Testosterone Pit - Home - The Last Two Times This Happened, The Stock Market Crashed
The last two times when margin debt reversed and fell after a
record-breaking spike, all hell broke loose. In 2000, it was
simultaneous. In 2007, it was delayed by a few months. Today, on the
surface, everything is still hunky-dory. The Dow is just fractions below
its all-time high that it set on Wednesday. But beneath the surface,
parts of the stock market are already coming unglued, and holders of
momentum stocks have been eviscerated.
The Nasdaq Biotech Index had beautifully shot up along an exponential
curve. Then the hot air hissed out of it, and it swooned 21% in six
weeks. The index includes big players, like Biogen, not just startups
with big dreams and no drugs. After some buying on the dip, the index
closed on Thursday down "only" 15%. But that hasn’t saved smaller
momentum stocks: Exelixis is down 58% from its 52-week high and 92% from
its all-time high shortly after its IPO in early 2000; Halozyme is down
60% from its high in early January. And so on.
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