I was looking at the stars. Not the ones you’ve seen. Silently opaque through the silver limousine. Floating in the air, powdering to preen. Chandeliers will crack – crumble reconvene. Is there a pride before we fall? Born of the night time, wait in desire for something more. Bored of the night time. I don’t know what to take now. I will wait for the upward feeling, meant to be any day now. Will I ever be something more than strange, strange or be forgotten. These lyrics open the song by the closing track of Volcano the 2017 album by English psychedelic rock band Temples. In the song, writers James Bagshaw and Thomas Smith, discuss the ethereal nature of celebrity.
I have long been interested in the nature of our celebrity culture. It seems to me amazing how so many people adore folks that they do not really know, have never met, and often have never even seen. That is not to say that I would not run off with Stevie Nicks if given the chance, but I have at least met her.
Celebrity culture has been around at least as far back as ancient Egypt. Are not the pyramids giant billboards to promote the Pharaohs? In fact, the earliest known representation of a king was on an incense burner from a pre-dynastic tomb from Nubia. And while the media may have been different at the time, celebrities have been around forever. Probably the earliest celebrities (who were not political or military leaders) were sports heroes: Winners of the Olympic games in ancient Greece, Mayan ball court champions, gladiators in Rome. During the Middle Ages religious figures became celebrities, and people would make pilgrimages to see various saints and their relics. After the Renaissance, musicians, writers and artists (think Leonardo DaVinci, Handel, Shakespeare) became the celebrities de jour.
America’s first celebrity was probably Washington Irving, who was, during his time, easily as popular as any movie star or singer today.
The point is that people have always flocked to celebrity in some form or another. This morning, while watching the business news, I realized that we have another form of celebrity, one that in some ways harkens back to celebrity inventors and businessmen of the late 18 and early 1900s. Back then, people like Thomas Edison, William Hurst, Andrew Carnegie, and Henry Ford were all media stars. Today, while there are still the Elon Musks and the Mark Zuckerburgs, in many ways, companies themselves, and more importantly their stocks, have become celebrities.
What makes this different than traditional celebrity is that, rather than people blindly following the activities of a person, they are blindly spending money to purchase stocks – often based solely on their celebrity.
There are some obvious instances where this has led to some pretty big losses. Most noteworthy today, is WeWork – and while that is not a public stock, Softbank and its shareholders have certainly lost a lot investing in a company with almost zero assets. Other major failures included Time Warner’s purchase of AOL for $165 billion, when AOL was really nothing more than a room full of modems, Pets.com, a company where the major asset was a sock puppet, and more recently, both Uber and Lyft, companies that lose money on every sale that they make. In fact, according to a recent CNN article, the 10 largest IPOs this year have together lost $44.7 billion in value – and this includes Beyond Meat, which alone generated a $6.6 billion market cap gain.
But it is not these stocks that are the true celebrity stocks. Here you need to look at the FAANGS, and to this I would add Tesla. These stocks are: Facebook, Amazon, Apple, Netflix, and Google (Alphabet). These companies are together constitute about 12.5 percent of the total S&P 500 in terms of valuation, and have a P/E ratio of over 40. Some, like Apple, and to some extent Google, are real companies operating with reasonable multiples and generating actual profits. Others, particularly Amazon are not. Add to this Tesla, with a current P/E of about 72 and you have a giant blob of really overvalued stocks ruling the market. These celebrity stocks, like Uber, Square, Slack, and so many others, generate their market capitalization based more on media worship and the same sort of adoration that the Kardashian sisters have, than they are on reality. In effect, they are the Kardashian’s of the equity world – beautiful to many, but empty inside.
The US economy is currently at an inflection point, and many economists are just waiting for the first shoe to drop. The bets are being mostly placed on the debt markets, but were retail investors to fall out of love with their current celebrities, the equity markets could lead the next downturn.
How many of today’s investors remember Lillian Gish, or Noble Johnson, or Charles Babbage or Beau Brummell, some of the biggest names of their day? The same will probably be said of Uber, Amazon, and Tesla Motors in the future. They may never be something more than strange, strange or be forgotten.