At 40 times earnings, there is a 0% chance that Microsoft stock will produce wealth for someone over the next 10 years to meet their needs, Cole Smead says
by Shawn Langlois
‘The buying that went on in August and September is a 10-year phenomenon the likes of which we have never seen, among millennials and in the risk-taking among people that don’t want to own bonds and want to own overpriced U.S. quality businesses, it is of record proportions.’
That’s Cole Smead, president of Smead Capital Management, explaining in a CNBC interview on Thursday how “young, dumb” investors have created a “total nightmare” in the current climate.
Smead went on to say that these nosebleed valuation levels are an example of a “stock market failure” at the hands of these inexperienced millennials who have gotten lured in to taking oversized risks in equities for the first time in their lives.
“They are buying bullish call options that expire inside two weeks. There was ($500 billion) of bullish call options bought in a four-week stretch by small retail traders,” Smead said. “In ’99 it was $100 billion, in ’07, it was $100 billion.”