Snapchat owners, SNAP Inc, will launch its eagerly-awaited $US3bn initial public offering (IPO) today, the latest tech darling set to create $Billions for the founders despite the company having never made a profit during its 5-year life, only widening losses put at $0.5BN for 2016. Furthermore, SNAP has given no promises on profits to new […]
Italy……the birthplace of the “Treaties of Rome,” which ushered in the European Economic Community, also labelled as the “Common Market,” is a fitting place for the great and the good of the now “European Bureaucratic Monster” to celebrate its 60th anniversary this weekend. Originally attended in Rome on the 25th March 1957 by representatives from […]
“Shock and horror” this week as UK CPI inflation breeched the Bank of England’s target rate of 2% pa, a target that the bank has hardly ever met over the past couple of decades, whilst across “the pond” the financial media talking heads are seeing the current 2.7% annualised rate for US CPI as a […]
Optimates……is defined as the “nobility or aristocracy” who held power back in the Roman Empire times, aka patrician politicians, whereas the “Populares” were the people or the people’s party who favoured the cause of the plebeians (plebs or commoners) and in particularly the urban poor. The latter were in effect an opposition party which has […]
Hogging has a variety of definitions, including ones of a nature that wouldn’t be included within this column, but “Hogging It,” as in “taking or keeping too much for yourself and not sharing” is ideal. Not sharing took on a whole new meaning of late within the hallowed halls of the “Bank of England,” the […]
Old Mother Hubbard……went to the cupboard, to fetch her poor dog a bone, and when she arrived there, the cupboard was bare, and so the poor dog had none! Now replace cupboard with “Exchequer or Treasury” and dog with “the populations of ALL G7 nations,” and you will start to understand the real dilemma of […]
Our Investment Market Overview for the week ending 3rd March included the following comment on the Dow Jones Industrial Average, the “Dow”: “A mass of anecdotal market evidence that scream “overvalued,” such as excessive valuations; extreme bullish sentiment readings; historic lows of cash held within stock mutual-funds and excessive use of leverage, has been phenomenal, […]
“SNAP back”…. Was the chosen title of this week’s “knowledge share,” article, chosen to coincide with the debut of the latest tech-darling’s initial public offering, whilst “subtlety” trying to join up the dots in respect of identifying market bubbles, including possible tops. The pace of the labelled “Trump rally,” co-incidental that it is to the […]
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Snapchat owners, SNAP Inc, will launch its eagerly-awaited $US3bn initial public offering (IPO) today, the latest tech darling set to create $Billions for the founders despite the company having never made a profit during its 5-year life, only widening losses put at $0.5BN for 2016.
Furthermore, SNAP has given no promises on profits to new investors, or on just how the company will be run and if that hasn’t quite been enough to excite your speculative juices, you get no voting rights either!
If you suspect that I am “cool” towards the stock, you would be right. Yes, there will likely be a 20-40% pop on it’s day one debut, but what after that? Aside of it being impossible to actually value a stock like this, it’s the timing of its flotation that is of far more interest.
Last July’s piece on “The Madness of Crowds,” aside of reminding of financial bubbles of the past 400-years, was timed to warn of what appeared to be the end of the 35-year bull market in bonds. Thus far that looks to have been a good call.
SNAP neatly joins a rafter of warning signs that were evident at every stock-market bubble-top and evident now: excessive valuations; extreme bullish sentiment readings; historic lows of cash held within stock mutual-funds and excessive use of leverage.
On the subject of leverage, better know as debt, it’s worth a reminder just how out of whack markets can become. The following chart compares the Dow over the past 35-years, in nominal terms and in real terms, which effectively shows the Dow if the debt is stripped out
Added for good measure is the lower chart in blue, which is a standard “relative strength index” a momentum indicator where a reading over 70 suggests that the Dow is overvalued and undervalued when under 30.
Kindly note that during the 1980s and 1990s nominal and real moved together, as they did during the 2000-2003 bursting of the tech-bubble.
But then something changed, with that change being an unsustainable debt binge, larger than any other in history. The 2007/09 financial crash started a re-alignment but then the fire-hoses of “official debt” drove the nominal Dow and other markets to “valuations” unheard of.
“Stretched like a rubber band,” comes to mind, which is great fun whilst it lasts, but then the inevitable snap-back transpires, which sometimes break.