Bitcoin at $10,000?
Bitcoin at $10,000? by Bill Bonner – Bonner and Partners
BALTIMORE – We live in an age of miracles. With some paradox and claptrap thrown in for good measure.
Over the last four years, almost all the stock market gains in the U.S. came from just five technology stocks – Facebook, Apple, Microsoft, Amazon, and Google.
Those five have tripled in value since 2012. In this year alone, they have gone up, on average, 25%.
The Big Five
What has the rest of the market done?
Owen Williams, via The Gloom, Boom & Doom Report editor Marc Faber, took these top five stocks out of the S&P 500. This left him with the S&P 495.
How well has it done since 2012?
Well, it’s up about 25%… or about 5% a year. The Big Five, meanwhile, rose 226% – or about nine times as much.
These five companies are not priced so high because they are earning so much money. Most of the increase comes from “multiple expansion,” meaning investors are willing to pay more for each dollar of earnings they produce.
And if you put them together, says Williams, and figure out the price-to-earnings (P/E) ratio for the group, you get an incredible 59.4 times trailing net earnings – more than twice the P/E for the S&P 495.
Then again, investors are lending money to the governments of Switzerland and Japan and paying for the privilege. And they’re also paying nearly $3,000 a pop for bitcoin – a crypto “currency” they can neither see nor hold in their hands nor (generally) use to pay for groceries.
So why shouldn’t they be willing to wait 60 years before their Big Five companies have earned enough to match their investment?
And what’s this? Another miracle!
On Friday, the Big Five began selling off. For example, Apple fell 6% from its peak.
Surely, there is another shoe still to drop in the tech sector. We wouldn’t be surprised if it had a steel toe… and went right through the floor.