Back in 2009, when the stock market was in the tank and we were bumbling around something resembling a depression, there was actually a minor Renaissance going on in Silicon Valley.
Facebook (FB) was at a $20 billion valuation, some social networking imitators were starting to spring up and people had a jingle in their pocket -- enough to pay for a little bit of Bay Area real estate. Naturally, people were calling it a bubble.
Rule number 62 says that any bull market, no matter how small, will be called a bubble by some dunce, somewhere. The first time you hear something is a bubble, it is definitely not a bubble. The tenth time you hear something is a bubble, it is still not a bubble. Maybe around the hundredth time you hear something is a bubble, it is close to being a bubble. But when you stop hearing something is a bubble -- now, that is when it is a bubble.
In terms of the cycle, tech is getting close.
The price action going into year-end is getting downright goofy, with Facebook , Twitter (TWTR), and Google (GOOG) all ripping. How do I know? My intern Twitter gets pumped for stock tips by his relatives. What do they want to know about? They are all interested in FB, TWTR, and GOOG. (Keep in mind I am in South Carolina).
I've been a big proponent of tech and I've been a big proponent of what I called "gifted and talented camps". And I've been a big proponent of the markets entering a "retail phase" where stocks like this go parabolic. Now that it is happening, I want out.
I've never been a good bubble trader. I am a Wall Street professional at heart, someone on the lookout for when the market is giving stuff away for free, deep value or distressed situations. Quite frankly, I've been a little out of my element in 2013, with all the charts in the upper right hand corner. So I've been taking profits, going to cash and buying the only distressed equities in the whole market: miners.
I am way early. And I still do own some highfliers, like Tesla (TSLA), SolarCity (SCTY) and Zillow (Z), having sold FB a few days ago. And topping is a process, and takes time. But we are definitely in later innings. I'd say David Robertson is on the mound.
I was living in the Bay Area in the nineties. I was there for the last bubble, so I know what one looks like. I will tell you that the wealth and opulence in the tech world far exceeds what was going on 15 years ago. We have The Internship instead of Liar's Poker. Journalists are moving from New York to San Francisco to write about class warfare, since finance guys don't make any money. Half of California owns a Tesla. It's starting to get stupid.
But the old-timers know that stuff can stay stupid and get even stupider over time. I'm slowly exiting longs in tech and I sure as hell am not going to go short -- not anytime soon. But I will invest strategically in undervalued businesses, and wait for the poison to take effect.