
U.S. tech stocks are now worth more than the entire European stock market - justinzollars
https://www.cnbc.com/2020/08/28/us-tech-stocks-are-now-worth-more-than-the-entire-european-stock-market.html
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Guzba
The growth in tech stocks has been pretty insane imo. It's so easy to be
afraid though and call this another 2000, but we really don't know what the
future holds.

I wish Europe had it's own set of exciting tech companies. That would be
amazing. As a human living on this planet, the more things available to me,
the better. Unfortunately, Europe doesn't seem to do much anymore. Google
"European growth stocks". I want them back in the game.

~~~
baconandeggs
The "growth" in tech has been entirely driven by monetary policy. Google or
Facebook or Apple or Netflix or Amazon have done nothing special than what
they've been doing for the last 5 years. I wish we were getting insane tech
out of this bull run but the truth is there's no "innovation" behind it and
their paper is just being used as a shield by investors which is why their
stocks keep going up.

~~~
spideymans
> The "growth" in tech has been entirely driven by monetary policy.

For the uninformed, what monetary policy exactly is driving this growth?

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free_rms
"Quantitative easing".

One way to juice the economy is just print more money and give it to everyone.
Everyone's richer, yay! Except you haven't increased production or necessarily
consumption, so prices will just equalize to the new money supply and you get
consumer price inflation.

For QE, we got smarter, and just gave all of the money to the bankers, because
that's what all the economic experts who work at banks said to do. So all of
the inflation happened in assets held by banks and rich people instead --
tradeable securities and real estate in coastal areas.

~~~
spideymans
Got it. I suppose this explains why there wasn’t an increase in the price of
consumer goods following the billions of COVID relief pumped into the economy.
Correct?

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sirmoveon
"Pour water into your wine to create more wine" sort of scenario. Why nobody
is talking about the USD being diluted and the inflation effects are embodied
in virtual equity valuations?

~~~
KMag
If that's the case, one would expect the FX rate changes to equally increase
European market valuations, if USD is the unit of account (numerare). If the
Euro were being diluted at a rate that kept FX rates in check, then one would
expect that to equally buoy European market valuations. So, there may well be
something to be said about USD dilution, but I don't see how it affects the
relative market capitalizations of the US tech sector vs. the Eurozone
markets.

~~~
sirmoveon
Most world economies keep their reserves in USD or are highly leveraged with
USD transactions. The denominator by which everyone has to abide by is the USD
and its probably why the relative advantage you are speaking of doesn't
present itself.

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baconandeggs
U.S. tech stocks are now _priced_ higher than the entire European stock
market.

~~~
ng12
And I can use that price to turn my stocks into real, hard cash. It's not like
it's funny money.

~~~
dontworry99
For now. The government is looking to let VCs use 401k’s as Monopoly money.

You might go to liquidate only to find that YOUR pension...er investment was
lost without you knowing it.

[https://www.salon.com/2020/06/16/trump-labor-department-
quie...](https://www.salon.com/2020/06/16/trump-labor-department-quietly-
offers-up-401k-plans-to-private-equity-vultures_partner/)

“You accepted the rules by buying in. Can’t say you weren’t aware the market
is risky!”

That’s what they keep telling grandparents when their pensions were flushed
down the drain.

Let’s keep trusting political grifters of our agency to do right by it despite
historical evidence though.

~~~
nightski
I'm confused because back when I had a 401(k) I managed it and chose what
investments the money went into. So I don't see how that money would magically
flow into private equity? Unless they mean mutual funds could start investing
in private equity? But this would show up in the prospectus would it not? Or
are they just arguing that many Americans are completely ignorant and
oblivious to what their 401(k) is invested in and would accept private equity
investments because they blindly follow advice?

~~~
dontworry99
In my experience, the latter is the case.

Look at the mathematical facts: most people live paycheck to paycheck, have no
rolling cash savings let alone an emergency fund of months.

You think that is a sign most folks are paying attention there very well?

But what’s that mean if they do anyway?

If everyone has a cool million is that some sign we have enough real supplies
to go around in a crisis? To satisfy that potential financial demand of cash
for real product?

We weren’t producing enough TP to handle a short run on supplies. All energy
spent on big finance is purposeful indirection away from truth.

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RedditKon
I find the headline a bit misleading bc even European tech companies like
Spotify are listed on the US exchanges.

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hogFeast
It is worth understanding that the European stock market, bar the UK and
possibly Sweden, isn't like the US. Most companies finance themselves through
banks. Whilst Europe as an economic unit is larger than the US, capital
markets are still basically non-existent (bar the efforts of the ECB to throw
cash at anyone who raises money from capital markets).

Also, the rise of tech stocks is significant not only relative to other
economies but relative to other large stocks in the US. The S&P500 is more
concentrated than it has ever been and is pretty close to what you see in
emerging markets (where the top 5 or so stocks make up a huge chunk of the
total index).

