The Current Situation is much more dangerous than during the Dotcom Bubble – Fred Hickey
The Current Situation is much more dangerous than during the Dotcom Bubble – Fred Hickey by Christoph Gisiger for The Market.ch
Fred Hickey, editor of the investment newsletter «The High-Tech Strategist», sees greater excesses in financial markets than during the dotcom bubble. The veteran investor tells where he spots the weakest points in the IT sector and why he’s convinced that precious metals are the place to be.
Wall Street darlings like Apple, Google and Amazon have dominated this bull market. But today, the so-called FAANG stocks have lost some of their attraction and are lagging the overall market since last year.
«Without participation from the FAANGs it will be difficult for the stock market to rip to new highs», says Fred Hickey. According to the renowned contrarian investor, each of the tech behemoths is struggling with its own fundamental problems, with Apple being the weakest of the group.
Hickey also sees a huge gap between fundamentals and valuations in the semiconductor sector since the SOX Index is up more than 30 per cent year-to-date despite the worst downturn in the industry since the global recession of 2008/09.
Yet, in contrast to previous cycles, the editor of the «The High-Tech Strategist» hasn’t placed large bets on a crash. That’s because he fears that central banks could step in once again and bloat the stock market with new rounds of quantitative easing.
On the long side, Hickey spots the best opportunities in precious metals. In an in-depth interview with The Market, he hints which gold and silver stocks he thinks have the best chances to outperform the sector.
Mr. Hickey, despite growing worries about the global economy the US stock market is up almost 18 per cent since the start of 2019. What’s your outlook for the rest of the year?
We’re near a recession if not already in one. Many parts of the world are in trouble. China’s growth is at a multi-decade low and its economy might be in a recession. As a result, we see terrible export numbers coming out of Korea and Taiwan. Around the globe, trade, manufacturing and capital spending are contracting. In the tech world, all the end markets are very poor: auto and smartphone sales are declining, PC sales are weak, and semiconductors are in the worst downturn in a decade.
How bad is the situation?
All of this is indicating tremendous weakness. Yet, central banks are reacting with more of the same: They are slashing rates again because their policies have failed utterly and completely. They never admit any of their mistakes and are going to take us further down this problematic path which doesn’t work for many parts of the economy. The ECB is hinting at more quantitative easing and deeper negative rates, and the Fed clearly is going to be cutting rates again. As the rest of the world is trying to get ahead of them, many central banks are cutting rates. The only place with any interest rates to speak of are the United States. It’s a gigantic mess.