I have seen various short selling markets in my career. The first one, the dot com bust, was driven by over investment in a huge variety of internet and telecom assets. The second bear market I saw was the GFC - which at its heart was overinvestment in the housing market. The third was the commodity and emerging market sell off, which again was driven by overinvestment. By then, myself and markets had learnt that overinvestment was where stock markets went to die, and so began the great private equity, buy back market. Investors wanted companies to raise prices, cut spending to the bone, and return cash where ever possible. Large corporates did this, and so did private equity. To be honest, I hated this model, particularly in the tech space - how can a tech company not invest? But companies like Broadcom, which were serial acquirers and cash strippers did fantastically well.
Broadcom has kept capex at a ridiculously low level, even as operating cashflow surged.
But when I look at markets now, I think an interesting change is taking place. Companies are getting punished for NOT spending enough in my view.
