What's the U.S. stock market going to do on Monday?

I won't tell anyone what to do re: TWTR, GOOG, FB. ... Google and Facebook are GREAT companies. Twitter is not on the same level. I mean, even if TWTR pulls back to $20 a share, it is trading at a forward P/E ratio of what, 40 times earnings? Without a speculative bubble-- such as what we have seen for the last several years--I am wondering why anyone would pay that much for it in normal times.

What I would suggest is that people have gotten carried away -- in general. Those companies are trading at unprecedented valuations (except maybe during the dot-com bubble), as ALL stocks have gotten carried away. And they are going to have to pull back quite a bit from even here before that isn't the case.

It can be a fantastic company. But expensive is expensive. Everything has its actual worth.

In a normal environment, do you think people will pay to the moon to own those companies? Maybe. So I am not saying not to invest in them if you have thought it through and think it is a good risk. Go with what you think. Just also consider the valuations. If we go into a recession, and/or a prolonged bear market, those stocks have a long way to go down before they are valued just "fairly" on a historical basis.

You might think GOOG or FB are great companies. And they are! I'd just urge anyone to consider the valuation. ... and take it out of the context of what people have gotten used to recently. We have had very skewed markets that have been manipulated upward. That "put" underneath the market can't be there permanently. It's artificial.

If it was a gallon of the best premium ice cream--a really tasty ice cream--let's say, would how much would you pay up for it? EVERYTHING has a limit. And those are very expensive stocks, even with this pullback. Maybe worth it. I'll let others decide. But know that they are very expensive on a historical basis.

 

Dow futures down 850 13 minutes before the open. S&P below 1870.

 

Depends on the company, how the economy is doing, etc. There is no one answer. For a company that is growing quickly, has a great business, is innovative, etc. ... people will legitimately pay up for it. ... They command higher multiples, because they have so much potential. The problem is that multiples across the board got carried away the last 5 years or so (in my opinion). Robert Schiller (the Nobel economist) does an adjusted index that has suggested for the last year that stock valuations haven't ever been this high, except in 1929 and 2008. People largely didn't pay attention to him.

 

Here comes the open. ...

 

The futures are still going down at the open. Dow futures just got below 1000. S&P futures down 117.

 

I know everyone just cares about the stock market. But the currency markets are signaling how serious this is. I know people don't follow this, but the dollar had a tremendous run -- driving the Euro and Japanese yen down. There have been currency wars going on. The ECB and BOJ were still doing things to devalue, while the Federal Reserve backed off a bit late last year. Right now, the dollar carry trade is unwinding all at once. The Japanese yen is up more than 4 percent relative to the dollar since last night. These are VERY unstable events. This goes beyond just a stock market correction.