20 Nov “HAS FAANG AND THE 10-YEAR TECH BULL MARKET BROKEN DOWN?”
Is the 10 year run in the NASDAQ/techs over? Will such an ending also coincide with the peak in passive/index investing?
In my view the issue at hand is the relentless drive to reduce costs by eliminating the middle man via indexing that it in itself has become a systemic risk. This prioritization of speed and cost of execution over liquidity and capitalization has created an “imbalanced market,” a view shared by several past and present SEC commissioners.
Little attention was focused when the mega sized companies advanced every day. If selling continues at current pace, I believe all will become focused on this issue, a focus that in return will generate reform that sows the seeds for the next crisis.
Some are blaming trade as the reason for current selloff. However such an explanation is not plausible for some of the marquee issues. For example AAPL which is off over 20% from its early October peak, down because of a cut in production for its next generation of phones.
Facebook is down over 40% from its July apex because of privacy issues. AMZN is off over 26.5% from early September, the result of possible increased taxation. Netflix is down about 36% from June because of lower than expected subscriber growth. GOOG has dropped 20% because of possible tax increases and regulation.
As I opined many times, these issues were priced beyond perfection with past growth rates extrapolated into infinity. This extrapolation coupled with massive ownership and rising interest rates has created a perfect storm.
Unfortunately values normally exceed both on the upside and downside.
Hypothetically trading should begin to wane as today progresses as many begin to leave early for the Thanksgiving holiday. Will such occur today? A concern that I harbor is selling pressure accelerates and because of today’s market dynamics, electronic liquidity will evaporate as many withdrawal from the market at the same trading ranks thin because of the holiday.
Last night the foreign markets were down. London was down 0.56%, Paris down 0.81% and Frankfurt down 0.90%. China was down 2.13%, Japan down 1.09% and Hang Sang down 2.20%.
The Dow should open significantly lower as a rout in the technology shares appears to continue today. The 10-year is up 4/32 to yield 3.05%.