There are those who say that the second coming of the tech bubble "is different." And perhaps, if only in the realm of semantics, it is. Which is why Bank of America has a more digestible term for the new bubble: it is not so much pure tech as "glamour" a concept which consists of "Internet Software, Biotech and Computers & Peripherals."
But nowhere is this new "glamour" bubble more visible than in the divergence between these "sexy" names built up on nothing but hype, or as David Einhorn would call them "story" stocks, and good old "resource" companies: those engaging in such "old economy" activities as energy and materials.
One dramatic representation of the "glamour" bubble at least as opposed to "old economy" resource stocks is shown below.
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But a far better one, one which needs no explanation is the following chart comparing Netflix vs AngloGold:
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And in other news, now that "capitulation" is finally raging among the commodity sector, overnight that other "Anglo" gold miner, Anglo American, reported a $3 billion loss [9]for the first half of 2015 and said it would cut 53,000 jobs over the next few years, as plunging commodity prices continue to wreak havoc on the bottom lines of miners world-wide.
Chief Executive Mark Cutifani said in a presentation to investors that the company would slash about 35% of its total workforce over the next several years, including jobs in operations the miner plans to sell. The job cuts include a reduction of 6,000 jobs at overhead operations, including 4,000 jobs in corporate-office operations. The overhead cuts should result in $500 million in cost savings, Mr. Cutifani said.
News of the cuts came as the miner reported a first-half loss, hit by a one-time charge of $3.5 billion, including $2.9 billion from a write-down on the value of Anglo American’s huge Minas-Rio iron-ore project in Brazil.
In retrospect, perhaps the good news is that while the overall market remains immune to reality, those companies and stocks reliant on the central bankers' most hated commodity, will finally undergo a long overdue period of "creative destruction", a result of which will be even less physical product in the market. It will also make the surviving companies stronger.
In the meantime, sit back and enjoy the reflation of the glamour bubble. If 2001 is any indication, companies with no earnings, no profits, but great "stories" can keep rising for a long time. Just make sure to sell before everyone else.
