Everything looks “toppy” to me. Our DoctoRx has called it just right again. The market is overvalued and the signs around us abound. Just this morning we read that hedge fund assets are at an all-time high and IPOs in tech stocks have surged. This is what I refer to now as the “Old Paradigm” after being told ten plus years ago during the dot com boom that we were in a New Paradigm which meant that values were based on air, not profits.
The Old Paradigm of a boom phase topping out is reasserting itself. The IPO market is going nuts. It smells like the coming of a bust. This morning the IPO of Splunk doubled on the offering (SPLK +109%). Splunk offers software to organize companies’ “big data” but still loses money after 8 years in business. The Bay Area is having its own mini-boom (again). Sorry, you folks in fly-over country. But real estate is popping, both for housing and commercial property. There was this heartwarming story today about this in the Wall Street Journal:
The wave of initial public offerings by Bay Area companies, in addition to giving entrepreneurs and venture capitalists a big payday, is providing a lift to the region by creating jobs for housekeepers, cooks and construction workers. … Through March, seven Bay Area companies have completed IPOs this year, representing 3.7% of all U.S. IPOs. That is the highest rate for the region since 2000, according to data compiled by Dealogic.
This is before Facebook hits the market. I wish I had the Porsche-Ferrari dealership in Palo Alto. But, those housekeepers buy cars too.
Then we discovered today that hedge funds made a new record, now clocking in with$2.13 trillion in assets. If you wondered where all the new money created by the Fed went, I can assure you that a lot of it is parked in these funds. According to the HFR Global Hedge Fund Industry Report, released today by HFR (Hedge Fund Research, Inc.), they returned 4.94% to investors in Q1 2012, the best performance in five years. Let’s see, that would be since 2007, just before the Crash of ’08 …
Manhattan real estate is also doing quite well and restaurants are thriving there. I’ll bet there is demand for housekeepers, cooks, and construction workers there too.
Try to catch that knife on the way up.