Investors should be cautious as more and more stocks are priced based on measures other than the number of earnings or profits their parent companies produce every quarter, warned CNBC's Jim Cramer on Monday.
Too many stocks are traded on "unconventional valuations" that make the market harder to establish, something the Crazy Money host said was reminiscent of a scandalous period about two decades ago.
"You have to be skeptical of markets, whole markets where more and more stocks are valued at something other than profit. This happened during the dot-com crash ̵
During the dots bubble, in the mid-1990s to early 2000s, they, the highly speculative internet shares, were Wall Street's hottest assets. collapsed, shedding nearly 80% of its value within seven months in 2000.
Wall Street trading was practically flat during Monday's session, with the Dow Jones Industrial Average advancing less than 15 points and simply it narrowed to 26,950 points, while the S&P 500 and Nasdaq Composite slipped even 0.1%. There are too many "different indicators" to keep up, Kramer said, citing companies like Netflix, Facebook and Alphabet to support his case.
Netflix shares fell nearly 1.8% one day after the streaming platform returned four awards to 71st Emis, with the exception of nine HBOs and seven Amazon statues. Cramer set a drop in stock prices as a reaction to Netflix's appearance on Sunday's event. The company would probably see a big boost in subscription if it wins more awards against its two rivals.
"There was nothing to make people say, 'You know what, wow … look at all these awards? "I am missing too much content. "That's why today's stocks hit," the host argued.
With regard to Facebook and Alphabet, Kramer said that stocks in the internet giants would be higher if judged on revenue. Instead their shares were traded based on news updates about antitrust companies' investigations, and Facebook shares fell 1.6% on Monday after a Wall Street Journal report said competitor Snap was working with the Federal Trade Commission to deal with hardball hippo tactics in social media
Google The Alphabet auditor, facing federal and state investigations, was able to make a profit of 0.39% because there was no negative news for the company.
Kramer also noted that other stocks, such as Johnson & Johnson, McKesson and Boeing, they trade mostly with poor publicity, not results.
"I have a dozen more examples in my head. A dozen examples of stocks that just don't trade in profits or sales anymore, "he said. "When there were only a few of these names, it was good. But nowadays there are so many of them that it becomes much more difficult to analyze what is happening in the wider market."
The homeowner advises that it is safe to own only one or two stocks from companies that are rated on "weird metrics" because they take a lot of patience. He also suggested buying other names that have high dividend yields and be skeptical of a market that is largely unprofitable.
"You can only go on for so long based on something other than profit before we have to accept that valuations in other words is not a normal market, so we have to be careful. "
WATCH: Cramer distorts the market
Disclosure: Cramer's charitable trust owns shares in Facebook, Alphabet and Johnson & Johnson.