Weekend August 5 2017
There are three columns about the stock market on page B5 of the Weekend WSJ. W
What Goes up Must Go...when market gains will stop is the question
The Market is Done the Math Proves it
And
Why it's Time to Dump Apple
The last article is perhaps the most relevant indicator of social mood towards tech stocks. Socionomists know that individuals engage in herding, all following the same lead cow, dog, bird, or fund manager.
The market capitalization of Appole is $808 billion or 4% of the entire S & P 500. Only a few firms like GE or Cisco have ever managed to attain this level in the past. Since May 2016 Apple has added some $300 B in market cap. How much money is $808 B?
For $710 B one could buy the entire S & P Small Cap Index and have $90 B left over. That is the entire value of some 600 companies.
Socionomic Observation
In the 1970s it was the Nifty Fifty, some fifty stocks that all the funds owned. Also back then, IBM dominated as Apple does today. Now we have the Fab 5 tech stocks. Herding results in too many funds chasing too few stocks. When the run for the exits begins, the parabolic rise collapses.
I am not expecting a collapse but this is certainly a cautionary story. And a good reason to switch to Southern Company or some energy plays as they may develop this fall.
Comments