Tagged: bubble

Dario: US stock bubble

Dario, founder of the world’s largest hedge fund Jinqiao water, warned in an interview recently that the scale of the US stock bubble has reached half the level of the historical market crash triggered by the 2000 Internet bubble and the Great Depression of 1929.

 

He warned that some of the best performing stocks benefited from price focused speculative trading, attributing the recent market volatility to the shift of investors to “meat and potatoes” stocks, which did not benefit from the epidemic trading as some technology companies did.

 

He explained that the important factor supporting the current valuation of stocks is high liquidity and low interest rate environment, and investors’ behavior is also one of the reasons for the formation of the US stock bubble. The tendency of investors to value past performance is leading to excessive expansion of the market, especially in the field of technology stocks, which are close to half of some historical bubbles in the past. Investors should be cautious about the low returns of US stocks in the future.

 

Dario also said that the arrival of many new things brought about changes, but investors tended to make inferences based on the past but did not pay much attention to prices. When this happened, a certain degree of bubbles began to emerge.

 

Dalio said:“

 

According to our yardstick, the bubble has not reached the level of 2000 and 1929, but it seems to be on the way now. ” Therefore, from the perspective of value, it can be predicted that the return of the stock market will shrink relative to other assets.

 

When asked what factors might lead to the eventual breakdown of the bubble, Mr Da Leo said that the Fed’s policy is the biggest driver of concern, and that as the low interest rate environment continues, Fed officials are facing difficulties. On the one hand, interest rates can be raised, which may lead to a sharp drop in the stock market and hinder economic growth; on the other hand, the authorities can maintain low interest rates by purchasing government bonds, which will lead to further inflation.

Everything is up! The world enters the bubble era

QQ Music Securities, March 8th, in order to fight the epidemic and prevent the health crisis from causing economic crises, governments and central banks of all countries are continuing to use unprecedented fiscal stimulus and monetary easing policies, and one of the important by-products of these policies is that many investors And the analysts have now smelled the smell of foam everywhere.

A replica of a Ferrari car was sold in Europe for 120,000 euros, a bottle of Romani Conti red wine was fired to hundreds of thousands of dollars, and even a baseball card was worth millions of dollars.

Everything is up! The world enters the bubble era

In February, a computer-drawn ape painting sold for US$900,000. The pixels of the work are very low, and it looks like it was made with the oldest computer. However, this is actually part of a series of so-called cyberpunk digital art works. The latter uses contemporary blockchain technology to ensure that such works are This is the only one in the world. In the past year, the digital art market has expanded 400 times.

At the same time, the price of Bitcoin has risen more than six times last year.

Former Fed President Alan Greenspan once said in 2002: “It is very difficult to clearly define the existence of a bubble. People can only rely on hindsight-the existence of a bubble can only be proved by its bursting. “In other words, only after suffering a solid loss can investors finally know that they have been in a bubble.

Judging from some indicators, today’s asset market enthusiasm has surpassed almost all asset bubble periods in the past.

Hedge fund giant Ray Dalio compiled a bubble index with six sub-indices, the latter currently reading 77%. Although the risk is increasing, Dalio said that referring to the 1929 crash and the Internet bubble in the late 1990s, it is expected that the current bubble has room for further expansion-both times, his index readings have reached 100%.

Nikkei conducted a research on five indicators and found that three of them showed that the current asset market is already very risky. For example, the Buffett ratio, which compares the total market capitalization of the stock market with the gross domestic product, has reached 186% in the United States, far surpassing the period of the Internet bubble and the years before the 2008 global financial crisis.

At the same time, the US housing price index has also exceeded the level on the eve of the global financial crisis. According to data from the Bank for International Settlements, current global housing prices have risen by 19% compared to 2010, with India, Germany and the United States seeing particularly impressive increases.

As the risk of asset bubbles continues to be high, the situation facing governments and central banks is becoming more and more difficult.

In India, more and more people are beginning to conduct bitcoin transactions, and the lower house of parliament is about to start a debate on a virtual currency regulation proposal-the final result is entirely possible to ban all virtual currencies in India.

In China, real estate prices in big cities are rising. Since January, banks have adopted stricter restrictions on loans to real estate companies and personal mortgages.

However, the United States continues to vigorously stimulate the economy. In the past weekend, President Biden’s $1.9 trillion stimulus plan was finally approved by the Senate, and it is expected that it will be passed with a high probability.

Now, what many investors worry about is a change like 2013. At that time, the U.S. Federal Reserve signaled that it expected to reduce the scale of asset purchases under its quantitative easing policy. As a result, it immediately triggered the so-called “reduction frenzy”-investors panic and the stock market plummeted. What happened at the end of February has shown similar signs. With the rapid rise in the yield of the 10-year US Treasury bond, global stock markets have staged a round of declines.

However, Mark Haefele, chief investment officer of UBS Wealth Management, is still optimistic. He wrote in an investor letter in January: “The choice of policymakers is to make those safe assets more expensive. Expensive makes the prices of risky assets more attractive. In this case, it is completely understandable that valuations exceed historical normal levels. The key is that we have every reason to believe that such a policy environment will continue for several years. ”

Due to fiscal stimulus, the ratio of US debt to GDP has increased from 1.08 to 1 a year ago to 1.29 to 1 in 2020, and this indicator in developed economies such as Japan and Europe is also at a record level. Level. If the current fiscal and monetary policies implemented by governments and central banks finally fail to come up with a suitable exit plan, then all generations in the future can only pay for the bill, and the burden on their shoulders is becoming heavier and heavier.

Is the Tesla bubble about to burst?

Recently, Tesla’s stock price has fallen one after another.

Is the Tesla bubble about to burst?

