I agree with Mr. Dalio that we are not at present in a bubble that is about to pop when you look at the market as a whole. IMO there some mega-cap tech darlings are now magnets for performance chasing short term MOM investors and their valuations already have so much anticipated future good news baked into them at current prices that their intermediate and longer term returns are going to be dramatically less than their recent past. On the other hand, these stocks do produce considerable and growing profits, have dominant market positions, expected future top and bottom line growth well into the future, relative resistance to a slowing economy, high return on equity, strong balance sheets with lots of cash, deep moats around their business plans and expected sustainable advantages relative to their competitors. These are not the dot com bubble stocks many of which had no profits and no realistic plane to ever be profitable. All many of them was a good optimistic story and dot com in their name. We are not IMO now at that degree of mindless euphoria in tech darlings although they are very richly priced.
The rest of the market, about 75% of it, is by most measures either fairly or cheaply priced. This is a backstop unless we get into a severe recession. If we do get a significant tech stock sell off, money will likely flow to fairly or cheaply priced stocks as it did 2003 - 2006. In short I believe the tech downside when it comes will be a correction, not a collapse. Accurately timing that turnaround is essentially impossible. As Keynes said, "The market can stay irrational longer than you can stay solvent." Unless irrationality and animal spirits gets totally out of hand, I don't believe it wise to make significant portfolio changes anticipating a collapse.
Garland Whizzer
The rest of the market, about 75% of it, is by most measures either fairly or cheaply priced. This is a backstop unless we get into a severe recession. If we do get a significant tech stock sell off, money will likely flow to fairly or cheaply priced stocks as it did 2003 - 2006. In short I believe the tech downside when it comes will be a correction, not a collapse. Accurately timing that turnaround is essentially impossible. As Keynes said, "The market can stay irrational longer than you can stay solvent." Unless irrationality and animal spirits gets totally out of hand, I don't believe it wise to make significant portfolio changes anticipating a collapse.
Garland Whizzer
Statistics: Posted by garlandwhizzer — Fri Mar 01, 2024 3:13 pm — Replies 3 — Views 370