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Oh No! A Dot-Com Style Bust Could Happen! Run!!!! (Cestrian Stocks Bulletin #137)

Cestrian Stocks Bulletin
Oh No! A Dot-Com Style Bust Could Happen! Run!!!! (Cestrian Stocks Bulletin #137)
By Cestrian Capital Research, Inc • Issue #137 • View online
You know what the rest of this post says already, right?

DISCLAIMER: This note is intended for US recipients only and, in particular, is not directed at, nor intended to be relied upon by any UK recipients. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Cestrian Capital Research, Inc., its employees, agents or affiliates, including the author of this note, or related persons, may have a position in any stocks, security, or financial instrument referenced in this note. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note’s date of publication and are subject to change without notice. Companies referenced in this note or their employees or affiliates may be customers of Cestrian Capital Research, Inc. Cestrian Capital Research, Inc. values both its independence and transparency and does not believe that this presents a material potential conflict of interest or impacts the content of its research or publications.
Keep Up, Grandpa!
For the last couple months, most everywhere on Talking Heads TV or its teenage equivalent, FinTwit, you can find wise old heads saying “there’s going to be a wipeout in growth stocks, because rates and inflation”. And citing the Great Career Defining Event of those tech investors now in their 50s & 60s, being, the Dot Com Crash.
For those of you who are yet to become pickled in your views on life (speaking as Old Folks ourselves), this is what has happened in tech stocks going back to the Recent Pleistocene Era.
Dot Com Bliss
1995-1999 - A new thing called the Internet came along and everyone said it was going to change everything so everyone bought the stocks because valuation didn’t matter only something called eyeballs mattered.
Dot Com Bomb
2000-2003 - It turned out that not all those companies were viable and a lot of the stocks went down and a lot of people lost a lot of money.
The Dark Ages
2004-2010 It turned out that some of the companies were viable and very quietly some people started to make an awful lot of money in tech but didn’t tell everyone how to do it, the cads.
Internet 2.0
2011-2019 Finally all that fiber paid for by the defaulted junk bonds issued in the Bliss years got linked up and lit and not connected solely to corroded lengths of aluminum wire euphemistically called the ‘last mile’ but instead maybe to some coax or shiny copper or, if you were exceptionally lucky, some glass. And lo and behold did the Internet start to work properly. And the eggheaded guy that kicked off the Bliss Years, now fully dissembled into an acronym rather than a name, kind of anyway, declared that “Software Is Eating The World”. Then under the said cryptonym a16z proceeded to make a whole lot more money than Jim Clark ever even dreamed of.
Work From Home
2020-2021 Internet stocks briefly fall 80% along with everything else. Then the stock market geniuses of J Powell, D Trump and N Pelosi headline Saturday Night Live with a cold open of, “We Got Your Back”, and, like magic, stonks only go up!
QT
2021 Q4 - The Fed Kills Growth Stocks.
The End.
Protagonists of this view point out that we’re in for a decade or more of stagflation, that the sequel to How The West Was Won will be produced in Mandarin, and only then if we can all hide out under the staircase for long enough for the nuclear winter to pass, or maybe hope that the arsenal has been laid low for so long that a fizzle yield is all that’s on offer.
Growth stocks? they say. Hay-yull no. Avoid! There Could Be A Dot Com Crash All Over Again.
Well, grandpa, lookit. Here’s what the Dot Com Bomb looked like (you can open a full page version, here).
The NASDAQ Composite Index, Inception To Dot Com Crash
The NASDAQ Composite Index, Inception To Dot Com Crash
The number of the beast was, as so often, 786. A 78.6% retracement of all the value created in the NASDAQ Composite index from inception to the dot com peak. Brutal. Quick too. And it look a loooong time to get back to that Wave 1 peak in the 5000 zip code. So, quite clearly, you don’t want to be hanging around whilst one of those crash thingummies happens.
Oops.
Faded Rock Stars, % Off Highs Since 1 Jan 2021
Faded Rock Stars, % Off Highs Since 1 Jan 2021
Gramps, that crash you’re worried about? It already happened. The eyeball-equivalent names, the Work From Home Heroes, they already shed between two-thirds and four-fifths of their value, more in some cases. Could they go down more? Sure they could, as Netflix just demonstrated, but, the risk now isn’t to the downside in our view. It’s to the upside. The pain trade? To the upside.
As in, when Joe P. Retail is telling all his buddies that Growth Is Dead Forever, probably, he’s not quite on the money as usual. Probably, he’s a little behind the story, not in front of it. Sure, his buddy Chad “Marginal” Loan may not have heard the story yet, so as long as he stays in his own echo chamber aka mom’s basement or Chad’s mom’s basement, sure, Joe’s ahead of the game. But out there on the mean streets where the Big Money prowls? Not so much.
We don’t know, but we suspect, that growth is about to turn up again. We suspect this because, one, everyone is telling you We Be Doomed, DOOMED, and that’s always a bullish sign, per 1987, per 2009, per March 2020; two, whole buncha stock charts look to have bottomed already and be making a sustained move up, three, probably the economy won’t be as bad as everyone thinks and, four, whisper it, probably inflation at this level is transitory.
Anyway that’s our 10c. (OK, 15c. Since inflation hasn’t transited yet.)
Here To Help You
As you know we are purely charitable in our intent here. And with helping you in mind we wish to highlight some price rises coming down the pike in our newsletters. They all hit on 1 May, so if you’ve been thinking about signing up for the pay version of our low cost letters - the pay versions get you the good stuff, detailed stock analysis, actionable ideas and so forth - then April is a great time to do so.
Cestrian Stocks Bulletin, Premium Edition (that’s the pay version of this free letter you are reading right now) goes up from $9/mo to $15/mo on 1 May, so, join now to lock in at $9/mo forever.
Cestrian Tech Select - does what it says on the tin - goes up from $89/yr to $149/yr on the annual, from $9/mo to $19/mo on the monthly, on 1 May, so again, join now to get in at the good price - free and pay signups are at this link.
Cestrian ETF Select - another not-so-creative title - moves from $79/yr to $149/yr, from $9/mo to $19/mo also on 1 May - you can get ahead of the rise by signing up for free and paid versions now, here.
And The Metaverse Investor - see if you can guess what that one’s about, took us a big ol marketing spend to come up with the brand, also moves from $79/yr to $149/yr, $9/mo to $19/mo on 1 May. You can sign for free and paid versions here.
So You Know This Isn't Just Hopium
If you want to know where risk assets are headed, most often you can let the S&P500 shine a light on the path ahead. If you have a few minutes to spare, read this note of ours which explains why we think that is.
And the S&P is headed higher to our old eyes. Chart below, full page version, here. We think SPY can hit 550 without too much stress. And lest you charge us with permabullishness, we think the next move after 550 is likely, down, and maybe down a lot. But for now, we think up is the new down.
First Gain, Then Prolly Some Pain
First Gain, Then Prolly Some Pain
Thanks as always for reading our work.
If you’re not signed up to our pay letters yet, give them a whirl.
Worst case you wasted nine bucks and probably that just inflated-evaporated out your bank account already this morning without achieving anything! So you have less than nothing to lose.
Cestrian Capital Research, Inc - 21 April 2022.
DISCLOSURE: Cestrian Capital Research, Inc staff personal accounts hold long positions in, inter alia, TQQQ, NFLX, ROKU, DOCU, FSLY, TWLO.
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