Somewhat surprisingly, 200 of the 1500 largest companies have proffered negative earnings over three consecutive years. Their stock prices must have suffered, right?
According to the Leuthold Group, investors have piled into unprofitable corporations more than they have at any other time since the dot-com disaster in 2000. And rather than punish these profitless ventures, participants have showered them with $2.3 trillion dollars.
Investors have not merely rewarded corporations that fail to turn profits. They’re equally enamored with writing blank checks to people or groups who hope to come up with ideas.
In other words, investors are writing blank checks.
The vehicle is called a Special Purpose Acquisition Company, or SPAC. And the billions that have poured into SPACs in 2020-2021 alone has been raising eyebrows.
There’s so much money out there (a.k.a. “liquidity”) that participants are chomping at the bit to gamble on almost anything. SPACs, crypto, blockchain art via NFTs.
Even traditional fund vehicles have seen crazy levels of inflow. The ever-popular tech proxy, the Nasdaq 100 (QQQ), recently witnessed its biggest week since the tech bubble of 2000.
Investors are going “all in.” The inflow evidence now exists across ALL funds and ETFs. (See the chart below.)
Is now the right time to be going “all in?” The last time we witnessed these types of events — feverish bets on unprofitable companies, fund flow extremes — the tech bubble burst, and the markets masacred account values.