From “Ramp Champs” in 2000 to “FAANG” Stocks in 2017

Monthly Market Commentary: October 1, 2017

In mid-May 2000 (17 years ago), my friend George Schott, in a contribution for the Gloom Boom & Doom report (the title of the GBD report was The Coming Vindication of Value Investors) wrote under the subtitle, "Ramp Champs" that the April 3, 2000 edition of Forbes Magazine, which unintentionally presaged the NASDAQ's worst week in its history, published an article entitled, ‘Ramp Champs: The Best-Managed, Fastest-Growing Tech Companies in the World.’

A month later these stocks had already declined by 66% from the early 2000 highs, and at the October 2002 low, the NASDAQ 100 Index had declined by 83% from the March 2000 high.....

In early 2000 a huge change in stock market leadership occurred. The TMT sector entered a historic bear market, while old economy stocks began to outperform. However, the transition was not smooth but turbulent because although the old economy stocks outperformed the TMT sector and the NASDAQ Index they were under pressure from the unfolding 2000 to 2003 bear market (the Dow Jones Industrial average fell from the January 2000 high to the October 2002 low by 39%).

It is therefore, important to keep in mind that in a bear market even the stocks which will be the future leaders face powerful headwinds coming from the value destruction that bear markets bring along. There are numerous similarities between the 2000 TMT bubble and the current US stock market bubble. However, whereas the 2000 bubble was concentrated in just the TMT sector the current asset bubble is just like SPECTRE (Special Executive for Counter-intelligence, Terrorism, Revenge and Extortion) everywhere – admittedly to lesser degree in some asset classes. The 2000 NASDAQ collapse - because of its narrow scope - did not cause widespread economic or financial hardship. This cannot be said of the current all-encompassing asset bubble. Whenever it will burst, the economic damage will be considerable all around the world as well as the capital losses to asset holders as there are hardly any places to hide.

My friend Richard Hurowitz (rhurowitz@remove-this.octavian.com) who publishes the excellent Octavian report has asked me to let our readers know about his upcoming conference, which will take place in New York on October 17 (http://octavianreport.com/forum).

With kind regards
Yours sincerely
Marc Faber 

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