a much wider reappraisal that began back in February.
app.hedgeye.com
Echo Bubbles Abound
Pater Tenebrarum at Acting Man discusses Stock Market Manias of the Past vs the Echo Bubble.
The Big Picture
The diverging performance of major US stock market indexes which has been in place since the late January peak in DJIA and SPX has become even more extreme in recent months. In terms of duration and extent, it is one of the most pronounced such divergences in history. It also happens to be accompanied by weakening market internals, some of the most extreme sentiment and positioning readings ever seen and an ever more hostile monetary backdrop.
The above combination is consistent with a market close to a major peak – although one must always keep in mind that divergences can become even more pronounced – as was for instance demonstrated on occasion of the technology sector blow-off in late 1999 – 2000.
Along similar lines, extremes in valuations can persist for a very long time as well and reach previously unimaginable levels. The Nikkei of the late 1980s is a pertinent example for this. Incidentally, the current stock buyback craze is highly reminiscent of the 1980s Japanese financial engineering method known as keiretsu or zaibatsu, as it invites the very same rationalizations.
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