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Sliding tech stocks: A blip or a bursting bubble?
http://www.sfchronicle.com/news/article/Sliding-tech-stocks-A-blip-or-a-bursting-bubble-5390505.php
"A monthlong slide in Internet and biotech stock prices could be just a correction. Or, in one analyst's view, Wall Street is about to be overturned like a Smart car in San Francisco.
"You have a stock market that's insanely priced, that's the problem," said Fred Hickey, editor of the monthly High-Tech Strategist investment newsletter of Nashua, N.H. "What we saw in the last couple of weeks is a warning sign for the rest of the market. Get out, while you have a chance."
Hickey speculates the rising income gap between rich and poor contributed to vandals overturning Smart cars this week. "They're flipping cars in San Francisco," Hickey said. "The average American is not doing well."
Internet and biotech companies' stocks have fallen by more than 20 percent since early March after a bullish run-up that started last year. The drop caused analysts like Hickey to wonder if the market will soon suffer its third bubble burst since 2000.
"Like I said in 2000 and I said in 2007, you're going to have a problem," Hickey said. "So how it all plays out, I don't know. I just know ... it's going to end somehow in a terrible depression."
'Just a little jolt'
However, some observers say the recent slide is nothing more than a blip.
"I don't think this is a tech bust," said Jack Albin, chief investment officer of BMO Private Bank of Chicago. "This is probably just a little jolt underneath the surface. Otherwise, I think things are in good shape."
Indeed, tech stocks rebounded Wednesday after a broad rally fueled by the Federal Reserve's report that the central bank's policymakers won't raise interest rates before they are sure the U.S. economy has recovered.
The Dow Jones industrial average, the Standard & Poor's 500 and the tech-heavy Nasdaq all posted 1 percent or more gains. Menlo Park social networking giant Facebook led the charge with a 7.3 percent surge, closely followed by a biotech firm, Vertex Pharmaceuticals.
But tech and biotech stocks also led a sharp drop in those indexes that started in early March and continued through last week. The Nasdaq, for example, fell 2.5 percent in March and was down as much as 2.1 percent this month.
Analysts said investors were selling out of growth stocks - higher-risk, but with greater future rewards - and moving their funds to companies with more tangible profits. So, for example, stock in San Francisco's Twitter recently fell by as much as 34 percent, and Seattle's Amazon about 18 percent.
"If you've got a growth story, you don't have a lot that you can sink your teeth into," he said. "Then it's really a leap of faith."
Biotech stocks fall
Biotech stocks have declined partly because of concerns about Gilead Sciences, the Foster City pharmaceutical company that recently received federal approval to sell an expensive blockbuster hepatitis C drug, Sovaldi. Overall, investors fear the rising prices of new therapies are unsustainable.
In addition, 29 life-science companies went public in the first quarter and raised more than $2 billion - a gold rush that fueled speculation of a bubble.
"Given the biotech and tech sectors' heightened sensitivity to investor sentiment, these sectors are volatile by nature," said Andres Garcia-Amaya of the J.P. Morgan Funds Global Market Insights Strategy Team. "At the beginning of the year, both sectors had lofty valuations and hefty earning expectations, so I view these past few weeks as a healthy correction."
He also said the recent sell-off gives investors a new opportunity to buy stocks because "the baby is often thrown out with the bathwater in environments of heightened volatility."
But Hickey of High-Tech Strategist said other factors that are similar to the previous two market busts point to a more serious problem ahead.
Those include a rush of new IPOs from companies that are not yet profitable and continuing unemployment problems. He also criticized the government's economic policies.
"This is the worst recovery in history," Hickey said. "
"A monthlong slide in Internet and biotech stock prices could be just a correction. Or, in one analyst's view, Wall Street is about to be overturned like a Smart car in San Francisco.
"You have a stock market that's insanely priced, that's the problem," said Fred Hickey, editor of the monthly High-Tech Strategist investment newsletter of Nashua, N.H. "What we saw in the last couple of weeks is a warning sign for the rest of the market. Get out, while you have a chance."
Hickey speculates the rising income gap between rich and poor contributed to vandals overturning Smart cars this week. "They're flipping cars in San Francisco," Hickey said. "The average American is not doing well."
Internet and biotech companies' stocks have fallen by more than 20 percent since early March after a bullish run-up that started last year. The drop caused analysts like Hickey to wonder if the market will soon suffer its third bubble burst since 2000.
"Like I said in 2000 and I said in 2007, you're going to have a problem," Hickey said. "So how it all plays out, I don't know. I just know ... it's going to end somehow in a terrible depression."
'Just a little jolt'
However, some observers say the recent slide is nothing more than a blip.
"I don't think this is a tech bust," said Jack Albin, chief investment officer of BMO Private Bank of Chicago. "This is probably just a little jolt underneath the surface. Otherwise, I think things are in good shape."
Indeed, tech stocks rebounded Wednesday after a broad rally fueled by the Federal Reserve's report that the central bank's policymakers won't raise interest rates before they are sure the U.S. economy has recovered.
The Dow Jones industrial average, the Standard & Poor's 500 and the tech-heavy Nasdaq all posted 1 percent or more gains. Menlo Park social networking giant Facebook led the charge with a 7.3 percent surge, closely followed by a biotech firm, Vertex Pharmaceuticals.
But tech and biotech stocks also led a sharp drop in those indexes that started in early March and continued through last week. The Nasdaq, for example, fell 2.5 percent in March and was down as much as 2.1 percent this month.
Analysts said investors were selling out of growth stocks - higher-risk, but with greater future rewards - and moving their funds to companies with more tangible profits. So, for example, stock in San Francisco's Twitter recently fell by as much as 34 percent, and Seattle's Amazon about 18 percent.
"If you've got a growth story, you don't have a lot that you can sink your teeth into," he said. "Then it's really a leap of faith."
Biotech stocks fall
Biotech stocks have declined partly because of concerns about Gilead Sciences, the Foster City pharmaceutical company that recently received federal approval to sell an expensive blockbuster hepatitis C drug, Sovaldi. Overall, investors fear the rising prices of new therapies are unsustainable.
In addition, 29 life-science companies went public in the first quarter and raised more than $2 billion - a gold rush that fueled speculation of a bubble.
"Given the biotech and tech sectors' heightened sensitivity to investor sentiment, these sectors are volatile by nature," said Andres Garcia-Amaya of the J.P. Morgan Funds Global Market Insights Strategy Team. "At the beginning of the year, both sectors had lofty valuations and hefty earning expectations, so I view these past few weeks as a healthy correction."
He also said the recent sell-off gives investors a new opportunity to buy stocks because "the baby is often thrown out with the bathwater in environments of heightened volatility."
But Hickey of High-Tech Strategist said other factors that are similar to the previous two market busts point to a more serious problem ahead.
Those include a rush of new IPOs from companies that are not yet profitable and continuing unemployment problems. He also criticized the government's economic policies.
"This is the worst recovery in history," Hickey said. "
I dont care if it goes thru the floor. Maybe that is what it will take to straighten things out.
It was down another couple of hundred at the close of today.
It was down another couple of hundred at the close of today.
This is going to be a repeat of the 1999-2000 "dot.com" bubble that burst onto the scene so quickly, only to burst OFF the scene even more quickly.
Fast up, fast down. Slow up, slow down. Kind of a good rule-of-thumb in finances, IMHO.
Fast up, fast down. Slow up, slow down. Kind of a good rule-of-thumb in finances, IMHO.
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