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On May 11, Wall Street’s most bullish analyst raised his year-end S&P 500 target from 7700 to 8250, the highest forecast on Wall Street. He did so because of the strength and breadth of S&P 500 earnings during the Q1 earnings reporting season.

Citing Fabulous Earnings Momentum (FEMO), Yardeni expects this year’s stock market melt-up to be more sustainable than a FOMO (Fear of Missing Out)-led rally.

However, even Yardeni has turned more cautious in the near term. Continue…

by Roger Montgomery Posted in Economics, Energy / Resources.

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“You cannot be afraid of new technologies. I think that this tenet passed Warren Buffett by. As he is the greatest investor of all time, I think it’s important to recognise that if he were not afraid of product cycles and obsolescence, he would have made much more these last few years than he did. Now, I know we shouldn’t criticise someone of his unbelievable prowess, but we must also recognise that it was wrong not to include technology stocks in the portfolio…[they] are creating too much wealth to ignore.”

With Musk now the world’s first recorded trillionaire after SpaceX’s float last Friday, you might be thinking the above quote has merit, especially as 60 per cent of Berkshire Hathaway’s portfolio is sitting in cash. 

But the above quote, by Jim Cramer, was made in January 2000, just three months before the Dot.Com crash wiped 76.81 per cent from the tech-heavy NASDAQ Composite index and investors saw an estimated US$5 trillion in paper wealth evaporate between 2000 and 2002. Continue…

by Roger Montgomery Posted in Economics, Editor's Pick, Global markets, Market commentary, Technology & Telecommunications.

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I joined Juliette Saly on Ausbiz to discuss the next phase of the artificial intelligence (AI) investment cycle and the growing divergence between the companies building AI infrastructure and the hyperscalers funding it. We explored the risks posed by mounting AI capital expenditure (capex), weakening cash flows, the emergence of lower-cost Chinese AI models and what could happen if hyperscalers begin slowing investment. We also discussed why investors may benefit from looking beyond momentum-driven technology stocks towards high-quality, value-oriented businesses and other defensive assets.

Watch the full episode on Ausbiz here: Who really wins from the AI boom? Continue…

by Roger Montgomery Posted in Economics, Global markets, Investing Education, Manufacturing, Market commentary, Market Valuation, Technology & Telecommunications, TV Appearances.

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I wonder whether there’s a more fundamental reason for SpaceX crashing 16 per cent overnight and 30 per cent since its June 16 high of US$225.64, beyond the headlines.

SpaceX (NASDAQ:SPCX) shares plunged roughly 16 per cent overnight after disclosing a massive US$20 billion bond offering to fund its artificial intelligence (AI) ambitions, amid growing dilution concerns stemming from a US$60 billion stock acquisition of the AI coding platform Cursor.

SpaceX has disclosed plans to sell US$20 billion in investment-grade senior unsecured bonds to repay bridge financing and fund its aggressive artificial intelligence ambitions.

Meanwhile, the company’s agreement to acquire Anysphere (the developer of the Cursor AI coding platform) for US$60 billion in stock will dilute existing stakes. Continue…

by Roger Montgomery Posted in Companies, Market commentary, Market Valuation.

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Many years ago, I was asked by an AFR journalist whether I would revise my valuation of ABC Learning Centres, which was a tiny fraction of the traded price at the time, given the Singaporean Sovereign Wealth Fund (Temasek) had just invested in the company’s then-latest capital raise at a much higher market valuation.

Full of youthful confidence, I responded: “stupid people live in all different countries.”

A familiar pattern of fundraising and deployment was playing out at ABC Learning. It was one I had seen before and one which often resulted in pear-shaped returns for equity investors. That was certainly the case at ABC, which subsequently blew up spectacularly. Continue…

by Roger Montgomery Posted in Economics, Global markets, Insightful Insights, Investing Education, Market commentary, Market Valuation, Popular, Technology & Telecommunications.

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In this week’s video insight, I take a closer look at the upcoming SpaceX IPO and some of the concerns being raised by critics. While many investors expect the listing to be a major success, I explore questions around the company’s unprecedented valuation, the folding of other Elon Musk ventures into SpaceX, rule changes that could accelerate its inclusion in major indices, and whether forced buying by index funds may help drive the share price higher. I also discuss the risk that early investors and insiders could benefit most, while everyday investors are left carrying the long-term risks. Continue…

by Roger Montgomery Posted in Market commentary, Video Insights.

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I joined Phil Clark on ABC Nightlife to discuss the Federal Government’s changes to capital gains tax (CGT) and negative gearing, and whether the reforms will improve housing affordability for younger Australians. We explored the potential impact on property investors, first-home buyers and housing supply, as well as the broader economic consequences of reducing incentives to invest. We also discussed the upcoming SpaceX IPO, concerns around its rapid inclusion in major indices, and why calm oil prices may be masking growing risks in global energy markets.

Listen here: ABC Nightlife Continue…

by Roger Montgomery Posted in Economics, Energy / Resources, Market commentary, Property, Radio.

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The defining irony of today’s stock market has got to be the yawning chasm between asset prices and their intrinsic values. As equity indices scale ever higher peaks, and as hyper-parabolic Price-to-Earnings (P/E) and Price-to-Sales (P/S) ratios are normalised, the underlying truths don’t seem to have changed. Eventually even this bubble must bust.

U.S.-based senior economist at the Centre for Economic and Policy Research (CEPR) in Washington, DC, and author of the ‘AI Bubble Monitor’, and U.S.-based antitrust and policy analyst Matt Stoller reckon this dynamic can be attributed to something Stoller calls the “Number Go Up Rule”– a systematic rewiring of institutional incentives to ensure corporate valuations ascend at all costs, and frequently favouring speculative mania over fundamentally productive or socially additive enterprises. Continue…

by Roger Montgomery Posted in Economics, Editor's Pick, Global markets, Insightful Insights, Investing Education, Market commentary, Popular.

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On the surface, markets appear remarkably resilient, so if you’ve felt a sense of calm looking at your portfolio performance lately, you aren’t alone.

But look beneath the surface and the structural fragility you’ll see in valuations, government debt, and global trade makes holding a narrow, concentrated equity portfolio (including any portfolio largely invested in index ETFs) one of the more dangerous bets an investor can make right now. Continue…

by Roger Montgomery Posted in Economics, Editor's Pick, Global markets, Insightful Insights, Intrinsic Value, Investing Education, Market commentary, Market Valuation, Popular, Technology & Telecommunications.

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I joined Juliette Saly on Ausbiz today to discuss why global equity markets may be closer to a peak than many investors expect. We explored the historical link between oil-price spikes and weaker share markets, why even strong artificial intelligence (AI) –driven earnings growth may not protect valuations in a higher-rate environment, and how the excitement surrounding SpaceX is pushing many listed “proxy” space stocks into hyper-exponential territory untethered from fundamentals.

You can watch via Ausbiz here: Global equities may be closer to a peak than many investors expect

by Roger Montgomery Posted in Investing Education, Market commentary, Market Valuation, Technology & Telecommunications, TV Appearances.

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