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Dot-Com Bubble 2.0 Is Bursting: Tech Stocks Are Already Down Half A Trillion Dollars Since Mid-2015

February 7, 2016February 7, 2016 by Michael

Do you remember how much stocks went down when the first dot-com bubble burst? Well, it is happening again, and tech stocks are already down more than half a trillion dollars since the middle of 2015. On Friday, the tech-heavy Nasdaq dropped to its lowest level in more than 15 months, and it has now fallen more than 16 percent from the peak of the market. But of course some of the biggest names have fallen much more than that. Netflix is down 37 percent, Yahoo is down 39 percent, LinkedIn is down 60 percent, and Twitter is down more than 70 percent. If you go back through my previous articles, you will find that I specifically warned about Twitter again and again. Irrational financial bubbles like this always burst eventually, and many investors that got in at the very top are now losing extraordinary amounts of money.

On Friday, tech stocks got absolutely slammed as the bursting of dot-com bubble 2.0 accelerated once again. The following is how CNBC summarized the carnage…

The Nasdaq composite fell 3.25 percent, as Apple and the iShares Nasdaq Biotechnology ETF (IBB) dropped 2.67 percent and 3.19 percent, respectively.

Also weighing on the index were Amazon and Facebook, which closed down 6.36 percent and 5.81 percent, respectively.

LinkedIn shares also tanked 43.63 percent after posting weak guidance on their quarterly results.

Overall, LinkedIn is now down a total of 60 percent from the peak of the market. But they are far from the only ones that have already seen their bubble burst.

Many of the biggest names in the tech world have gotten mercilessly hammered over the past six months of so. Just look at some of the famous brands that have already lost between 20 and 40 percent of their market caps…

Yahoo (YHOO) shares are off 39%, and Netflix (NFLX), the best-performing stock in the S&P 500 last year, is now off by 37% from its 52-week high.

Likewise, Priceline.com (PCLN) is off 31% and eBay (EBAY), 22%.

But there are other very big tech companies that have seen stock collapses that completely dwarf those numbers. Here are some more absolutely stunning statistics from USA Today…

Twitter and Groupon are the biggest dogs of this boom, both off 70% from 52-week highs and well below their IPO prices.

FitBit shares have collapsed 70%, while Yelp’s valuation has shrunk by two-thirds.

Box, which has the distinction of posting quarterly net losses in excess of revenue, is down by half.

Match.com, the holding company for dating sites owned by parent Interactive Corp. that went public late last year, is down 39% from its high.

When your stock loses 70 percent of its value, that is a complete and utter collapse.

In the past, I have specifically singled out Twitter, Yelp and LinkedIn as tech stocks that were irrationally priced.

Hopefully people listened to those warnings and got out while the getting was good.

At the top of this article, I mentioned that tech stocks have already fallen in value by more than 500 billion dollars. The financial crisis that began in the middle of last year is now greatly accelerating, and Wall Street is starting to panic.

As stocks crash, many hedge funds are being absolutely pummeled. The following are just a few of the high profile names that are experiencing massive losses right now…

Some of the biggest names to get trounced include:

►Pershing Square Capital Management, the publicly traded investment vehicle of billionaire hedgie Bill Ackman, fell 11% last month following a 20% decline last year, data from the web site shows.

►Larry Robbins’ Glenview Capital, famous for picking stocks that could benefit from Obamacare, dropped 13.65% in January following a decline of 18% last year, according to data from HSBC’s Hedge Weekly report, a copy of which was obtained by USA TODAY.

►Marcato International, a well-known activist fund run by Ackman protege Mick McGuire, fell 12.1% last month following a 9% loss last year, according to HSBC.

When you lose more than 10 percent of your money in a single month, that is not good.

And if I am right, this is just the beginning of our troubles.

And of course I am far from the only one warning that big problems are on the horizon. In fact, analysts at Citigroup just made international headlines by warning that the global economy was now trapped in a “death spiral”…

Some analysts — including those at Citi — have turned bearish on the world economy this year, following an equity rout in January and weaker economic data out of China and the U.S.

“The world appears to be trapped in a circular reference death spiral,” Citi strategists led by Jonathan Stubbs said in a report on Thursday.

“Stronger U.S. dollar, weaker oil/commodity prices, weaker world trade/petrodollar liquidity, weaker EM (and global growth)… and repeat. Ad infinitum, this would lead to Oilmageddon, a ‘significant and synchronized’ global recession and a proper modern-day equity bear market.”

