Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Tech Stocks Bubble: Different this time?

Stock-Markets / Liquidity Bubble Apr 14, 2015 - 10:25 AM GMT

By: EWI

Stock-Markets

Editor's note: This article is from Elliott Wave International's brand-new investment report, "U.S. Investors Face a Giant, Historic Bubble." It originally appeared in the April issue of The Elliott Wave Financial Forecast, published March 27, 2015. For a limited-time, EWI has agreed to give our readers exclusive free access to the full report. Please click here to read it now.

In March, we covered the return to a popular fascination with technology.


The striking resemblance to 2000's technology mania is not going unnoticed. How can it? With the NASDAQ's much heralded return to 5000 and magazine covers proclaiming "Google Wants You To Live Forever," concern about an "asset bubble" is being raised. But this is actually another throwback to early March 2000, when the NASDAQ reached its all-time high and the Financial Forecast remarked on a "public ambivalence toward warnings of any kind."

The March issue of The Elliott Wave Theorist explains that while people may remember some of the details, they "forget their prior mood and rationalize present extremes into normality."

This March 7 headline from a major financial paper offers a perfect example of how this "normalization" works: "Forget 2000. It's a Different Investing Ballgame." Really? Yeah, really. "It really is different this time," says another. "The crazy valuations seen at the turn of the millennium -- when silly concepts, such as collecting eyeballs, attracted billions of dollars from breathless speculators wanting to get in on the new, new thing -- are absent."

There's just one problem with this assessment, it's not accurate. Here's the reality, or should we say surreality, as depicted in Bloomberg on March 17:

The Fuzzy, Insane Math That's Creating
So Many Billion-Dollar Tech Companies

The article discloses how companies are shooting to "astronomical valuations," mostly with Internet ideas that capture people's bullish imaginations and, as in 2000, cause them to look beyond mundane things such as cash flow and profits. Once again, such stone-age metrics are less important than "the number of people using the product" and "whether they pay for it. Investors salivate over what's called 'hockey-stick' growth curves, indicating massive uptake. Costs, especially operations costs, are largely ignored."

As in 2000, the fever has been spreading fast. According to Bloomberg, start-ups with billion-dollar valuations were once dubbed "unicorns" because of their rarity. Now, Bloomberg counts more than 50 of them. Many have expanded ten-fold, so a new buzzword, "decacorn," now applies to those with capitalizations of more than "$10 billion, which includes Airbnb, Dropbox, Pinterest, Snapchat and Uber."

Of course, the driving force behind many of these investments is the same--a fear of missing out (FOMO).

"A severe case of FOMO can cause some to do crazy things to get into the hottest deals," says Bloomberg. This is exactly what the Financial Forecast said in March 2000, when we explained why people fail to heed ample warnings in the final throes of a mania: "Acting on such an opinion might mean missing something on the upside. 'The average person must ride it out,' says [a] Nobel Prize winner. Quotes such as these will deserve preservation in bronze when the bear market is mature." Clearly, that time still lies ahead.

For compelling Elliott wave evidence of a culmination of the Mania Era, see the five-wave advance in the share price of the current technology leader, Apple Inc., on page 3 of the March Elliott Wave Theorist. As the Theorist notes, after rising more than 14,500% over the past 12 years, S&P Dow Jones Indices added the stock to the Dow Jones Industrial Average on March 19.

This is one more remarkable parallel to the prior technology mania, as Microsoft was added to the Dow Industrials just prior to its January 2000 top. Here's how EWFF interpreted its addition in November 1999:

The ultimate concession to technology is due November 2, when Microsoft will be inducted into the Dow Jones Industrial Average. For most of the bull market, the world's most dominant stock was excluded from the world's premier blue-chip average. But just as RCA was added to the Dow in October 1928 (and removed in 1932), Microsoft has assumed its rightful place at the head of the pack, in time to lead the way down.

Apple has just been acknowledged in the same way and for the same reason. The pressure to pile onto the technology bandwagon has proved irresistible to the Dow's purveyors. This has generally happened when the most important stock market reversals were at hand.

Editor's note: This article is from Elliott Wave International's brand-new investment report, "U.S. Investors Face a Giant, Historic Bubble." It originally appeared in the April issue of The Elliott Wave Financial Forecast, published March 27, 2015. For a limited-time, EWI has agreed to give our readers exclusive free access to the full report. Please click here to read it now.


About the Publisher, Elliott Wave International Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world's largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private investors around the world.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in