On March 5th, Eastern Time, Tesla’s stock price dropped by 13.19% in intraday trading, and closed with a drop of 3.78%. The closing price of the day was 597.95 US dollars per share, which was the lowest since 2021.

So far, Tesla’s stock price has fallen from its peak of $900 per share on January 26 to less than $600 per share, a drop of more than 30%. In more than a month, Tesla’s market value has evaporated by 270 billion U.S. dollars, and the latest market value is about 573.9 billion U.S. dollars.

Some analysts believe that factors such as the current shortage of chips and the increasingly fierce competition in the electric vehicle field have caused Tesla’s stock price to fall.

The stock price has shrunk “2 Ford + 2 GM”

Since Tesla CEO Musk disclosed on February 8 that he had invested $1.5 billion in the purchase of Bitcoin, Tesla’s stock price began to show signs of decline, and it has continued to this day.

The continued decline in stock prices caused Tesla’s market value to shrink by more than $300 billion. This value is more than twice the current market value of Ford (F, market value: US$48.819 billion) and General Motors (GM, market value: US$77.449 billion), and is more than twice the current market value of Toyota Motor (TM), the world’s second-highest automaker by market value. The market value of 2076.28 billion U.S. dollars) is even higher than 100 billion U.S. dollars.

Picture source: Photo by reporter Liu Ling (data map)
In the view of Cao He, president of Quanlian Auto Dealer Investment Management (Beijing) Co., Ltd., the decline in Tesla’s share price means that it has entered a “squeezing bubble” stage. “It can be said that (the stock price decline) is a sequelae of Tesla’s (stock price) continuous skyrocketing last year. The stock price was too high before and now it has entered a period of decline or deep decline, which is normal.” Cao He is accepting “Daily Economic News” The reporter said in an interview.

In 2020, Tesla’s share price skyrocketed, with an increase of more than 700% during the year, and Musk, who holds more than 20% of the shares, also became the world’s richest man. Public data shows that from March 19, 2020 to January 26, 2021, Tesla’s stock price soared by more than 1,100%.

Jiang Han, a senior researcher at Pangu Think Tank, also said: “For a stock like Tesla, it is actually impossible to rise forever, and it is impossible to make money and profit continuously. A fall is a high probability event.”

In fact, JPMorgan Chase poured “cold water” on Tesla’s stock price and market value soaring in December last year. JPMorgan Chase said that Tesla has been “severely overvalued” and its stock price will plummet by more than 80%.

JPMorgan Chase analyst Ryan Brinkman once stated in a research report that basically all valuation indicators show that Tesla’s stock price is “severely overvalued” and investors should not increase Tesla before it is officially included in the S&P 500 Index. hold.

There is a view that Tesla’s share price fell because investors worried that the automaker might be severely overvalued. At the same time, rising U.S. bond yields make companies that pay small dividends unattractive.

It is understood that in the fourth quarter of 2020, the US Bridgewater Fund will finally sell 35,000 Tesla shares. At this point, this fund has all liquidated the 212,000 Tesla shares it bought in the fourth quarter of 2019.

But Wedbush Securities analyst Dan Ives believes that the decline in Tesla’s stock price is temporary, and the recent correction is an excellent buying opportunity. In the next 12 months, Tesla’s stock price target is set at $950 per share. “Tesla’s market value may reach US$1.5 trillion to US$2 trillion in the next two years.” Ives said.

Multiple factors have caused the stock price to fall

“Tesla’s stock price may not see a surge similar to last year’s in 2021, and it will be difficult to achieve a new high.” Cao He believes.

Some analysts believe that the stock price has entered a callback period, chip shortages, market competition and other factors, which ultimately caused a sharp drop in Tesla’s stock price this round.

It is understood that Fed Chairman Powell stated on March 4 that the restart of the US economy may put upward pressure on prices and push up inflation. The market is currently generally worried that interest rates will rise.

Powell’s statement caused a shock in the U.S. stock market, leading to large-scale adjustments in many technology stocks such as Tesla and Apple. Analysis believes that technology stocks rely on the expectation of substantial growth in future cash flows, and once the level of inflation rises, the value of these future cash flows will undoubtedly be greatly discounted.

Image source: Photo by reporter Sun Tongtong (data map)
In addition, the current fierce competition in the field of electric vehicles has allowed more investors to stop focusing on Tesla, but gradually spread the “eggs” into other baskets. For example, Ron Barron, the founder of American Barron Capital, has sold about 1.7 million shares of Tesla and invested in Tesla’s rivals-General Motors Cruise and Amazon-backed Rivian.

It is understood that traditional automakers including Ford and Volkswagen have begun to seize Tesla’s market share in the United States and Europe. Currently, the sales of Ford Mach-E and Volkswagen ID.3 have soared in the US and European markets.

At the same time, the current global chip shortage also endangers Tesla. “The chip shortage has the same impact on global car companies, and this is a common problem.” Cao He said.

In the past few months, the global automotive industry has encountered unprecedented chip supply shortages, and many companies, including Tesla, have announced measures to stop production and reduce production. On February 25, Musk said that Tesla’s factory in Fremont, California was temporarily closed due to a shortage of parts.

In fact, at the financial report analysis meeting for the fourth quarter of 2020, Tesla has already issued an early warning that the shortage of chip supply may affect the company’s production goals in the first half of this year.

In addition, cost control is also a major factor affecting Tesla’s stock price. At the end of last year, Musk said in a letter to all employees that investors believed in Tesla’s profitability. However, if investors change their minds, Tesla’s stock price may plummet. At the moment, Tesla is building factories in Texas, USA and Brandenburg, Germany at the same time, which may put a lot of financial pressure on Tesla.