FAANG’s Falling. $1 Trillion Drop, So Far

FAANG’s fell from the bull's rush, and entered the bear's claws, leaving a trail of $1 trillion in capital losses compared to their combined 52 week high. Empirical data, statistical forecasts, and market corrections are parts that compounded to NASDAQ’s superstars’ descent. But, it's also a human nature thing.

Facebook loses face over geopolitics and privacy security issues. Amazon investments and tax break backfires. Apple’s iPhone zoning out. Netflix not getting clicks for subscriptions. To Google employees’ walkout to remind the company, “don’t be evil”, these fundamental factors are the explanations given for the group’s recent selloff, as well as, the market’s correction of overpriced stocks, of course. But, all these factors are based on something that can be very tricky to grasp through pure empirical observations.

 

People add social values to things, and people make profits from adding these values. If social values don’t matter, then the difference between an iPhone and an Ifone would be the products’ actual functional integrity. Brands in a sense won’t exist. The stock market might be less volatile, and become a futile patch to put your money in and watch it grow, yay, or perhaps there won’t be a market of any sort at all. A world where everyone wears white when they feel hot and black when they feel cold. It is the intangible values that actually steers the economy. The communist experiments can testify to our fickle nature when tempted with all the colors, scents, luxury and fast foods of the capitalist society.

 

Giving something social value is like subscribing to a faith. Products become amulets that protect us from rejection, social media, our magic mirror to see who is fairest of them all. It is human nature to want to give meaning to our decisions. We want to label actions as right and wrong. The FAANG quintet that has been a major contributor to the US stocks’ market reemergence is now facing questions of faith from its followers. And, thus, raising doubts about their profitability in investors.

 

Market sentiment functions like social values in that it’s more of a feeling than something derived from rigorous statistical analysis, or going through a company’s entire financial statement and actually comprehending it. People don’t want to know how a financial analyst comes up with the forecast, they just want to know if the analyst is right. People buy according to the values they believe in. They buy trust.

Our trust in present technology has brought us to a digital dawn where its dusk seems it would be the end of civilization itself. Other epochal breakthroughs like the steam engine, or plastic and petroleum probably had the same zealous fans. But, even the most profound followers can be swayed. It is human nature to want something to trust in, and at the same time to be able to distrust it, to scrutinize it. FAANG is going through scrutiny on a societal level, and it is reflected through market sentiments. Aggregated numbers are crunched in the aftermath to confirm the size of the storm. There are many ways to configure statistical forecasts, and too many inaccuracies in forecasting to bet your house on them.

 

In the end, and through hindsight’s perfect vision, everything is flimsy, and digital technology probably will be not so different. So, the investor needs to always keep the mind vigilant and read the writing on the walls, and keep in mind that in stocks, what goes up eventually falls, and that the question is not just when will stocks fall but how low.