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Maybe we can build a list of the craziest, most hyped, bubble stocks (or other securities) in this current market rally? Here's what I have
To me the whole US stock market is a giant bubble, no need to cherry pick. Similar euphoria was in Japanese nikkei in 80-90, we all know how that ended, and despite ultra low interest rates (hello FED) still has not recovered.
 

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I want reactions, so let's post this.

Quiz question:

During the dot-com bubble of 2000, who had the biggest and the longest drawdown?
  1. US Large Cap (aka S&P 500)
  2. US Small Cap Growth
  3. US Small Cap Value
The answer... drum roll... US Large Cap aka S&P 500! It took more than 4 years to recover from its -44% drawdown after more than 6 years underwater. Small Caps took only 9 months to recover from their -32% drop, after 2-3 years underwater.

Quiz question:

From 1995 to 2019 included, where was it best to invest $10,000 every year?

  1. US Large Cap (aka S&P 500)
  2. US Small Cap Growth
  3. US Small Cap Value

The answer... drum roll... US Small Cap Growth with a final balance 18% higher than US Large Cap aka S&P 500! US Small Cap Value was also 12% higher than US Large Cap.

Who's better positioned to hedge a market bubble while outperforming? The one holding a S&P 500 ETF or the one stock-picking small caps?
 

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Discussion Starter #24
I want reactions, so let's post this.

Quiz question:

During the dot-com bubble of 2000, who had the biggest and the longest drawdown?
  1. US Large Cap (aka S&P 500)
  2. US Small Cap Growth
  3. US Small Cap Value
The answer... drum roll... US Large Cap aka S&P 500! It took more than 4 years to recover from its -44% drawdown after more than 6 years underwater. Small Caps took only 9 months to recover from their -32% drop, after 2-3 years underwater.
And what was the QQQ drawdown?
 

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Discussion Starter #25
PLUG
TSLA
NIO
FCEL
ARKK
Bitcoin
Ethereum
I'll add HMMJ to the list

The pattern is similar and they've gained steam around the same time. If you look at volume and price movements, you'll see that a new wave of enthusiasm hit most of the above in November, and has gotten increasingly crazy since.

Nice to see that marijuana stocks are popular again.
 

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Discussion Starter #27
What does QQQ hold? Large Cap.
Back then, it held one sector. It shows the danger of high concentration in a single sector.

No problem investing in some EVs / battery stocks, but all of these are basically one sector. If you diversify across more equity sectors, the danger of any one sector hitting you very hard is alleviated. That's the right way to put together a portfolio.

ARKK is not well diversified, by the way. It has a huge 10% weight in TSLA and also a lot of biotech. Very risky, could see huge drawdowns if things go badly.
 

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Back then, it held one sector. It shows the danger of high concentration in a single sector.

No problem investing in some EVs / battery stocks, but all of these are basically one sector. If you diversify across more equity sectors, the danger of any one sector hitting you very hard is alleviated. That's the right way to put together a portfolio.

ARKK is not well diversified, by the way. It has a huge 10% weight in TSLA and also a lot of biotech. Very risky, could see huge drawdowns if things go badly.
Talking about diversification. First, large caps had bigger drawdowns than small caps during the tech bubble. How many small caps does SPY hold? How many small caps does ARKK hold? 15%. And also 35% medium caps.

You know that small caps have a long history of outperforming. Yet everybody into SPY is missing that exposure.

And that's without mentioning SPY's huge exposure to mega caps vs ARKK mega cap exposure being only 14%.

You may feel safe with SPY having 500 holdings, but its top 6 holdings accounts for most of its performance and about 20% of its market cap.




US healthcare has been the sector with the smallest drawdowns. See XLV. ARKK holds 35% healthcare. People fear tech drawdowns. How much tech does SPY hold? 27%. ARKK is at 29%.
 

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I had a question. is Tesla in a bubble? I ask because their stock price is up 1000% since march 20 of 2020 but if I look at earnings in yahoo finance from q4 2019 to q3 of 2020 their earnings dont show a 1000% increase. Although it does show that that is when tesla first became profitable. Am i using the wrong numbers? Or is it because Tesla is considered disruptive technology that has great potential for the future?
 

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Or is it because Tesla is considered disruptive technology that has great potential for the future?
Its valuation is based on the beliefs of the disruptive technology and current moat, which makes it hard to valuate. That's why it's a big debate.
 

