Are US Stocks in a Bubble? Are Emerging Market Stocks Value Plays? Russia, China Stocks!

Dear Reader,

Many analysts say US stocks are in a bubble. This may well be true. But I think the US stock market rally is set to continue for 2-3 more years. The largest technology stocks like Apple, Google, Microsoft, Facebook, Amazon are richly valued, but they are posting mind blowing results in terms of profit and revenue. Amazon excluding, which has been  notorious for making scant profits. So if the Nasdaq falls, it will fall by no more than 30% from peak, according to my humble opinion.

There just isn't a visible catalyst on the horizon which could unleash a financial crises. A possible crises cause could be the ETF industry which exhibited stunning growth in recent years. Another Black Swan event for the global stock market rally could be a large globally systematic bank failure. In US there are no obvious candidates, but in Europe Deutsche Bank, Italian and Spanish banks could fall into trouble. Regarding the Catalonia independence movement, things are going to get worse, before they get better. Large Spanish banking players like Santander and BBVA could easily get into trouble and drag other global banks and the global economy down with them.

Regarding emerging markets stocks... Russia stocks have developed into something of an oil value play. I personally feel oil measured by both US WTI and Brent could easily hit 70 USD which should propel Russian stocks. Chinese stocks seem also value plays, but to a lesser extent. Personally, I think China will suffer a crises, triggered by the financial sector in the country burdened by the over-leveraged both state-owned and private enterprises. A crisis in China could sink the global economy in deep recession.

Basically, If a global crises ensues, after it is done, emerging market stocks should be a great long term investment, in my opinion. Emerging markets(Brazil, Russia, India, China etc.) are now big enough to stand on their own feet. So they should survive the next crises and prosper afterwards.


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Kind regards,
Petar Posledovich