Great Chart: Nasdaq 2020 vs. 1998

Even though some analysts have compared the 2020 rebound in equities to the 1930 ‘hope’ phase following the 1929 crash, we think that this year has shown some strong similarities with the 1998 / 1999 period. While tech stocks were experiencing strong inflows in the second half of the 1990s amid the dotcom boom, the Nasdaq suddenly fell by 30% in the third quarter of 1998, before starting to reach new highs and surging by over 120% in the following year.

This year, tech companies’ valuations are up 90% in the past 9 months following their dip reached on March 23rd and seem on their way to reach new all-time highs in the coming months as another 3 trillion USD is expected to reach markets in the coming year.

This chart shows some strong co-movements between the Nasdaq index in 1996 – 2000 and in August 2018 – December 2020. Even though market sentiment has reached extreme levels, the bullish trend in mega-cap growth stocks could easily continue for another year amid the surge in liquidity coming from central banks to support the economies and finance the high costs of lockdowns.

Is it really a good time to short equities?

Source: Eikon Reuters

Introducing the TechCrunch Bubble Index

Today, I thought it could be interesting to introduce the TCB Index that has been making the ‘headlines’ lately. First of all, what does the Index tell us? The TCB index counts the number of headlines on TechCrunch (blog: see techcrunch.com) over the past 90 days relating to startups raising money (‘startup fundraise’ means that the amount raised was at least $100K and less than $150mio). Therefore, the higher the index, the better the fundraising environment.

For instance, if we have a look at the chart below (source: Todd Schneider’s website), we can see that the startups business has been going through a difficult time for the past few months. On November 16, 2014, the TCB Index was at 209, which means there were 209 TechCrunch headlines about startup fundraise in the 90 days preceding that (roughly 2.3 per day), down from a high of 346 in April this year.

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 (Source: Todd Schneider)

Quick thoughts on Twitter’s IPO and the dotcom bubble 2.0

It makes me think the way I felt when I saw the headline ‘Twitter files for IPO’ last year. As a reminder, the company sold 70mio shares on the IPO (November 6, 2013) at $26, raising $1.82bn in its Initial Public Offer. In addition, I was asking myself how a company, that wasn’t profitable at the time it went public, could be valued over 10 billion dollars?

In its first public financial statement, Twitter reported $79.4mio in losses for the year 2012 (after a negative net incomes of $67.32mio in 2010 and 128.3mio in 2011), and was predicting even steeper losses for 2013 (guess what: losses reached 645.32mio that year).

I concluded that we were in a second dotcom bubble. Below I added a chart from the Wall Street Journal (which sums up briefly what I just said).

Val

(Source: Wall Street Journal)

 Is it just the beginning?

Today, as the TCB Index shows us, there is less money in the startups business and we are starting to see some weaknesses. For instance, we heard lately that Fab (a design-focused commerce company), a once-to-be Silicon Valley’s darling valued $1bn back in June 2013, is about to sell for $15mio according to some sources (the acquire: PCH International) as it had struggle to sustain its growth. With the Fed considering starting raising rates for the first time since 2009, are we going to experience more of those cases?

 ‘A thing is worth only as much as it can be sold for.’

Publilius Syrus