The New Economy

Those of you who are not punk kids and were trading during the dot com bubble should be very familiar with the term “new economy.” Ten years removed from the greatest bubble of all-time, which led to a 75% reduction in the nasdaq, here we are in another bubble. This time the bubble is found, yet again, in technology.

AMZN, NFLX, RVBD, CAVM, FFIV, CRM, OPEN etc. are in fatalistic bubbles. However, they also are saddled with large short positions, which serves as tinder for their respective share prices. I do not get in the way of runaway trains. If I was to explore betting against these names, I’d go with LEAPS, out of the money puts. Allocate a few g’s across a basket and just walk away. Back in the old days, I remember a good friend of mine had a monster winner: EXTR. Back then, EXTR went up everyday, like NFLX, defying all laws of gravity. The stock went up and split, then went up again. He had millions of dollars of gains in EXTR and never sold a share. He thought it would go up forever, since it was so hot for so long. The pitch was perfect and there was nothing that could derail EXTR, until the wheels fell off.

Right now the market wants to go up. There is a lot of hot money chasing a few names, so I seriously doubt we are going to see any significant sell off, barring some news.

Personally, I’ve given up on trying to time the top and will remain long biased until we overheat or breakdown. I like stupid stocks, like CHGS, HEAT and FUQI, let’s not forget MWW.

The point of this post: take profits when you can and never stand in front of runaway trains.