Investor Sternlicht: Parts of Stock Market a 'Speculative Bubble'

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The prominent real estate and hotel investor Barry Sternlicht has some serious reservations about speculative areas of the stock market.

“You really have two stock markets today. You have the one I grew up on. I went to business school and I learned about discounted cash flows and companies’ ability to pay dividends and grow,” he told CNBC

“And then you have a complete casino society. A complete, total speculative bubble, whether it’s the meme stocks, even some of the multiples on the tech companies that are impossible to imagine.”

The trailing price-earnings multiple for the Nasdaq Composite exceeds 28. As for meme stocks, AMC Entertainment  (AMC) – Get AMC Entertainment Holdings, Inc. Class A Report, the world’s largest movie theater chain, has skyrocketed by a factor of 17 this year.

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The current market reminds Sternlicht of the bubble at the beginning of this century.

A lot of companies are losing money when their market cap is at an all-time high, he said. “There are a lot of warnings signs that we are in the 2000 and 2001 [period] before the Nasdaq dropped 82%.”

To be sure, Goldman Sachs analysts said earlier this week that the S&P 500’s 5% slump from Sept. 2 to a week ago Monday probably won’t continue.

“Investor anxiety has catalyzed a long-anticipated S&P 500 pullback, but we believe this dip will prove a good buying opportunity, as 5% pullbacks usually have in the past,” writes the Goldman team headed by David Kostin.

“The 226-trading day stretch between last November and last Thursday ranked as the eighth longest period since 1930 without a 5% S&P 500 pullback.”