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Discussion Starter #32
I had a question. is Tesla in a bubble? I ask because their stock price is up 1000% since march 20 of 2020 but if I look at earnings in yahoo finance from q4 2019 to q3 of 2020 their earnings dont show a 1000% increase. Although it does show that that is when tesla first became profitable. Am i using the wrong numbers? Or is it because Tesla is considered disruptive technology that has great potential for the future?
Nobody knows for sure, but I believe that TSLA, FCEL, PLUG and all these battery/electric related stocks are acting bubbly at least right now.

Longer term it might be a different story
 

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Americans are going to print another two trillions $$$, the bubble will be growing bigger. Then in February will be more printing. why create jobs and collect taxes if you can just print money and buy everything you need from other countries.
 

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@MrBlackhill : I see. Now that you mention the moat it does make a lot of sense. I saw an interview of Cathie wood recently talking about how tesla has the most self driving car information out of anyone else as well as other things.

@james4beach :Yes for sure. I feel like I will just watch tsla for now and see what happens. Seems too hot to get involved with right now which I could be wrong about.
 

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Its valuation is based on the beliefs of the disruptive technology and current moat, which makes it hard to valuate. That's why it's a big debate.
What "disruptive technology" does Tesla have?

Everyone has electric cars, superchargers, over the air updates (if they want), self driving capabilities.

The Tesla moat is simply reputation and brand status, which while valuable, aren't a great moat.
Apple has has reputation and status, but as well the ecosystem lock in.
 

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@MrBlackhill : I see. Now that you mention the moat it does make a lot of sense. I saw an interview of Cathie wood recently talking about how tesla has the most self driving car information out of anyone else as well as other things.
What "disruptive technology" does Tesla have?

Everyone has electric cars, superchargers, over the air updates (if they want), self driving capabilities.

The Tesla moat is simply reputation and brand status, which while valuable, aren't a great moat.
Apple has has reputation and status, but as well the ecosystem lock in.
I've just stated what the general beliefs are for TSLA investors, not my own opinion.

Well, it's my interpretation of the beliefs of TSLA investors.

As for me, I just stand clueless about TSLA, so I decided not to invest based on my cluelessness.
 

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What "disruptive technology" does Tesla have?

Everyone has electric cars, superchargers, over the air updates (if they want), self driving capabilities.

The Tesla moat is simply reputation and brand status, which while valuable, aren't a great moat.
Apple has has reputation and status, but as well the ecosystem lock in.
They are way ahead of everyone for autonomous cars, batteries, autonomous taxis and ride hailing etc. Here are 2 articles explaining their edge.


 

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They are way ahead of everyone for autonomous cars, batteries, autonomous taxis and ride hailing etc. Here are 2 articles explaining their edge.


I'm aware of those reports
I don't think they're significantly ahead of anyone in those areas.
It's interesting that you claim they're ahead in autonomous cars, autonomous taxis and ride hailing.

Honestly the biggest barrier to autonomous vehicles at this time is regulatory approval and the liability problem. The technology in many cases is already better than human drivers.

They might be slightly ahead in batteries, one of the most critical parts, but they're way behind in high quality mass production.
The quality rankings of Tesla have dropped significantly, which is expected as they shift from unique and premium and more into the mass market.

If their only technical advantage is battery tech, they're one innovation away from being second place.
 

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I think this should be a momentum investing thread. People who dont believe in momentum investing should not hold any stocks that do not have traditional metrics. Everything is over-valued because when the fed prints money and keeps interest rates ridiculously low, equities are the only game left.

The S&P500 is the safe territory like bonds used to be. I am 75% in equites. My net worth grew by 14% last year and the plan is 6% so I am ready for a correction. My only pure play is LULU. Everything else pays me to wait.
 

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Unless it's a crash recovery, if S&P500 value is 2.5x its value from 5 years ago, don't buy. That's about 20% CAGR for the trailing 5-year. SPY is currently at 15% CAGR.

If NASDAQ is getting over 3x it's value from 5 years ago, don't buy.

The market as a whole has never justified such a fast valuation growth, so it's certainly overvalued.

3x in 5 years is almost 25% CAGR.
QQQ trailing 5-year is currently 24% CAGR.

Unless you are momentum investing.
 
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