Here is an incontrovertible fact.
- Joshua M Brown
- November 26th, 2012
This will end abruptly and badly. You will not get a phone call or an email in advance. No one will give you the heads up.
What am I talking about?
From CNBC Net Net:
While the stock market has spent the last month in the doldrums, a few of the least respected tech and internet companies have seen their stock soar. All the stocks the experts told you to hate are doing well.
John Carney is referring to the idea of massive outperformance from the likes of Research In Motion, Facebook, Dell, Yahoo, AMD, Zynga etc. One or two of these will keep going. The rest will give traders who stay too long a second circumcision.
It is an incontrovertible fact that that which is unsustainable will not be sustained indefinitely. An investment thesis built on the premise that "things can only get better from here" is an unsustainable one.
And the thing is, in all of these stocks, it's the same people trading them for the same reasons. They will Get and Jet. You will be left with the bag when they're done.
The fundamental guys will race to come up with fundamental reasons to justify the price action we've seen. BlackBerry 10 and Marissa Mayer and traction in mobile ads and all the other stupid shit that has nothing to do with anything.
The simple fact is that there was no one left to sell these stocks, people came in to nibble, this led to trend reversal and momentum divergences flipping the short-term outlook for the stocks -not the companies - upside down.
That led to short-covering.
That led to rallying and a shift in sentiment.
Which then led to analysts, watching the price action and afraid to miss the boat, upgrading and raising price targets.
More like vapor. There is nothing there and soon enough - POOF!
Now you know how the game works.
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The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations... More.