The New Abnormal
Gary Gordon | Dec 13, 2020 01:26AM ET
This is a world where more and more people will need to rent rooms in their homes to make ends meet. Indeed, corporations like Airbnb (NASDAQ:ABNB) stand to benefit.
However, a number of 2020 IPOs have catapulted more than 100% on the first day of trading. This has occurred despite overvaluation at the initial offering price. Shares of Airbnb were no exception.
What’s going on? Large portions of the investment community are buying shares of names regardless of price or realistic earnings prospects. It’s every bit as ridiculous as the dot-com frenzy in 1999.
Is there an alternative? Government bonds across the globe yield less than inflation. In quite a few instances, negative nominal yields guarantee loss of principal. At present, there’s $18 trillion in negative yielding debt.
Perhaps ironically, those who may not have the stomach for stock volatility are seeking “safety” in the debt of junk-rated companies. Many of these corporations could go bankrupt in the current recession or the next recession.
That hasn’t derailed “safe haven seekers” from acquiring junk. Their actions have pushed junk bond yields to record lows.
The best way to describe the current era? The New Abnormal.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.