‘Market collapse or a massive increase in rates’: Ackman

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OPINION: Snap might look cheap after its startling 43 per cent fall, but market heavyweights warn worse may be to come for growth stocks as inflation rages.

hero Michael Burry and hedge fund titan Bill Ackman.There’s something almost comical about the status that Burry’s infrequent tweets on the market have taken on; the fact he deletes them all almost immediately clearly adds to the mystique.

There certainly weren’t many buyers for Snap shares on Tuesday night, and its fall helped drag down Wall Street with it.But at the risk of sounding terribly old and completely out of touch, the most surprising thing about Snap’s plunge isn’t that it could lose 43 per cent of its market capitalisation in a day, but rather the fact it could still be worth $US21 billion at the end of the carnage.

, wiping a combined $US165 billion from the value of Facebook owner Meta, Google owner Alphabet, Twitter and Pinterest.But Snap’s warning of a sudden deterioration in the US economy will reverberate beyond that, given last week’s big falls in retailers, including Target and Walmart, which reported profitability was under pressure from rising costs and slowing spending on goods.Still, not everyone is deterred by Snap’s historically ugly day.

In his latest quarterly letter, published on Tuesday night, he argues “growth traps” can be even more dangerous than the “value traps” that most investors are familiar with. But Inker argues that traps are actually more prevalent in the world of growth stocks. “In a typical year, about 30 per cent of stocks in the MSCI US Value index turn out to be value traps, and they underperform that index by 9 per cent on average.“But what seems to be somewhat less well-known is that growth traps are both more common and more painful than their value brethren, with a prevalence of about 37 per cent of the MSCI US Growth index and an underperformance of 13 per cent on average.

 

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