CANCELLED — Saturday Review — CANCELLED

The eSignal data manager or password authentication function (or both) are not responding this morning. So, today’s Saturday Review is cancelled. I will record a bigger picture analysis if/when charts are restored.

One item I had planned to explore was this interesting observation by John Hussman:

Presently, Apple is valued at 5.1% of GDP, Amazon at 4.8%, Alphabet (Google) at 4.6%, Facebook at 3.3%, and Netflix at 0.8% of GDP. That’s a total market capitalization of nearly 20% of GDP across 5 stocks. It’s worth remembering that historically, the pre-bubble norm for market capitalization to GDP, adding up every nonfinancial company in the stock market, was only about 60%. At secular lows like 1974 and 1982, the ratio fell to 30% of GDP – for the entire market.

A similar observation could have been made with equal concern at any time during the past many months, regardless of the different percentages. So, the reading doesn’t have much timing value, and it may be greater months from now. Although, I doubt that. As I began noting about FAANGS with the NFLX earnings plunge, and reiterated with the FB and TWTR plunges: Growth expectations and valuations aside, these price reactions are at the very least, raising concerns among so-called “hedge fund hotels” that more attractive pricing may lie ahead.

And the FAANGS market segment losing buying demand at the margins can be magnified to great effect. Which may be happening already. But the death of leadership tends to be the penultimate victim. Outperforming laggards often defines the last upleg before the greater fall. Rotation is not the smoothest gear change — Friday’s reaction to last week’s new recovery highs exemplifies would fit that description.

[Presumably, eSignal’s international customer service and technical support will become available Sunday night to correct the issue in time for the U.S. open. If not, then I’ll initiate an alternative overnight.]