What is ‘The Bubble Basket’?
Back in April of 2014, following the sharpest draw down of my professional career, I created a bubble basket, one that mirrored what I imagined David Einhorn’s basket (why not? he seems to be smarter than 90% of managers out there) looked like. He has disclosed to be short about 100 bubble stocks, all high valuation, high hype, low in profits, pieces of offal. My ‘Bubble Stock Index’, placed inside of The PPT is, essentially, a thermometer of risk appetite, the sort of appetite that gets you into trouble.
When the index was created, it cratered down to 80, only to come racing back to new highs, AND MORE, in August of 2014. If you recall, I penned this piece, warning you to sell.
Well, here we are now and the bubble index has been coming in.
Frankly, it looks broken. People don’t have the appetite any longer for this sort of sordid investing. We may bounce from these extreme oversold levels. If we do, I invite you to examine your portfolios and to sell anything trading more than 10x sales. Granted, I own a few high valuation stocks, like PANW and CYBR, but CYBR is meant to be a trade and PANW is long term. If you like SPLK and FEYE for the next 10 years, ignore this post. We’ve all become degenerate heroin addicts in search for a quick fix. Back in the old days, when men were still men, they’d take 90% draw downs and be delighted to have been apart of the game, retired, then jumped out of windows. Nowadays, we whine and bitch and moan about our prospects or lack thereof.
In summary, the Bubble Basket has broken lower and I expect more pain to come, before things start looking good again for you River Boat gamblers.
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Without QE they were nothing. They built a house of straw. The thundering machines sputtered and stopped. Their leaders talked and talked and talked. But nothing could stem the avalanche. Their world crumbled. The cities exploded. A whirlwind of looting, a firestorm of fear. Men began to feed on men.
On the roads it was a white line nightmare. Only those mobile enough to scavenge, brutal enough to pillage would survive. The gangs took over the highways, ready to wage war for a tank of juice. And in this maelstrom of decay, ordinary men were battered and smashed. Except for one man, armed with a portfolio full of TLT and a honda full of silver.
Edgar Alllan Poe I presume? Back from the dead again I see.
Yes. The above was plagiarized from Longfellow, that bastard.
many try to emulate your writing style on here Fly, but they all end up just looking like jackass poseurs.
I can see that I’m not appreciated here. Goodbye.
@edgar, I thought it was the opening of Mad Max.
Faux Fly
Lord Wez sayz:
No more talk, NO MORE TALK! We go in, we buy puts on those stocks, we put them to zero!!
Yes that was a joke and a play on words from ‘Road Warrior’….
lol. I think that is a quote from Mad Max.
The Fly is Mad Max.
The Road Warrior.
The Ayatolllah of Rock and Rollla.
that was beautiful..
I’m long ICPT (but with limited exposure via options), is the PE relevant in ICPT? Would you call it a ‘bubble stock’ or is bio exempt?
ICPT, which I am long too, either goes back to $700 or $40, based on NASH data. I believe it comes out in Nov
Einhorn is interesting to me as he has been completely wrong on GMCR and CMG, but will still initially crush any stock he announces a short in.
Will you be holding Facebook throughout? Thank you for your response ahead of time.
I am long from 32 and do not intend to ever sell it, literally ever.
Love it, appreciate the transparency and curtness.
COME BITCH RUN
interesting to note SLW and GLD higher and UUP is lower right now…
RUN YOU BASTARD BITCH RUN RUN RUN
just got scared out of my positions
Dial back Huggie!
You are a good man but the market can stay irrational longer than you can stay solvent!
pretty much flat
made back 1/6 of my ;losses on the bounce
Just an awesome blog post Fly as per usual. Thanks for your insight.
Shitting myself with laughter…hat tip, Mr. Poe