We are due for an equity market shakeout. The NASDAQ is up 450% since January 2009. The 26% spike in the NASDAQ from October 2019 to February 2020 on a lack of supporting fundamentals is like nothing I’ve ever seen. By late March we had traded down 30% from February’s high yet we have gained 22% off the low on a preponderance of negative news. There are quite simply too many “pretender” cash-burning technology companies with outlandish valuations. These valuation abominations are promoted by venture capital firms and enabled by passive investment vehicles which are anything but selective. Some sign posts:
Hotel occupancy: Mid-March occupancy rate for Marriott International (tkr: MAR), was 25% compared to 70% a year ago. I would be surprised if North American occupancy rates are not close to zero. To expect a snap-back effect in occupancy rates would be foolish.
Bookings activity: Bookings activity is obviously down materially for most Technology companies given the recent spate of companies that have pre-announced negative Q1 results and withdrawn full year guidance.
CRE loans and impaired U.S. economy: JP Morgan (tkr: JPM), is extending commercial real estate loans on a case-by-case basis. JPM CEO Jamie Dimon discussed how the bank is working through various economic models based on dramatic reductions to GDP and dramatic increases in unemployment (here).