| | | Caution advised ...
Let’s go Crazy - There’s been a plethora of crazy stuff occurring across financial markets. Today’s Bits & pieces looks at a few of the things that have been going on in this increasingly weird world.
“In all my 6 days of trading, I have never seen anything like this ….."
Veteran trader’s mocking comment on the GameStop moves
“Almost never does a stock trade more than twice its market value in a single day. It never happened in 2001, for instance, and never happened in 2003, and only happened once in 2002. It has happened 7 times this week already, and 20 times this month. In the past 12 months, it's happened 84 times, which is more than all of the previous occurrences going back to November 1998.” Axios.com
“Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a byproduct of the activities of a casino, the job is likely to be ill-done.” John Maynard Keynes
“Most notable to me this week is the size of “Margin Debt to GDP.” Simply, this gives us a sense for just how much leverage there is in the system. Retail investors gone mad. Margin debt is good on the way up. Think of it as capital to fuel stock purchases. But leverage is dangerous and can unwind, by force, quickly. Margin debt as a percentage of GDP ….. is higher than the last two bubble peaks in 2000 and 2007.” Fund Manager Steve Blumenthal
“Long-term investing is important because that is how I got this money,” 9 year old Jaydyn who made US$3,200 from his “long-term” investment in GameStop aided by his mother.
“Etsy Stock Jumps on Praise from Elon Musk After He Buys a Gift for His Dog.” Bloomberg Headline. By the way Etsy is up 320% over the past year and currently trades on: PER 84x, PB 26x, EV/Sales 14x and a highly attractive EV/Ebitda 50x
“Lofty valuations persist ….. as of end January, 47% of S&P 500 stocks had a forward PER >20 ….. higher than any level during dotcom era.” Chief Investment Strategist, Charles Schwab Liz Ann Sonders via Twitter.
I calculated the number for CLSA’s Asia-Pacific coverage and coincidentally the same percentage (47%) of stocks in the region are trading >20 PER. And on that front another calculation highlighted just how much market cap is trading at what I would describe as elevated multiples (>30x PER and >3x Price-to-Sales).
The number is a whopping USD22.8 trillion in market cap.
Within Global Listed equities with a mkt cap >US$10bn the combined mkt cap for those with:
>3x Price-to-Sales
>30x PER
>20% 1 year return
….. is USD22.8 trillion
Source: Bloomberg
“Eye-catching action is visible across the Pacific. Shares in electric vehicle manufacturer China Evergrande New Vehicle Group, a division of the world’s most indebted property developer China Evergrande, jumped by as much as 67% after announcing plans to sell HKD $26 billion ($3.4 billion) worth of shares to an investor consortium. That brings the post-June rally in those shares to a cool 625%, leaving Evergrande auto with a $51 billion market cap. That not only tops the $44 billion market value for industry mainstay Ford Motor Co. but also the $28 billion market cap for China Evergrande, the owner of 68% of the E.V. hopeful, which has yet to commence commercial sales of its products.” Almost Daily Grant’s
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