When Wall Street Gets DeFANGed———Look Out Below! by David Stockman

Four stocks are holding up the S&P 500 Index. From David Stockman at davidstockmanscontracorner.com:

As the stock market labored into Friday’s close, CNBC was apparently tying to help with a crawler saying that the S&P 500 was heading for its “best week of the year”. Then again, the gain of just 1% since New Year’s Day is not a whole lot to write home about.

In fact, there were some fireworks in last week’s gains, but if history is any guide they were exactly the kind of action that always precedes a thundering bust. To wit, the market has narrowed down to essentially four explosively rising stocks—–the FANG quartet of Facebook, Amazon, Netflix and Google—–which are sucking up all the oxygen left in the casino.

At the turn of the year, the FANG stocks had a combined market cap of $740 billion and combined 2014 earnings of $17.5 billion. So a valuation multiple of 42X might not seem outlandish for this team of race horses, but what has happened since then surely is.

At this week’s close, the FANG stocks were valued at just under $1.2 trillion, meaning they have gained $450 billion of market cap or 60% during the last 11 months——even as their combined earnings for the September LTM period were up by only 13%.

In a word, the gamblers are piling on to the last train out of the station. And that means look out below!

To continue reading: When Wall Street Gets DeFANGed