Fantastic Friday – Google Gains $75Bn Overnight


That's how much the market cap of Google (GOOG) gained overnight in a 10% run that brings their market cap to $860Bn and back in contention for the Trillion Dolllar Club.  There are only 30 S&P 500 companies valued at more than $75Bn:  GE (GE) is only $92Bn, Caterpillar (CAT) is $75.8Bn and CVS (CVS) is $72Bn so, essentially, GOOG added an entire blue chip to their valuation in overnight trading.  

Did $75Bn pour into the company?  No, not at all, the overnight trading is very thin with less than 500,000 shares trading and, even at $1,200 per share and even if every transaction were a buy and not a sell, that's only $600M of inflows yet the stock shows that investors gained over 100 times that amount.  That's one of the great illusions of the stock market, the APPARENT valuation of these companies has very little to do with actual money flows – it's more like an auction where whatever crazy price the last person bids on the last share sold becomes the price of hundreds of millions of other shares – regardless of whether there is actually demand for them or not.

Google's advertising revenue growth accelerated in the second quarter of 2019, after decelerating in each quarter since the second quarter of 2018. (David Foster/Yahoo Finance)We take advantage of this foolishness all the time in our options plays, where mispricings occur daily and I'm certainly not saying that Google, with their $60 per share in annualized earnings, don't deserve a $1,200 (20x) valuation – it's just that is certainly didn't really generate that kind of interest yet and it's a good example of how many, many stocks in this market are severely overpriced – having risen to all-time highs on very thin trading which povides very little support should sentiment ever turn negative.

This morning we're going to get our first look at Q2's GDP, which is expected to come in at 1.8% and that's down 42% from Q1s 3.1% growth rate – a very significant slow-down.  The Atlanta Fed's GDPNow forecast, in fact, has lowered their projections for Q2 down to 1.3%  – quite a bit lower than leading economorons and the market will not likely take…
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