Regan vs. Regan: No-Holds-Barred on Tech Valuations

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April 7 (Bloomberg) –- Bloomberg’s Michael Regan discusses valuations in the tech sector. He speaks with Trish Regan on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

Write about.

Saying you are not so worried about the lofty levels of the tech selloff and the continued selloff of the worst three-year decline -- three-day decline in three years.

Why are you not concerned?

Quacks like you say, there is reason to be concerned about looking at the tech sector as a whole, valuation shifts are not that big if you compare it to 2009 in 2000. for example, the technology companies in the standard & poor's 500 index trading 17.8 times reported earnings.

That is the sixth highest of 10 groups.

Sort of right in the middle.

Not really the valuation bubbles.

The nasdaq composite index.

That is purely a tech index.

Right now the nasdaq composite is trading for 31 times earnings , double the s&p 500, which sounds alarming but in 1999-2000 you are looking at 200 times.

The nasdaq 100 looking at 21 times earnings now versus in the neighborhood of 300 during the heavy bubble days.

One of the concerns and points i have made is you are running the danger of specific bubbles.

Not overall in technology but within certain sectors.

You look at social media for example and linkedin trading at more than 700 times earnings for example.

Those might be areas where people need to be concerned.

You look at the facebook acquisitions where money is seemingly almost not real.

Spending $22 billion in the mass month or so -- last month or so.

Does that give you pause, the fact that there could be sit -- specific places where there are bubbles intact right now yeah go that could be a valid concern.

Amazon pe was something like 200 a couple of weeks ago.

Obviously there will always be overpriced stocks in the market as well as undervalued stocks at any given time.

To me, the point where you want to get concerned is when it leaves into the entire market like it did in 99 the ninth and 2000. -- 1999 in 2000. certainly some of the individual names are overvalued, not just tech and biotech.

The momentum stocks, the really high flyers of the bull market have had some of the winds taken out of their sales in the past two weeks.

Again, looking at it from a perspective of the entire sector or entire sector as a whole, not that super inflated bubble.

I look at the companies out there any think about interest worth over $3 billion according to the recent round.

Look at dropbox worth roughly $10 billion.

It almost feels in some way as if some of these companies pocket $3.5 billion.

It feels ever slows slightly within specific sectors.

Has defense contributed to this yeah go pushing them further and further out, looking for risk and growth and opportunity?

I believe that is a fair assumption.

A lot of the research i has read has signaled the retreat we've seen over the past month or so is driven hedge funds that were very highly leveraged and a lot of the momentum stocks are very popular with hedge funds, and as -- at the end of last year people were wondering the fed decided they will taper in december.

Will they do it month after month.

By january and february it became clear they were on, not necessarily a clear course, but it will take bad news to get them off the course of tapering.

As a result, some of them are deleveraging a little bit and getting rid of the more speculative and risky bets they were making.

Not only do you see declines in those but a rotation into the lowered valued stocks.

Industrial companies and old-fashioned -- overvalued companies like caterpillar and bowling throwing a lot of money into those names.

The etf that tracks industrial companies through inflows that it has seen since 1999. 41998 rather.

So it is not necessarily something to be very scared about as far as the entire market but something like the entire market at this point.

Michael reagan, thank you for

This text has been automatically generated. It may not be 100% accurate.


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