Navigating The Tech Bubble & Living To Tell About It.

There has been a growing concern over Technology stocks as investors “Party Like It’s 1999.” While no two periods are the same, the outcomes often are. For longer-term investors, if we are amid another “Tech Bubble,” the biggest challenge is navigating it and “living to tell about it.”

Interesting Times

“May you live in interesting times.” – Joseph Chamberlain

That certainly seems an apropos statement after watching the financial markets plunge 35% in March to recover back to positive territory by July. Interestingly, this is the fastest rebound in the market since 1938 but is occurring against a near economic depression.

Here are some current stats:

  • -34.7% Annualized GDP Growth (-8.675% for Q2) via Atlanta Fed GDPNow Estimate
  • ~50-million people unemployed
  • -4.2% personal income
  • -104.2 billion decrease in international transactions for Q1 (Q2 will be markedly worse)
  • -54.6 billion decrease in international trade of goods and services.
  • ~30% decline in corporate profits
  • ~35% decline in corporate earnings based on current estimates

There is no precedent for such a dichotomy between the markets and the economy. Yet, as stated, this is the fast recovery in the market since 1938. Just not so much for the economy.

Tech Bubble, #MacroView: Navigating The Tech Bubble & Living To Tell About It.

As I said, we certainly live in “interesting times.”

Party Like It’s 1999

Over the last couple of weeks, I have discussed the disparity in value, and the deviation between value and growth.

Part of those discussions related to similarities seen at previous market peaks where investors threw “caution to the wind” and paid astronomical prices to own the “hot stocks.” To this point specifically, we quoted Scott McNealy, then CEO of Sun MicroSystems, who chastised investors for paying 10x Price-to-Sales for his company. That was in 1999. Today, investors are doing it again.

Tech Bubble, #MacroView: Navigating The Tech Bubble & Living To Tell About It.