"Markets are partying like it’s 1999 again"

Markets euphoria and also commentators exuberance are showing no sign of cooling, see for yourself:

  • U.S. Stocks Rally as Dow Rises to Highest Level Since June 2008
  • Biggest Rise in Profits Since 1900 Sustains Rally After S&P 500 97% Gains
  • Zynga, Facebook Spark 51% Jump in Value of Top Web Startups
  • The markets are suddenly partying like it’s 1999 again.
Below are quotes from various Bloomberg reports (corresponding to the titles in bullet points above)

April 6 (Bloomberg) -- U.S. stocks rose, sending the Dow Jones Industrial Average to the highest level since 2008, as Cisco Systems Inc. spurred a technology rally and European lenders’ plans to raise capital lifted financial shares.

Cisco Systems rallied 4.9 percent on speculation the maker of networking equipment will sell or spin off its consumer business. 
Note: Isn't the consumer business mentioned the Linksys company that Cisco acquired dearly during the 2006 or 2007?

Of course, Cisco could have rallied or dropped on the news, but the market decided to see the bright side of things, as it's been doing for more than 2 years now.
The Standard & Poor’s 500 Index [...] as high as 1,339.38, near 1,343.01, its closing high for the rally since March 2009. The Dow average advanced 32.85 points, or 0.3 percent, to 12,426.75, the highest level on a closing basis since June 2008.

We’re beginning a period of a self-sustaining recovery,” said Michael Strauss, who helps oversee $27 billion as chief investment strategist at Commonfund in Wilton, Connecticut. “There’s strength in economic data and corporate earnings. Technology, in particular, is an area where the generation of cash flow presents an interesting valuation play. There are a number of companies looking to tweak their business models to help to get that more into focus,” he said. “If we break into new highs, we’ll certainly see new buyers into the market.”
The fundamental drivers will probably continue to pull this market higher,” Detrick said in an interview from Cincinnati. “After that, the next logical area would be 1,440 on the S&P 500, which is the May 2008 peak.”
The S&P 500 may climb to a record 1,600 next year as U.S. corporate profits benefit from global economic growth, said Chris Hyzy, chief investment officer at U.S. Trust.

Profit by companies in the benchmark measure for U.S. equities will increase about 7 percent to 8 percent next year as the S&P 500’s valuation climbs to 16 times earnings, he said. The index is trading at 13.7 times estimated 2011 earnings, Bloomberg data show.

Global growth is going to be rising 4.5 percent-plus through this,” Hyzy, who oversees $367.7 billion in client assets at the Bank of America Corp. unit, said in an interview today on Bloomberg Television’s “InBusiness” with Margaret Brennan. As the global expansion has a larger impact than in the past on the balance sheets of U.S. companies, Hyzy said, it may also extend the bull market. “We call it a global bull marathon, not a race,” he said.
Biggest Rise in Profits Since 1900 Sustains Rally After S&P 500 97% Gains
April 4 (Bloomberg) -- The biggest increase in profits in more than a century is telling investors that this is no time to sell stocks, even after the Standard & Poor’s 500 Index rallied 97 percent.

S&P 500 earnings are poised to surpass the 2007 peak of $90 a share in the third quarter after surging from $7 in March 2009, the quickest recovery since at least 1900, according to data from S&P and Yale University’s Robert Shiller compiled by Bloomberg. The gap between projected 12-month profits and average earnings over the last 10 years is set to widen the most since 1951, the data show.
People are more comfortable with the recovery than at any time over the last couple of years,” said Doug Ramsey, the Minneapolis-based director of research at Leuthold Group, which oversees $3.9 billion and recommended buying equities four days before the bull market started. “That’s typically when retail investors regain courage,” and may spur a rise of up to 25 percent in the S&P 500 during the next 18 months, he said.

[...]The gauge’s gain since March 9, 2009, is the most over comparable periods since 1937, according to S&P’s Howard Silverblatt. 
Shares haven’t kept up with earnings. S&P 500 companies’ 12-month profits are projected to reach a record $91 a share by August, according to estimates compiled by S&P and Bloomberg. That would be the highest-ever level on an inflation-adjusted basis and up almost 13-fold from their low two years ago, S&P and Shiller data compiled by Bloomberg show.

