Thus, in a sense, to him the fall is written on the screen. To justify this, the new sectors will have to account for at least 50 to 60 per cent of the GDP, which clearly is not realistic. World-over technology, media and communication stocks account for 40 per cent of global market capitalisation while their contribution to global GDP is less than 10 per cent. Clearly a huge downside risk. If I were investing I would sell new economy stocks and buy old economy stocks.
Bubbles burst when people lose money and it is happening.
When people lose money sentiment changes. The tech sector is a classic case of crowded trade with everybody betting on the same item. In other words, when the bubble does burst all those who are buying at any price now, will be selling at every level. Faber believes that the Nasdaq, which is around 4400 now, will go down to about 1000. True the two are not integrated but the inherent risk comes from a vacuum.