Twitter's a lot of things to a lot of people. For me, it's a way to get some excellent feedback about what passionate speculators care about, the gambles that they will take, where they want my blessing for doing so -- or want to curse me out for not endorsing their views.
Right now, the speculators are pressing me on three major issues: marijuana, cryptocurrencies and the stock of Micron (MU) .
Let me say at the outset that I never want to simply dismiss the tweeters out of hand, even if I would have no desire to speculate the way they do. In other words, despite what's often claimed, I respect the legitimacy of speculation, as long as you know it is speculation.
I can't tell if people are such voluminous posters on these three because they know I won't dismiss them, meaning call them sparky, or bud or chief, or because they hate that I don't endorse their views here or on Mad Money. But put simply, I think the vast majority do not know they are speculating when they are buying marijuana or bitcoin derivatives, or the stock of Micron itself.
Let's start with the cryptocurrencies. I very much think they are for real, and not going away. However, I am not crazy about the different ways to speculate in them, whether they be derivatives that ultimately don't sync with the value of the currency or tangential equities like Overstock (OSTK) or Square (SQ) that go up or down depending upon cryptocurrency momentum, or Advanced Micro Devices (AMD) and Nvidia (NVDA) , which make the chips that you need to mine them.
I will change my mind, however, and be more positive the moment that I see the cryptocurrencies being de facto currencies, like gold, or a cash alternative for non-speculators. I think that could happen if Goldman Sachs (GS) makes a solid two-way hedging market in a cryptocurrency.
Marijuana just got really difficult, because we don't know what attorney general Jeff Sessions really intends to do, now that he has shown the desire to press for felony charges for those involved in the marijuana nexus somehow. He did ruin some parts of the market immediately by making the use of credit cards off limits to buy the products.
Presumably, he made state line crossings from, say, Colorado, Oregon or California a prosecutorial felony, too. I think that Sessions has crushed the domestic marijuana market, but there's nothing he can do about Canada, which will soon embrace national recreational use. No matter, that's a small market. I think, post Sessions' surprise ruling, there's way too much speculation in the sector.
Micron has real potential. Oh, my, what a hot button this one's been for me, simply because I said you have to be careful with it -- a short admonition coupled with a statement that I prefer shares of Action Alerts PLUS holdings Nvidia and Broadcom (AVGO) .
The evidence the bulls use? That Micron's stock sells for less than five times earnings.
To me, that's evidence, though, for the bears, not the bulls, because when Micron has sold that cheaply before it usually means that it won't make the estimates. I am in the not-so-fast camp, as opposed to the bear camp, because Micron makes two kinds of chips, flash and DRAM, and both are commodities. Flash pricing peaked several months ago. DRAM's, I think, could peak this year because of new factory supply. If that's the case, then Micron will fall far short of the estimates.
Now, it is entirely possible that demand accelerates for both flash and DRAMs. It is also possible, though, that a lot of supply comes on from South Korea. I think the bulls believe these kinds of chips are more proprietary than they are.
What makes me concerned that Micron's stock may turn out to be more dangerous than many realize? I have seen this stock collapse three times in my life, and the circumstances are almost identical to those that I see right now: more supply coming on after a big run in price for DRAM. The difference? Micron does have a second line, flash, but as I mentioned flash has peaked, and once commodities peak, they tend to stay down for ages.
Clever speculation always makes sense to me. But a recognition that you are speculating, not investing, would make me feel better about these choices. Now, though, I just wish the most vociferous and neophyte of players know the risks, not just the rewards.
