![]() ![]() If it sounds like I’m talking out of both sides of my mouth, I’m okay with that. It probably doesn’t make sense to pay 90x sales for a $90 billion company (Snowflake), but it also doesn’t make sense to slavishly follow a playbook from two decades ago. While a heavily tech-weighted S&P 500 was a warning sign for investors, one of the biggest differences between now and the dot-com bubble of 22 years ago was that that nascent era of the internet. History is no doubt rhyming, but we have to remember the key part of this phrase History doesn’t repeat. Today certainly has similar characteristics to the 90s. Today, aside from a handful of names like Nvidia, Snowflake, and Tesla, the stocks are smaller. In the 90s, megacaps were trading at 20x sales. …But the % representation in the index isn’t close. Yes, the % of stocks trading above 20x sales is approaching ’99 levels… There are some signs that investors are starting to get the jitters over tech stocks, suggesting the tech stock bubble might be about to burst. Jeremy Schwartz did some adjusting to make a more apples-to-apples comparison. And while the data above is factually true, it isn’t 100% accurate because the S&P 500 market cap is 3.5x bigger today than it was back then. Uh oh, is it time to sell everything? I’m not saying Michael is saying that, but that is a reasonable question to ask just by looking at that chart. Market cap of companies with Price/Sales ratio over 20 □ Even adjusted for inflation current nonsense makes the dotcom bubble look like a period of reason and prudence. Take this chart from Michael Arouet, which shows that stocks trading at 20x sales have a much larger market cap today than they did in the 90s. There are a lot of expensive stocks today just like there were during the dotcom bubble. Over the past 19 years, technology and communication services sectors have again seen new potential in the form of areas like mobile technologies, cloud technologies, artificial intelligence and. 43x earnings for Coca-Cola! 41x for Johnson & Johnson! 46x for Wal-Mart!!! People poured money into the stock market to reap the gains, but when the tech bubble burst in 2000, not everyone was able to survive the collapse. We refer to that period in time as the dotcom bubble, but as Corry points out, it was a large-cap growth bubble. “It’s not a bubble if everyone says it is” just isn’t true. Bernstein held an entire conference on it in June 99! Unfortunately, the quip “it’s not a bubble if everyone says it is” just isn’t true Investors were comparing the internet sector to tulip mania as early as mid-98. His whole thread is worth reading, but the one that hit hardest for me was this: Everybody knew it was a bubble. Luckily we have people like Corry Wang, who was working at Bernstein during the runup, to share some lessons he learned. Looking back at how crazy the numbers got during the dotcom bubble is informative, but data doesn’t tell the whole story. Telling future generations about the lockdown cannot possibly convey what it was like to experience it. It’s one thing to study the past after it was written, it’s another thing to experience it in real-time. ![]()
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