Signs of a significant economic downturn are all around us, and so many of the exact same patterns that played out during the last two stock market crashes are happening again, and yet most people continue to refuse to acknowledge what is taking place.

If you are waiting for this new dot-com bubble to crash, you can stop waiting, because it has already happened.

When your stock falls by 50, 60 or 70 percent, the game is already over.

But just like 2001 and 2008, many people out there will end up being paralyzed by indecision. Once again the mainstream media is insisting that there is no reason for panic and that everything will be just fine, and once again millions upon millions of ordinary Americans will be wiped out as the financial markets implode.

This is now the third time this has happened since the turn of the century.

How clueless have we become? The exact same thing keeps happening to us over and over and yet we still don’t get it.

Only this time around there isn’t going to be any sort of a “recovery” afterwards.

This is essentially our “third strike”, and the years ahead are going to be extremely bitter and painful for most people.

But if you want to believe that one of these politicians is going to come along and save America, you go ahead and keep on believing that.

Most people believe what they want to believe, and the capacity that many Americans have demonstrated for self-delusion is absolutely remarkable.

What In The World Is Happening To The Nasdaq?

April 7, 2014April 7, 2014 by Michael

All of a sudden, the Nasdaq is absolutely tanking. On Monday, it fell more than 1 percent after dropping 3.6 percent on Thursday and Friday combined. At this point, the Nasdaq is off to the worst start to a year that we have seen since 2008, and we all remember what happened back then. So why is this happening? In recent years, the Nasdaq has been ground zero for “dotcom bubble 2.0”. The hottest stocks in the entire world are on the Nasdaq – we are talking about stocks like Yahoo, Netflix, Apple, Tesla, Google and Facebook. Those stocks have gone to absolutely incredible heights, but now they are starting to fall. Some are blaming insider selling, and without a doubt the “smart money” is starting to flee the stock market. Just check out this chart. Others are blaming low expectations for first-quarter earnings or the tapering of quantitative easing by the Federal Reserve. But whatever is causing this decline, it is starting to get alarming. The Nasdaq just experienced its largest three day fall since November 2011.

No stock can resist gravity forever. What goes up must eventually come down. This is especially true for stock prices that become grotesquely distorted.

On Wall Street, a price to earnings ratio of 20 to 25 is usually considered fairly normal. In recent years, the price to earnings ratios for many of these “hot tech stocks” have gone way, way beyond that. For example, posted below is a screen capture from Bloomberg TV that was featured in a recent Zero Hedge article…

There is no way in the world that such valuations are justified.

We have been living in another dotcom bubble, and it was inevitable that it was going to burst at some point.

The following is how one financial industry insider described the carnage that we have seen on the Nasdaq over the past few days…

Gary Kaltbaum, president of money-management firm Kaltbaum Capital Management, describes the carnage of once high-flying “growth” names in the Nasdaq composite, that have come crashing down to earth: “The best we can describe what we have been recently seeing in ‘growth-land’ is a 50-car pileup,” Kaltbaum told clients in a morning research note. “Call them what you want … risk areas, growth stocks, froth areas … they are melting away.“

And of course it isn’t just the Nasdaq that has been seeing declines over the past few days. On Monday, some of the biggest names on the Dow also fell precipitiously…

Visa, Goldman Sachs and Boeing are among the biggest drags on the Dow Monday, falling 2.1%, 2.9% and 1.4% respectively. Weakness in these stocks is especially problematic since the Dow gives greatest weight to the stocks with the highest per-share prices. And at $203.41, $158.56 and $125.59 respectively, Visa, Goldman and Boeing are the stocks that really matter to the measure.

And the trouble in these stocks isn’t just today. So far this year, Visa is down 8.7%, Goldman is off 10.5% and Boeing is down 8.0%.

This recent decline has many analysts groping for answers.

Some believe that it is simply a “rotation” as investors leave growth stocks that have become overvalued and move into safer, more traditional stocks.

Others are pointing their fingers at the Federal Reserve…

Peter Boockvar, chief market strategist at Lindsey Group, believes it’s all about the Fed. “I’m still amazed at the complacency with the Fed taper, and a lot of people still don’t think it’s a big deal,” he said. “I just don’t think it’s a coincidence that the high-fliers are getting popped when the Fed is half way done with QE. We’ve got tightening smack in front of your face with the taper.”

In fact, some believe that the really big stock market decline will happen later this year when the Fed starts to wrap up quantitative easing completely…

Once the Fed begins to truly reduce its massive bond buying program later this year, markets could see a quarter of their value wiped off the books, a private equity pro told CNBC on Friday.

