No, I'm not talking about Nasdaq. I'm talking about momentum investors being doubly leveraged in January and February because they were using money as collateral in margin accounts that was due to be withdrawn by April 17. If we assume that they were momentum investors then they played the last groups that were going up, notably B2B and Biotech. If you look at the charts, those two sectors topped out March 10, not like Amazon which topped out much earlier...and had sold off much less from it's March 10 price.
Hey, I'm not proposing this as dogma. It's just an interesting take, and it has some real-world components. To me its better than anything else I've heard.
NASDAQ is a big average, and it has all sorts of components, but it is capitalization-weighted. The formerly biggest component and probably the largest contributor by far to Nasdaq's decline, Microsoft, has suffered fundamental damage by Judge Jackson's decision, and if his decision is upheld it will not be the same company. It would be hobbled with competitive restrictions (the kind of restrictions that hit at the core of the company's historic growth tactics) and it would face huge cash payouts from slam-dunk triple-damage cases. (As a former Netscape investor, frankly I can hardly wait).
There is a chance that momentum investing could be repudiated and we're in for a tortuous readjustment. I don't think that will happen because this decline was a momentum event in itself. Plus in this instantaneous-communication culture every player on earth is aware of movement and is attracted to it. It's a network-effect phenomenon.
Most importantly we war babies, the key principal cause for this bull market, still have under-funded retirement assets and are years away from needing them. Those assets are not leveraged, and contributions are systematic...and growing because we are in our prime earning years. The war babies have overheated everything we touched in our history because there are just so many of us. Schools in the 50's and 60's, popular culture and politics in the 60's and 70's, real estate (and the general economy as be built households and took jobs) in the 70's and 80's, now the the stock market in the 80's, 90's and 00's. I'm on the older edge of this hoard, and I've seen it first-hand.
Lastly...to address my favorite sectors, the Internet complex and biotechnology...there are no industries with growth prospects that come close to them, and they are principally American inventions, and the highest-quality investments here on Nasdaq. Most of the capital is attracted to the US market with few notable exception like Nokia, Siemens, Nortel, etc.
There is NO WAY the technology genie is going back into the bottle. Applied information technology saves time and money. It pays for itself in very short order. Biotechnology is at the most promising stage of its long evolution. There is always enough money around to sponsor growth. |
