How Big Is the Technology Stocks Bubble?

Dear Reader,

Many analysts, economists and portfolio managers are saying we are in a technology stocks bubble.

But how big is the global technology stocks bubble? I estimate the global technology stocks bubble's value is around 9 trillion USD. The Nasdaq Stock Market value, where most US technology stocks are listed, is 17.2 trillion USD. If US technology stocks crash, this will lead to a fall in the value of global technology stocks, especially those listed in China which are remarkably big in market capitalization.

Actually, the current technology and general stock market bubble is the greatest in terms of market capitalization in history. 11 years of money creation or quantitative easing by leading global central banks, which is an euphemism for printing money, brought unprecedented liquidity to income generating assets like stocks, bonds and real estate.

Due to the structural competitiveness of the Information Technology sector much of the money created by global leading central banks buying up assets went into technology stocks. Firms all around the world due to the sluggish economy and in search of ever higher profits are trying everything to cut costs. Firms are replacing humans with computers and computers with cloud based IT services. This only brings greater demand and revenue growth for the largest technology companies leading to them producing spectacular revenue growth and net profit. At least most of them are profitable.

And Wall Street equity research analysts are giving a helping hand by producing equity research reports constantly raising their price targets for technology firms based on future projections of continuing spectacular revenue and net profit growth driven by the secular move to technology to cut costs and produce more efficiently. And later their analyses are followed by fund managers investing more and more of the money entrusted with them in technology stocks and technology exchange traded funds. Thus prices of technology stocks keep going higher and higher leading to new analyses by Wall Street equity research analysts raising prices of technology stocks, new money flowing in and new technology stock prices records.

This will all work until it doesn't. Some technology bubbles like Groupon, Fitbit, Gopro, Blackberry have already burst. 

One trigger for the 9 trillion USD  US technology stocks bubble to burst will be leading central banks like the Federal Reserve, The European Central Bank, The Bank of Japan and The Bank of England raising their key interest rates due to a sudden spurt of inflation. This will raise the general interest rate levels in the economy, money will flow into bonds' higher yields and to the higher interest rates on deposits and flow away from technology stocks. The prices of commodities like corn, wheat, oil and soybeans have already risen which may be the precursor of sudden inflation bouts.

The current 9 trillion USD bubble in global technology stocks is the biggest in history. If I have to estimate, I would say that the global overall stock market bubble is worth no less than 30 trillion USD or 34 % of the global stock market capitalization of 89.5 trillion USD.

I forecast the global technology stocks lead bubble will continue inflating for 1 to 2 years more. It may burst even earlier.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich