One stock, Facebook, went down 25 percent in a few hours of trading after the close. What does that mean for the equity market? From Simon Black at sovereignman.com:
As you you’ve no doubt seen by now, shares of Facebook plunged around 19% this morning.
In fact it was down as much as 25% in after-hours trading, wiping out $120 billion of wealth in a matter of minutes.
To be clear, that is the largest single-day loss of value ever seen in the history of the world.
(And Mark Zuckerberg’s net worth fell by $17 billion as a result… though I doubt he’s going to be missing too many meals anytime soon.)
The company announced disappointing earnings and slowing growth, which spooked investors.
And while most of the mainstream media is focused on what this means for Facebook and other tech stocks, I’m much more concerned about what this means for -all- assets.
In fact, I think today marks a MAJOR turning point for the “everything bull market” that’s been going on for ten years.
Stocks in particular have been rising for years, led primarily by the most popular “FAANG” tech companies– Facebook, Apple, Amazon, Netflix, and Google.
These companies have been pushed to absurd limits.
Netflix is always a great example: the company loses billions of dollars each year and burns through shareholders’ money, yet the market has constantly pushed its stock to new heights.
Then one day Netflix reported less-than-stellar growth, and the stock tanked. Poof. Billions of dollars of shareholder wealth vanished in an instant.
Now it’s happened to Facebook.
This is an important lesson: when a bubble bursts, there can be a lot of pain… very quickly.
By the way, it’s useful to point out that the FAANG companies have essentially been propping up the entire stock market.
To continue reading: No one has ever lost this much money in all of human history