Dot-com era is back or is it?

Cramer breaks down the state of the market

‘’You have to be sceptical of markets, entire markets, where more and more stocks are valued on something other than earnings,”

CNBC’s Jim Cramer says.

Heard of the dot-com bubble? The dot-com bubble (also known as the dot-com boom or the tech bubble) was a historic period of excessive speculation mainly in the United States that occurred roughly from 1994 to 2000, a period of massive growth in the use, and adoption of the Internet. Investors should be careful as more and more stocks are being valued based on measures other than the revenue or earnings numbers that their underlying companies produce each quarter, CNBC’s Jim Cramer warned.

“You have to be sceptical of markets, entire markets, where more and more stocks are valued on something other than earnings. This is what happened during the dot-com crash — you had tons of companies that were trading on eyeballs and page clicks,” he said.

During the dot-com bubble highly speculative internet stocks were the hottest assets on Wall Street. The tech-heavy Nasdaq eventually collapsed, shedding nearly 80% of value within seven months in 2000.

What do we witness now? Shares of Netflix were down nearly 1.8% one day after the streaming platform took home four awards at the 71st Emmys, short of HBO’s nine and Amazon’s seven statues.

As for Facebook and Alphabet, Cramer said equities in the internet giants would be higher if they were judged by earnings. Instead, their stocks have traded based on news updates on antitrust investigations into the companies.

Shares of Facebook fell 1.6% Monday after a Wall Street Journal report said that competitor Snap has been working with the Federal Trade Commission to address the social media behemoth’s hardball tactics.

“I have another dozen examples in my head. A dozen examples of stocks that simply don’t trade on earnings or sales anymore,” he said. “When there were only a few of these names, it was fine. But these days there are so many of them that it’s become much harder to parse what’s going on in the broader market.”

And if you are ready to take advantage of the bubble, balloon or whatever it might be , get your TradeApp account ready to go.

source: https://www.cnbc.com/2019/09/23/jim-cramer-warns-of-dot-com-era-parallels-its-not-a-normal-market.html