No stock can resist gravity forever. What goes up must eventually come down. This is especially true for stock prices that become grotesquely distorted. We have been – and still are – living in another dotcom bubble, and – like the last one – it is inevitable that it is going to burst.
So says Michael Snyder (theeconomiccollapseblog.com) in edited excerpts from his original article* entitled What In The World Is Happening To The Nasdaq?
[The following article is presented by Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), the FREE Market Intelligence Report newsletter (subscribe here) and www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and has been edited, abridged and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]
Snyder goes on to say in further, extensively edited, excerpts:
The hottest stocks in the entire world are on the Nasdaq – stocks like Yahoo, Netflix, Apple, Tesla, Google and Facebook. Some have gone to absolutely incredible heights (e.g. LinkedIn @ 718x, amazon @ 557x, NETFLIX @ 140x), but are now starting to fall alarmingly.
It isn’t just the Nasdaq that has been seeing major declines. Some of the biggest names on the Dow are also down dramatically so far this year. Visa, Goldman Sachs and Boeing are down 8.7%, 10.5% and 8.0%, respectively, and weakness in these stocks is especially problematic since the Dow gives greatest weight to such stocks with the highest per-share prices.
These recent declines has many analysts groping for answers:
- Is it simply a “rotation” as investors leave growth stocks that have become overvalued and move into safer, more traditional stocks?
- Is it because of the Fed taper?
- Is it that we are now moving into earnings season, and it is being projected that, overall, earnings for companies in the S&P 500 for the first quarter will be down 1.2 percent?
- Is it insider selling (and without a doubt the “smart money” is starting to flee the stock market)?
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.
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.
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. 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.
[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
*Original version: http://theeconomiccollapseblog.com/archives/what-in-the-world-is-happening-to-the-nasdaq (Copyright © 2014 The Economic Collapse)
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