~~~
smabie
Yeah, a lot of people don't realize how market cap weighted actually gets you
a not very diversified portfolio. For example, if you hold the S&P 500, about
8% of that is Apple, 6% is Amazon, 6% Microsoft, and 4% Google.

So 25% of your capital is going to 4 names, all in the same sector. Meanwhile,
the smallest holdings will be under 1%.

Though market cap weighted is good for avoiding trading fees (you don't have
to rebalance when the price of a stock changes), it's bad for investors. Not
only do you miss out on some diversification, you end up with undue exposure
to only a few sectors and you miss out on Fama and French's size factor by
only investing in large companies.

~~~
hogFeast
The size factor has lost money pretty consistently. It is also a very
suspicious factor generally because there are very obvious non-risk factor
explanations (i.e. liquidity). Just generally, FF do very irrational things
with their models (i.e. not including momentum)...they are credible but the
way they do things is obviously not quite correct (Fama spent decades saying
this kind of thing was totally impossible).

Market cap weighting is fine, if you actually end up with something
reasonable...which you don't anymore. I wouldn't really recommend equal
weighting either...so...

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jaclaz
Maybe I have it wrong, but I would replace "are now worth" with "are now
valued", I always feel like "worth" to be more suitable to something more
tangible than stock values, which are often crazy on both sides of the pond.

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DeonPenny
Europe growth in the past 12 years has be pretty anemic for the past 10 years.
Look at the GDP per capita growth of lets say germany and you get a real good
idea of how mismanage their economy has been for the past decade so this
doesn't surprise me.

~~~
systemvoltage
Perhaps you’re getting downvoted for not providing sources. Can you add
citations?

~~~
DeonPenny
You can google german gpd per capita and get the information from the world
bank with a interactive chart.

The German gdp per capita in 2008 was 45k in 2018 47k. The US in same time 48k
to 62k. If your country growth rate is number is that slow of course you are
going to lag behind

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hpoe
I would argue tech isn't high because of the value of it but instead it is a
combination of being seen as a safer investment while also having potential
for growth that outstrips inflation.

If there is a company that is only growing slightly year over year, then due
to the loose money policies of the fed, they won't be able to make your real
money adjusted for inflation.

Bit another issue may be that as Matt Levine likes to point out private equity
markets are the new public markets. So the question is what will be the next
step in financial engineering?

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vharuck
What's the benefit of lumping all these companies into a single bucket and
calling it "tech?" Looking at it as an investor, it's a distracting term. When
the pandemic hit, did Uber start making more money like Amazon? If more
countries pass laws like the GDPR, will that hurt SalesForce as much as
Facebook?

The pandemic is a great test for how we look at the market. If two companies
fare _wildly_ differently in an extreme event, were they every really in the
same category? If you own a department store, don't "diversify" by investing a
lot in Amazon. You'll just get a double whammy whenever disposable income is
hurting.

~~~
smabie
Okay of the 11 GICS sectors, give me examples of what you think some of these
companies should be classified as.

~~~
vharuck
In addition to information technology, because a lot of them also offer cloud
computing or other kind of developer-targeted services:

Apple: Consumer discretionary (electronics)

Alphabet: Communication services (advertising and fiber networks), health care
(mostly research), financials (investing), whatever urban planning is
classified under,

Amazon: Consumer discretionary (retail), consumer staples (food)

Microsoft: Industrials (office services), communication services

Facebook: Communication services (chat apps and advertising)

I could be totally off base, and investors do ignore the "tech" label. But
from what I've heard in the news and seen in discussions, it doesn't seem so.

