The "growth" in tech has been entirely driven by monetary policy. Google or Facebook or Apple or Netflix or Amazon have done nothing special than what they've been doing for the last 5 years. I wish we were getting insane tech out of this bull run but the truth is there's no "innovation" behind it and their paper is just being used as a shield by investors which is why their stocks keep going up.
And Microsoft multiplied their profits a few times between 2000 and 2010 while their stock dropped 75%.
Valuations are important. Valuations are affected by the monetary policy/liquidity cycle. And Google's valuation is growing faster than any rational measure of economic value.
What? Any price history you look at is going to be split-adjusted. And okay, you got a $1 of dividends...you only lost $29/share out of the $60 you invested.
If it was established that they'd grow their revenues, then why was it still outperforming other asset classes by this much? Does Wall street have lacking models of how tech businesses grow? Or are people too risk averse to invest into tech?
What I don't get either is why quarterly reports in the current situation are so important for stock value in the current market climate, as in why did tech stocks soar so much after quarterly reports got announced? These numbers aren't showing anything other than how the companies perform in the current, corona-affected, economy and are not representative of how it's going to look like in a post corona world.
> why was it still outperforming other asset classes by this much?
Because the future is uncertain, and that uncertainty was baked into the price? And there's nothing to say that "baked into the price" has to be accurate... investors could have collectively read the tea leaves wrong.
> These numbers aren't showing anything other than how the companies perform in the current, corona-affected, economy
Which could be considered passing a stress test with flying colors - maybe people are interpreting this as "which businesses are robust or anti-fragile for a once in a century event". Or just as easily - maybe investors are betting there's a chance that some of this current context is the new normal.
I'm a little confused as to what you're trying to ask overall. Markets and investors aren't perfect, the future is uncertain, and random walks are everywhere.
Only some Wall Street firms use models to calculate cash flow and stock prices. A lot of them don't even care about such things. They just buy whatever has the most momentum, or whatever they think others love (Keynesian beauty contest), or whatever fits their thesis of the world.
Monetary policy and the fact that the big tech companies (and a lot of the smaller more "boring" ones) have almost universally resisted the effects of C19. A large part of the world being asked stay indoors means more spending on home entertainment (Netfix), more free time to melt your mind with social media (Facebook), more ad impressions (Google), more online shopping (Amazon), businesses needing a robust WFH infrastructure (Microsoft, Zoom).
This is all while "traditional" businesses have had governments shut them down or tell their customers to stay at home.
If you were an investor paying attention over the last 6 months you would be selling everything else and buying tech.
FB, Google, and Microsoft all lowered their revenue guidance they set pre-COVID. This stay at home situation has clearly benefited some companies (Zoom, Docusign, Amazon), but definitely not most tech companies.
I'm not sure your sample is representative here. Facebook and Google are primarily ad companies, and it's unclear whether the current situation would be a net positive or a net negative over the entire set of businesses that might advertise with them.
Meanwhile, markets like e-commerce, telecommunications and online entertainment are booming thanks to the stay-at-home culture, and no doubt there will also be an entire generation of new and/or rapidly growing products and services aimed at supporting home offices, flexible work patterns and more distributed teams.
I'm not sure we'll ever go all the way back to how things were now, even if someone discovers a perfect cure for the coronavirus problem tomorrow. I think when the dust has settled, we will have learned that it's often useful to have specialised workplaces, but also that working from home is fine for some people doing some jobs at least some of the time if they want to. I suspect we'll see some big, permanent changes in industries like retail as a result, and that this in turn will sustain at least some of the boost that a lot of tech stocks have received recently.
There are many non-ad companies whose revenue has not accelerated at all due to covid such as Salesforce, IBM, Atlassian, and DropBox. Sure most of them have not been terribly impacted as well, but the idea of “digital acceleration” simply has been a buzzword, not a reality.
Even for some companies that have had some boost, the spike in share prices has been over exaggerated. One glance at the price movements and it’s fairly obvious. A company like DataDog or Fastly is NOT 2-4 times as valuable just because more ppl are working from home. This market is 99% fed-induced, and 1% actual fundamental improvement
"Of the $10 billion on offer, the $1 billion five-year tranche was issued at a coupon of 0.45%, the lowest coupon seen on a U.S. corporate bond at that maturity, according to Refinitiv data, which goes back to 1980."
"The SMCCF, initially funded with $25 billion of equity from Treasury, will leverage its equity ten times when acquiring corporate bonds from investment grade issuers and ETFs whose primary investment objective is exposure to investment grade corporate bonds. It will leverage its equity seven times when acquiring corporate bonds from issuers rated at below investment grade, and from three to seven times when acquiring other eligible assets, depending on risk."
So if you're a large corporation capable of selling bonds you can get a loan for far less than even the extreme low end inflation predictions. The big tech companies have the ability to take advantage of the current climate.
One way to juice the economy is just print more money and give it to everyone. Everyone's richer, yay! Except you haven't increased production or necessarily consumption, so prices will just equalize to the new money supply and you get consumer price inflation.
For QE, we got smarter, and just gave all of the money to the bankers, because that's what all the economic experts who work at banks said to do. So all of the inflation happened in assets held by banks and rich people instead -- tradeable securities and real estate in coastal areas.
Got it. I suppose this explains why there wasn’t an increase in the price of consumer goods following the billions of COVID relief pumped into the economy. Correct?
