It’s Different this Time … Right?

The NASDAQ hit 15,0000 this week for the first time. I can’t help but think that fashion err mispricing is repeating every 20 years. Here’s the updated total return of NASDAQ and the DJIA over the last 30 years.

You can see since the pandemic started the NASDAQ has gone crazy as technology/biotechnology/workout at home stocks have gone vertical. The question is: Too much too soon?

The only other time we’ve see this level of divergence between NASDAQ and DJIA was in … the late 1990s. And we all know how that turned out. And it’s probably important to note that the DJIA includes Apple.

In my opinion, people are over-extrapolating what has happened over the last 16 months into future growth. For example, we just did a PC super cycle as everyone needed to upgrade their computers. Will that demand be sustainable? Hell no.

But yet every chip company is building FABs. It takes 2-3 years for those to come online. So we’ll probably hit a demand abyss right when that capacity goes online.

How many people are still going to be a Peloton? (see here) Who’s left to subscript to Netflix? How many people need PCs? The chip shortage for cars is just a side effort of just-in-time inventory.

We’ll see over the coming years what happens. The Fed looks like it’s going to start pulling support in the next 4 months… the last 2 tapers did not go well for the markets.