The 50-month rebound in profits, following a 92 percent drop during the global financial crisis, would be faster than the 52 months it took to recover from the bursting of the dot- com bubble in 2000, when earnings fell 55 percent, the data show. Profits didn’t recoup their 67 percent tumble during the Great Depression until 19 years later. [...]
The S&P 500 trades for 13.7 times estimated 2011 earnings, compared with an average of 15.7 times reported annual profit since 1900, Shiller data compiled by Bloomberg show.

Earnings for the measure will total $95.21 this year, according to S&P’s estimate when adjusted for inflation using the median economist projection for the consumer price index in a Bloomberg survey. If that forecast is met and the 12-month price-earnings multiple climbs to its mean since 1900, the S&P 500 would rise 12 percent to end December at 1,494, or 4.7 percent away from its record of 1,565.15 on Oct. 9, 2007.
Should earnings match analysts’ forecasts next quarter, they’ll be about 59 percent higher than the 10-year average. The only other times since 1951 that the gap approached that level was in December 2006 and August 2000, near the peaks of U.S. profit and economic expansions, data compiled by Bloomberg show.

That won’t kill the rally, said E. William Stone, who predicted the 2009 gain in stocks and helps oversee about $108 billion as the Philadelphia-based chief investment strategist at PNC Wealth Management.
Evidence is building that we have a self-sustaining recovery,” said Stone. “There are corporate profits. There’s the fact that consumer spending is there. Things are getting better.”
“We see accelerating growth around the globe,” Duessel, who turned bullish on U.S. stocks at the beginning of 2009, said in an interview from Pittsburgh. “That helps to continue to propel earnings. This market looks cheap to us.” 
The market is nowhere even close to being priced to perfection.
Zynga, Facebook Spark 51% Jump in Value of Top Web Startups
April 7 (Bloomberg) -- Zynga Inc. and Facebook Inc. led a 51 percent surge in the private market valuations of top Web companies in the first quarter, according to Nyppex LLC.

Zynga, maker of the “CityVille” and “FarmVille” online games, rose 81 percent in value from the fourth quarter to about $8 billion, Nyppex said today in an e-mail. Facebook, the world’s largest social network, climbed 57 percent to about $65 billion. The valuations are based on transactions among institutional investors.

As the top venture-backed Web companies stay private longer, some early stakeholders and employees are selling to investment firms including Goldman Sachs Group Inc. and Russia’s Digital Sky Technologies. Demand for technology startup shares is also growing in the mutual-fund industry, where T. Rowe Price Group Inc. and Fidelity Investments are boosting their stakes.

LinkedIn Corp., the business-networking site that filed for an initial public offering in January, rose 43 percent in value to about $2.2 billion, while Web daily-deal site Groupon Inc. increased 19 percent to $5.6 billion. Twitter Inc., the microblogging service, rose 7.7 percent to $4 billion.

Nyppex, a Rye Brook, New York-based research and advisory services firm, tracks eight of the fastest-growing social-media startups, and produces reports for money managers, venture funds and corporations. Total valuations jumped to $86.1 billion in first quarter from $56.9 billion at the end of December, said Laurence Allen, managing member at Nyppex.
April 5 (Bloomberg) -- Initial public offerings. Big takeovers. Nerdy 20-somethings getting rich quickly. To borrow a phrase from an old Prince song, the markets are suddenly partying like it’s 1999 again.

The tech bubble is back. Facebook Inc. is commanding an enormous valuation. So are Groupon Inc., Twitter Inc. and LivingSocial.com. Even Rovio Mobile Oy, the small Finnish company behind the hit app Angry Birds, looks like it will soon be worth a fortune.

The trouble is, everyone still remembers how the bubble burst last time around.
The trouble is, I do not know where the author got that statement, but it's obviously false. Nobody remembers how the bubble burst, everybody is cheering the current (non-)recovery, and record (phantom-)earnings...

No comments: