Momentum gives way to fear and other updates
The markets are acting weak and there’s even some fear finally starting to creep back in as the bulls find the latest all-time highs being rejected like a bad layup in the Sweet 16. Momentum stocks in particular are being hardest hit, continuing the trend from last week. The biotech index is in a veritable crash pattern at this point. Down 12% in the last few weeks, and nearly 10% in the last two trading sessions, biotech is the poster child for euphoria giving way to fear.
We added XRT and other puts and short hedges in recent weeks and the Pandora short from just ten days ago is working well for us as the stock continues to crash, down 8% again today. I’m holding all of the new positions steady for now. I’d like to see a real panicky sell-off in the broader markets of 5-10% from here before I start peeling back towards a more aggressive net long stance.
Lots of interesting headlines and some deep thoughts to touch upon, so let’s jump right in.
GSV Capital Corp. Reports Fourth Quarter and Fiscal Year 2013 Results of Operations – I let what was left of my GSVC puts which were up huge anyway, convert into GSVC short common stock on Friday when they expired. I’d sold most of them awhile ago for big profits, taking advantage of the GSVC spike into Twitter’s IPO, and I think this stock still has much more downside over coming weeks and months, as its valuation remains stretched. GSVC remains a good hedge to our Facebook and other highflying longs.
Apple, Comcast in streaming-TV talks – Amongst the big global tech corporations, I guess it’s basically a standard assumption at this point that Net Neutrality, in which all traffic on the Internet is treated equally no matters its source, Is Dead. An unlevel playing field for Internet content providers is bad for freedom, for the economy, and bad for you, but it’s yet another net benefit for profiteering by these giant tech companies, and shareholders will benefit. So, stick with Apple, Google, Netflix, and the other giant Internet content providers who are big enough to pay for unfettered access like Apple is trying to here.
Gold Drops to Four-Week Low – In recent columns here, I’d written repeatedly things like, “I do think the big banks and the Fed want gold lower and they’re doing everything they can to crash it another time or two before the end-game finally comes some day.” And so it goes. I stepped up and bought some silver bars on sale late last week, and will continue to add to my physical gold and silver holdings judiciously on weakness or when I find some on sale.
Why you can not afford to be a bull or a bear – Terrific article from LunaticTrader. In it he asks, “When was the last time you changed your mind about the direction of the market?” Well? My last time was in 2009 when I turned from bear to bull. And before that I’d turned from bull to bear in 2007. Changing your mind about the direction of the market and/or individual stocks is a key to long-term success.
Apple Sapphire Crystal Display Rumors Buoy GT (GTAT) Shares – I don’t doubt that GTAT will benefit from increased demand from Apple and others for their Sapphire Crystal Displays. But this run from $4 to $19 over the last few months reminds me of another time I was on Kudlow & Company with the CEO of a Titanium company that had just signed a new supply deal to Boeing for billions and the stock was up 500% or something over the last few months into the announcement. The stock was TIE and it never touched those levels again and was bought out six years later for 65% less than where it had traded back at its highs upon the announcement of that supply deal. I’d rather sell the news on GTAT up here. The stock is wildly overextended and it will take a lot of growth to justify the current levels already.
