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Market Concentration Risk ‘Worse In Some Ways Than Dot-Com Bubble,’ Kolanovic Says
As discussed at some length in "Magnificent 7: Bubble Or Not?" dot-com redux warnings are pervasive in 2024.
The narrative is straightforward: Market concentration is extreme and valuations for the so-called "Magnificent 7" can only be justified by way of growth estimates that may or may not pan out.
The implication is that the current environment may be analogous to the dot-com bubble in that if growth disappoints, the leadership is vulnerable and thereby so is the entire market.
In the link
Agreed. Concentration killed the S&L industry. It killed SVB. It killed Lehman. It’s just gluttony, pure and simple.
I was talking today with a friend about the Mag 7 and how they just seem to keep going up. It has been this way for a while now and with the rise of passive investing, it might stay that way. At what point does a 3 trillion-dollar company reach maturation? Also, when does the government step in and break them up? The “market” has been very narrow for years and Rule 7 of Bob Farrell’s famous 10 Rules says it’s indicative of a weak market. We shall see