Is the Market in a Bubble... Again? Also, Top-Ticking the Market, and Something's Missing From a New MedTech ETF

Up first, at its peak late last year, was the market in a bubble... or in the throes of a mania? With the market clawing back some gains from the big drop this year, is the bubble merely reinflating? Or are we back in full-scale mania mode? Neither? Both? But first, you have to answer... […] Not rendering correctly? View this e-mail as a web page [here](. [Empire Financial Daily] Is the Market in a Bubble... Again? Also, Top-Ticking the Market, and Something's Missing From a New MedTech ETF By Herb Greenberg --------------------------------------------------------------- [Man Who Called AMD at $2: 'An Odd Shift is Coming for the Stock Market']( My system is signaling something odd. A strange shift ahead for the stock market. I believe a few surprising stocks will soar as the Fed raises interest rates. And you could profit, if you get in now. [Click here and I'll give you a sneak peek into my highly sought-after stock market system]( and tell you exactly how to prepare for the next interest rate hike. --------------------------------------------------------------- Up first, at its peak late last year, was the market in a bubble... or in the throes of a mania? With the market clawing back some gains from the big drop this year – today notwithstanding – is the bubble merely reinflating? Or are we back in full-scale mania mode? Neither? Both? But first, you have to answer... Which came first, the mania or the bubble? The answer can be found in a late 1990s edition of Charles Kindleberger's classic, Manias, Panics, and Crashes... The word mania emphasizes the irrationality; bubble foreshadows the bursting. First published in 1978, the late MIT professor's take on market extremes has been revised multiple times over the years, even after his death in 2003. I was lucky enough to [interview]( Kindleberger back in 1997, just as a bunch of folks were convinced the market at that time was a bubble bound to burst. But it wasn't the bubble part of what he was saying that caught my attention, but what Kindleberger believed was behind the bubble... He felt it was largely the result of the inflow of all of that 401(k) money into mutual funds. As he put it... It's a bit of a rush of the lemmings toward the cliff. I've been thinking that for six months, and I've been wrong for six months. To which I wrote... That's the thing about bubbles: There's no saying how large they get before they burst. Or whether the bursting will be cataclysmic. Three years later, that one did (burst)... and it was (cataclysmic). But that's not what has me intrigued. Back then, Kindleberger said stock prices were inflated by the average guy pouring money into mutual funds. This time, it was the average guy pouring money into "meme stocks," special purpose acquisition companies ("SPACs") and, more broadly, the highest-flying exchange-traded funds ("ETFs"). That's the thing about the markets... No matter what anybody says, it's never really "different this time." Next time it won't be either. --------------------------------------------------------------- Recommended Link: ['God Code' Now Programmable]( For the past 50 years, developers and programmers used the binary code to create every piece of software you use today. But now, highly specialized programmers are using a different code to make everything from vaccines to plant products to data-storage devices and more. McKinsey, a leading consultancy, claims this code will usher in a $4 trillion industry. And Wall Street is starting to take notice. The man CNBC nicknamed "The Prophet" says he's found the one little-known company that has the potential to rule this industry and become America's Next Big Monopoly. [Get the full details here](. --------------------------------------------------------------- Next up, speaking of bubbles bursting... In the [November 19 Empire Financial Daily]( – titled, "Concerns of 'Delusion'​ – Are Private Company Valuations the Canaries of the Stock Market?" – I said... In the very least, the relationship between private and public valuations – and the warnings being raised by those who stand to make the most – should serve as a reminder that the higher stocks go without a correction, or even a pause, the greater the risk. As it turns out, that day was the peak of the Nasdaq's year-and-a-half melt-up, with the index closing at 16,057. (Dumb luck will do it every time.) Over the subsequent four months, the Nasdaq tumbled 20%. It's now down a mere 10% from the top. Meanwhile, the S&P 500 Index – rocky as it became – didn't fully crack for six weeks after the Nasdaq. Before it did, [I pointed out]( the "Ponzi" nature of the market and [questioned]( whether valuations were starting to matter. (They did.) Moving on, I confess to being a fan of medical technology, or 'MedTech'... So I took a special interest in a new ETF launched last week by Lux Capital, the First Trust Nasdaq Lux Digital Health Solutions Fund (EKG). Lux is a venture capital firm, which has put together a handful of thematic indexes. This is the first one that Lux is actively investing in. As Lux's managing partners put it in a blog... The equity market pullback in life sciences and technology provides a more attractive entry point for long-term investors seeking exposure to secular mega-trends that we believe have duration into the decades. And that's the point with MedTech and biotech – it's just so hard to pick winners. And even if the technology looks promising, as I wrote on Twitter the other day... Betting on any single MedTech can be dicey. Lotsa landmines, booby traps, promoters, false positives, and false negatives. I've been fooled with the best of them, mostly being too negative on companies that went on to do exceedingly well. As currently structured, the fund has 59 names. One that's noticeably absent from the list: Edwards Lifesciences (EW). Edwards was my top "free" pick during the special event to launch my [Investment Opportunities newsletter](. It's also one of my favorite companies – period – but I'm highly conflicted and biased because an Edwards heart valve is thumping away in my chest. Still, I warned that at these levels the stock is considered expensive. And in an expanded write-up in the April edition of Investment Opportunities, where I added Edwards to the Watch List, I added more concern. But even with that concern... given that the company is by far and away the biggest maker of tissue heart valves, the leader in the rapidly growing world of transcatheter aortic valve replacement, and seemingly far ahead of the pack on transcatheter mitral and tricuspid valve replacements – spending an impressive 20% of its revenues on research and development (R&D) in the process – I would have expected to see Edwards toward the top of EKG's holdings. However, the fine print shows that to qualify for inclusion, each company: - Must have a minimum free float market capitalization of $500 million and a three-month average daily trading volume of at least $3 million. - Must have annual revenue growth of at least 10% in each of the two preceding full fiscal years. In 2020, due largely to COVID-19 when hospitals were shut down for almost anything that wasn't pandemic-related, Edwards missed that annual growth metric. The trouble is, so did quite a few of the bigger MedTech companies that made the list for EKG. Why isn't Edwards there? Valuation? No idea. As a sidenote: One reader, a portfolio manager, shared a report he wrote on Edwards in April 2001, shortly after it was spun out of Baxter (BAX). With the stock at around $19 per share ($1.89 after splits) and a market cap of $1.2 billion, the analyst made a compelling case that the stock could rise to roughly $30 per share. (Back then, that would have been considered a good "investment.") Today Edwards trades at around $120 per share, with a market cap of roughly $75 billion. Reflecting on how well it did, that reader wrote me yesterday, saying... After selling the stock due to its high valuation, I never looked back until reading about your recommendation, which made me realize that I had sold too early what became a 100-bagger... Oy vey! Oy vey, indeed. As always, feel free to reach out via e-mail by [clicking here](mailto:feedback@empirefinancialresearch.com?subject=Feedback%20for%20Herb). And if you're on Twitter, feel free to follow me there at [@herbgreenberg](. My DMs are open. I look forward to hearing from you. Regards, Herb Greenberg April 5, 2022 If someone forwarded you this e-mail and you would like to be added to my e-mail list to receive e-mails like this every weekday, simply [sign up here](. © 2022 Empire Financial Research. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Empire Financial Research, 601 Lexington Ave., 20th Floor, New York, NY 10022 [www.empirefinancialresearch.com.]( You received this e-mail because you are subscribed to Empire Financial Daily. [Unsubscribe from all future e-mails](