Amusingly (to me anyway) I called it a fever, that word just popped in and I went with it. If I may expand on my nine second sound bite...
These short manias happen from time to time. I brought up the example of Comparator Systems from the mid 1990s another one from roughly the same time was Andrea Electronics, there have others before and more importantly there will be others in the future.
Michael Kahn mentioned the current episode in Barrons yesterday.
This is one of many behaviors that repeat over and over in the market, that is just how it is. My comments in the segment were essentially if you want to go for it go ahead, people are making money for now and at some point it will end one way or another and the last buyer will be out of luck.
Thinking of this sort of speculation as bad or good is probably the wrong way to look at it. It certainly may not be your type of trade, it is unambiguously not my trade, but this sort of thing comes along every so often, some people make money, some lose money and then it peters out at some point.
If people want to speculate that is fine of course save for the occasional person who does not realize what is going on which is a great stresser for why it is crucial to understand what you are buying.
In terms of any implications for the bigger picture I think of big speculative manias as being warning signs. The widespread willingness to gamble in this sort of manner strikes me as being emblematic of tops be they intermediate or something else. I should say that I have not researched this and so the data could easily prove me wrong but the occasional contrarian within leads me to want to lean a little the other way.
8 comments:
I wonder if this is really "widespread" gambling or just a bunch of the hot money hedgies all rushing into the same few stocks. John Paulson was fabulously successful shorting them on the way down and is now going long. I'll bet lots of his competitors are trying to ride on his coattails, but John Q. Public...?
It doesn't change your point, of course, and probably means even greater volatility as they all hover around the sell buttons on their computers and try to game September.
Good post. These spasms are always interesting one way or another, although it seems a high percentage end in tears sooner rather than later.
The statement, "save for the occasional person who does not realize what is going on," sticks out, since what usually characterizes situations like these is that people rush to the action and very many don't realize what is really going on.
i struggled a little with "occasional..." because you're right it could be many
Yes, but as long as the Fed is accommodating this bull will keep going. ZIRP is as accommodating as I can ever remember.
I should check out the video again to see if you mention volume. How can you tell if it's an old fashioned "fever" or if it's just Goldman making a computer generated profit? heh.
There are times when being an observer of the market is a better idea than fully participating.
I think now is one of those "times".
T
Speaking of fevers: FT reported yesterday that junk bonds are up 40 percent, topping previous record of 39 percent in '91.
So natch, a whole lot more product is going to be shoveled out the door after Labor Day.
Nothing like a little junk to spark a portfolio. You betcha.
BillM
Roger,
Don't be used by CNBC anymore. I enjoy your blog, have for some time,read you every day. Much concurrence!
You go on tv to talk value and they
turn it into trash about the unusual volume in trash stocks. As far as tv is concerned, be anonymous. CNBC is all hype, a GE
organ and GE is an organ for Obama.
Here's to better values!
Dynan Candon
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