Jay Jordan, founder of the Jordan Company, issued the dire warning during an interview on CNBC’s “Squawk Box,” saying a 25 percent drop could extend to all asset classes. He blames the monetary policies of former Fed chair Ben Bernanke for artificially inflating asset prices through super-low interest rates.

Yet others point to the fact that we are now moving into earnings season, and it is being projected that corporate earnings will come in at very poor levels. In fact, it is being estimated that overall earnings for companies in the S&P 500 for the first quarter will be down 1.2 percent.

So what should we expect to see next?

Whether it happens this month or not, at some point a massive stock market correction is coming. In recent years, the financial markets have become completely and totally divorced from economic reality, and that is a state of affairs that cannot last indefinitely.

Many have compared the current state of affairs to 2008, but to me what is happening right now is eerily reminiscent of 2007. The Dow soared to record heights quite a few times that year, but there were constant rumblings of economic trouble in the background. Stocks began to drop steadily late in the year, and 2008 ultimately turned out to be an utter bloodbath.

I believe that what is happening right now is setting the stage for another financial bloodbath. I truly believe that we will look back on this two year time period and regard it as a major “turning point” for America.

And as I have written about previously, we are in far worse shape as a nation than we were back in 2008. We have far more debt, the “too big to fail banks” have a much larger share of the banking industry, the derivatives bubble has gotten completely and totally out of control, and our overall economy is far weaker than it was back then.

In other words, we are now even more vulnerable. When the next great financial crisis strikes us, it is going to be absolutely crippling.

Now is not the time to get complacent.

Now is the time to get prepared, because time is running out.

How Has The U.S. Government Been Getting User Data From Major Internet Companies?

June 10, 2013June 7, 2013 by Michael

****IMPORTANT UPDATE**** Apparently the big Internet companies are not as “innocent” in all of this as they originally led us to believe. So this additional information changes some of the conclusions that I reached in my original article. It appears that some of the biggest Internet companies have been cooperating with the government in this data collection effort at least to a certain extent. The following is from an article in the New York Times that describes how the U.S. government has been getting user data from major Internet companies…

The companies that negotiated with the government include Google, which owns YouTube; Microsoft, which owns Hotmail and Skype; Yahoo; Facebook; AOL; Apple; and Paltalk, according to one of the people briefed on the discussions. The companies were legally required to share the data under the Foreign Intelligence Surveillance Act. People briefed on the discussions spoke on the condition of anonymity because they are prohibited by law from discussing the content of FISA requests or even acknowledging their existence.

In at least two cases, at Google and Facebook, one of the plans discussed was to build separate, secure portals, like a digital version of the secure physical rooms that have long existed for classified information, in some instances on company servers. Through these online rooms, the government would request data, companies would deposit it and the government would retrieve it, people briefed on the discussions said.

****END OF UPDATE****

The U.S. government has been hacking in to the servers of Microsoft, Yahoo, Google, Facebook, PalTalk, AOL, Skype, YouTube and Apple and has been taking their user data without their knowledge or consent. According to the Washington Post, the information being stolen includes “audio and video chats, photographs, e-mails, documents, and connection logs”. This program is known as PRISM, and it was first revealed by the Washington Post on Thursday. Since the story broke, Director of National Intelligence James Clapper has admitted that PRISM exists and so has Barack Obama. The Washington Post initially claimed that all of the Internet companies were willingly handing over their user data to the government. Now we are learning that is NOT true. In fact, all of the Internet companies named in the Washington Post story have denied knowing about PRISM or ever giving the federal government permission to directly access their servers. So this means that the U.S. government has been stealing massive amounts of user data from the largest Internet companies in the world without their permission. Of course this is highly illegal and it directly violates the Fourth Amendment to the U.S. Constitution, but you can bet that the Obama administration is going to do everything that it can to get the courts to “make it legal”. Hopefully the revelation of this program will be enough to get the American people to realize that we are rapidly being transformed into a Big Brother police state that is descending into tyranny.

Barack Obama has described the systematic gathering of cell phone records and the Internet spying that the federal government has been doing as “modest encroachments” that we should all just accept as part of the price of living in a modern world, but if we allow the government to get away with this, where will it end?

Even if we had a total “Big Brother” society where the government watched everything that we did 24 hours a day, bad people would still do bad things. There would still be terror attacks and great tragedies. No matter how much the government intrudes into our lives, it can never guarantee us 100% safety.

Those that founded the United States understood this. They did not want this country to be turned into a police state. That is why they guaranteed us some very important protections in the Bill of Rights. If the government wants to do a search, there are some very important procedures that must be followed first.

Unfortunately, the Obama administration appears to believe that the Constitution does not apply to user data on the Internet. The NSA is apparently hacking into Microsoft, Yahoo, Google, Facebook, PalTalk, AOL, Skype, YouTube and Apple and taking whatever they want without ever getting permission from those companies.

You can bet that there are some very, very angry executives at those companies right now that are trying to figure out how to respond to these revelations.

All of these companies have vehemently denied that they were involved. At this point, there is no reason to doubt their very strong denials.

For example, the following is what Larry Page, the CEO of Google and David Drummond, the Chief Legal Officer of Google wrote in a message to Google users on Friday…

Dear Google users—

You may be aware of press reports alleging that Internet companies have joined a secret U.S. government program called PRISM to give the National Security Agency direct access to our servers. As Google’s CEO and Chief Legal Officer, we wanted you to have the facts.

First, we have not joined any program that would give the U.S. government—or any other government—direct access to our servers. Indeed, the U.S. government does not have direct access or a “back door” to the information stored in our data centers. We had not heard of a program called PRISM until yesterday.

Second, we provide user data to governments only in accordance with the law. Our legal team reviews each and every request, and frequently pushes back when requests are overly broad or don’t follow the correct process. Press reports that suggest that Google is providing open-ended access to our users’ data are false, period. Until this week’s reports, we had never heard of the broad type of order that Verizon received—an order that appears to have required them to hand over millions of users’ call records. We were very surprised to learn that such broad orders exist. Any suggestion that Google is disclosing information about our users’ Internet activity on such a scale is completely false.

Finally, this episode confirms what we have long believed—there needs to be a more transparent approach. Google has worked hard, within the confines of the current laws, to be open about the data requests we receive. We post this information on our Transparency Report whenever possible. We were the first company to do this. And, of course, we understand that the U.S. and other governments need to take action to protect their citizens’ safety—including sometimes by using surveillance. But the level of secrecy around the current legal procedures undermines the freedoms we all cherish.

Facebook CEO Mark Zuckerberg has issued a similar denial. He insists that Facebook never even heard of PRISM until Thursday…

I want to respond personally to the outrageous press reports about PRISM:

Facebook is not and has never been part of any program to give the US or any other government direct access to our servers. We have never received a blanket request or court order from any government agency asking for information or metadata in bulk, like the one Verizon reportedly received. And if we did, we would fight it aggressively. We hadn’t even heard of PRISM before yesterday.

When governments ask Facebook for data, we review each request carefully to make sure they always follow the correct processes and all applicable laws, and then only provide the information if is required by law. We will continue fighting aggressively to keep your information safe and secure.

We strongly encourage all governments to be much more transparent about all programs aimed at keeping the public safe. It’s the only way to protect everyone’s civil liberties and create the safe and free society we all want over the long term.

So how has the U.S. government been getting this user data if they do not have the cooperation of these large Internet companies?

They have been stealing it.

Is this the kind of society that we want to have? Do we really want the government to be free to hack into the servers of Internet companies and take user data any time that it wants?

And guess what?

According to the Wall Street Journal, the NSA has also been gathering massive amounts of credit card data as well…

The National Security Agency’s monitoring of Americans includes customer records from the three major phone networks as well as emails and Web searches, and the agency also has cataloged credit-card transactions, said people familiar with the agency’s activities.

So if you ever bought something embarrassing with a credit card, there is a very good chance that the NSA knows about it.

If you don’t like where all of this is headed, then now is the time to stand up and say something about it.

Sadly, the truth is that most of our politicians see absolutely nothing wrong with our current system. The following is what Barack Obama said in response to the recent revelations about the NSA…

“You can’t have 100 percent security and also then have 100 percent privacy and zero inconvenience. We’re going to have to make some choices as a society,” he said. “I think that on balance, we have established a policy and a procedure that the American people should feel comfortable with.”

Do you feel comfortable with the fact that the NSA is hacking into major Internet companies and stealing their user data?

I know that I definitely am not.

I think that the journalist that originally broke the story about how the government is systematically gathering our phone records summed up what many of us are feeling right now pretty well…

“There is a massive apparatus within the United States government that with complete secrecy has been building this enormous structure that has only one goal, and that is to destroy privacy and anonymity, not just in the United States but around the world,” charged Glenn Greenwald, a reporter for the British newspaper “The Guardian,” speaking on CNN. “That is not hyperbole. That is their objective.”

What do you think?

Is all of this government spying good for America or bad for America?

Please feel free to share your opinion by posting a comment below…