FAANG: The New “Nifty Fifty” -Bonner/Bonner And Partners
"At Dow 25,000, stocks are too expensive. The Dow-to-gold ratio is now 21. In other words, it takes 21 ounces of gold to buy the Dow. That ratio has only been higher twice in the last 100 years. And each time was followed by an 85%-90% selloff. The FAANG stocks are especially expensive....You buy stocks to make money, not to get rid of it. The whole idea is to buy low and sell high. If you buy high, you’re starting off on the wrong foot.
...Since things that are out of whack tend to go back into whack, eventually… and since it is extremely unlikely that earnings could rise enough to justify such a high valuation… the price will have to fall to a more reasonable multiple of earnings. In other words, investors will lose money. Even if the FAANGs' technology survives, they probably won’t make much money for investors....That is what happened with the Nifty Fifty stocks of the late 1960s and early 1970s. They were good companies - including Coca-Cola, Sears, and General Electric....The Nifty Fifty stocks might have been good companies, but at 1972 prices, few of them turned out to be good investments. If you had bought them at their peak in 1972, by 1975 you’d have lost two-thirds of your money. By today, you would have lost much of the rest of it. Will the same happen to the FAANG stocks? Will Facebook, Apple, Amazon, Netflix, and Google soon be 'yesterday’s technologies?' We don’t know. But at 2018 prices, there is probably far more downside than upside."