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Editors
Note: Tesla (TSLA) is taking the market by storm. So far this year it
seems the stock is simply incapable of going down as evidenced by a 65%
increase since January 1. The latest jump in the stock, to a record high
of $248 on Tuesday, was ...
Breakout
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Tesla zooming as market climax nears
Editors Note: Tesla (TSLA)
is taking the market by storm. So far this year it seems the stock is
simply incapable of going down as evidenced by a 65% increase since
January 1. The latest jump in the stock, to a record high of $248 on
Tuesday, was thanks in part to a renewed focus on battery production.
Tesla is just one of several high momentum stocks that concerns "friend
of Breakout" Josh Brown. He says it might be a sign of bad things to
come for the market as a whole. The following is a guest post from Brown
and was originally posted on his blog The Reformed Broker.
This past week’s $19 billion Facebook binge
felt like the beginning of a climaxing of sorts – the type of deal that
usually comes to punctuate the end of a great bull market (think AOL-Time Warner, the LBO of Equity Office Properties)
or at least speeds up the gallop into the end. It’s either the sound of
the curtain dropping or it’s the gun fired just as the dogs round the
last lap on the racetrack.
Either way, it’s ominous as hell to those of us with a memory. Facebook (FB) at 70, Tesla (TSLA) at 200, Netflix (NFLX) at 450, Google (GOOG) at 1,200, it’s all of a piece.
Jeff
Mortimer of BNY Mellon Wealth Management tells Bloomberg News about
some similar activity he’s seeing – namely the fact that stocks that
lose money are the new leadership group on The Street:
Two things explain why the biggest gains in the U.S. stock market this year are coming from companies without profits, according to Jeff Mortimer of BNY Mellon Wealth Management: Greed, and fear of missing out…
Unprofitable
companies such as Zynga Inc. and FireEye Inc. are leading gains in
the Russell 1000 Index. The Nasdaq Biotechnology Index is up 25 percent
in the past 10 weeks, the most since February 2012, data compiled by
Bloomberg show. Less than a third of its 122 companies earned any money
in the last 12 months. Marijuana shares, which trade on venues with less
stringent reporting requirements, are among the most active.
“In
this backdrop of human emotions, which begins to take over, it’s one of
greed, it’s one of willing to pay for something that will happen in the
future and being afraid that one might be left behind.”
I’ve seen this kind of thing before.
I
was around in ’99 when they started taking companies public for
billions of dollars just because they had the word “Linux” in their
names. I saw 3Com take 5% of its Palm subsidiary public in 2000 and
watched as that 5% little stub became worth more than all of 3Com – the
parent company that owned the other 95%, plus its own business.
We’re not quite there yet, but we’re well on our way. Anyone who tells you otherwise or pretends that this is normative, rational behavior is a dangerous idiot with no sense of market history.
end quote from:
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