Why is the market up so much this year? People can talk easy money, Fed interest rates, the number of rainbows, who knows. This one graph tells you why. It’s expected earnings growth over the course of 2021.
Earnings growth expectations increased by over 20% during the course of the year.
Of course the question is what happens next year. With earnings growth at 9% and 3 Fed Rate hikes expected, I don’t think we’ll see such a tailwind in 2022.
Snap Inc. (aka Snapchat) is down 25% today after the company disappointed with their earnings. Snap is part of the delusional dream list. TWTR + SNAP + GRPN + PINS = $178B in market value, $13B in losses.
Here is a chart that shows you the retained earnings (aka total profit/losses) for the these 4 social media companies.
All of these companies really don’t know how to make money. All of them are not young companies. In fact, the only company that has been able to monetize creepy is Facebook, or whatever they’ll call themselves next week.
Bottom line: Most of these companies’ valuations are built on delusional dreams. Once the dream starts to end, the losses are massive.