Bubbles, bound bubbles for trouble?

With Marc Jones and Thyagaraju Adinarayan

LONDON (Reuters) – BofA analysts have noted the $ 6.2 billion-per-hour rise in the value of world stocks since March last week – and suddenly there is a high hissing noise. .

Tesla’s electric car doyen, which raced 750% in last year’s frenzy, went into the red for 2021 on Tuesday, hit by tech stock sales and a fall in Bitcoin, in which the seller posted $ 1.5 billion property recently.

Both are technically in bear markets, interpreted as down 20% from their latest peaks, but for ultra-volatile Bitcoin that has risen well above 1,000% since March, it has been admitted that that was just a few days ago.

Overall, Tesla and the FAAMG bellwether quintet – Facebook, Amazon, Apple, Microsoft and Google – have seen half a trillion dollars seen, or about the same as the Austrian economy, on the combined value this year.

Meanwhile, ten-year U.S. Treasury yields, a major driver of global borrowing costs, have risen from just under 0.9% to just a shy of 1.4% which, while scarce to be seen in it. the historical context, nonetheless a 50% increase.

For UniCredit Co-Head of Strategy Research, Elia Lattuga, the rapid rise in benchmark yields represents a “high risk for equities in general but especially for market segments such as growth and technical stocks that are see fastest expansion in valuations. “

(GRAPHIC – Bubble Assets: Bitcoin to FAANGs: https://fingfx.thomsonreuters.com/gfx/buzz/dgkvlzayqvb/Pasted%20image%201614091294852.png)

He said the 80% rise in world stocks since the collapse of COVID-19 in March last year – at a pace nearly 10 times faster than seen after the 2008 global financial crisis – had been led by the more than $ 20 trillion in aid provided by governments. and central banks.

From the beginning of the year, however, the hopes that vaccines will help overcome the coronavirus and reduce the need for so much erectile support.

Keeping track of the trend in U.S. Treasury, the still-negative German Bund yield is set for their biggest monthly jump in three years, while yields in Japan are under the influence of declining stocks. damage at the highest rate in more than two years.

There are echoes of the ‘taper tantrum’ in 2013, when world stocks saw several 3-5 percent point falls as global yields began to climb.

Stocks recovered, however, and were climbing again when U.S. yield rose 3%, and for the head of SEB global asset allocation Hans Peterson, any risk signs from the current rise in come with a caveat result.

“I don’t see it as a fundamental threat to the markets. But it’s up for debate,” he said.

(GRAPHIC – Up and Beyond: growing global bond yield: https://fingfx.thomsonreuters.com/gfx/mkt/qzjpqgobnpx/bondyields2302.png)


This time, however, as nearly 90% of respondents concluded in Deutsche Bank’s latest money manager survey, bubbles are building in many market segments.

Bond bubbles, biotech bubbles, special purpose construction company (SPAC) bubbles, shortening bubbles, space travel ETF bubbles. Of course, you have to do a very difficult study to find an unidentified asset class.

Ray Dalio, chief investment officer of the world’s largest hedge fund, Bridgewater, said Monday that about 5% of the top 1,000 U.S. companies were in a bubble zone, which although it is a long way from levels dot.com promotion.

Concerns about climate change also mean that nothing green has turned a hot red.

Tesla ‘s rise has been a staggering 16,000% over the last decade. Most of the world’s other car dealers are worth bringing together and even with its decline this month, its shares are still trading at 163 times the earnings expected. -year.

(GRAPHIC – Meteoric rise of FAANG + TM in the last 10 years: https://fingfx.thomsonreuters.com/gfx/buzz/xegvbwqrkpq/Pasted%20image%201614099482523.png)

It’s a multi-layered bandwagon that numbers are growing.

Jeremy Grantham, a former GMO bubble player, has warned of a sharp rise in SPACs – blank check companies that merge with private companies specifically for stock market launches – and original public offerings (IPOs) .

SPAC-led Tesla-wannabes seem to appear almost every day. The S&P Global Clean Energy index has almost doubled in value over the past year, giving it a 41-fold increase in their companies ’expected earnings.

There were 480 original public offers (IPOs) last year, more than the height of dot.com mania. Of that, 248 were SPACs and there have been over 150 this year according to Spacinsider.com data and plenty with well-known supporters.

Green bands are also declining, along with solar, wind and hydrogen stocks. Hydrogen fuel cell maker Plug Power is trading at nearly 65 times the expected revenue after a share price rise of over 1,000% over the past year.

“It’s those big bubbles where fortunes are made and lost,” Grantham said recently. “… This bubble will burst in no time, no matter how hard the Fed tries to support it.”

(GRAPHIC – Global stock valuations go well above long-term average levels: https://fingfx.thomsonreuters.com/gfx/buzz/ygdvzebllpw/Pasted%20image%201614091756897.png)

(Additional report by Dara Ranasinghe and Elizabeth Howcroft; edited by John Stonestreet)