Another day, another rally in Facebook (FB) with shares pushing $70. Facebook shares are up 23% year to date, about a gazillion percent I believe over the last year, screaming higher in a flat market.
Now you’ve heard about the four horseman of the apocalypse, and the four horsemen of tech back in the day when I was young man in the 90s. Well right now we’ve got a three-legged, wobbly barstool of speculation in the form of Facebook, Netflix (NFLX), and Tesla (TSLA). Let’s take a look at these charts. You have Tesla up 35% for the year, even with today’s pullback. Netflix is up 20% on nothing that can be construed as good news.
I’ll tell you why these matter. It’s not whether you should be grumpy not owning the shares, or argue about valuation, it’s that these shares represent speculative money. The good thing about Facebook is that it’s not Twitter; for fund managers that are underperforming this market they need to make up for last year, and being long Facebook is relatively safe.
What you need to keep an eye on is when these three, wobbly barstool legs have to report earnings. Keep an eye on Tesla, the numbers are high, the expectations are ridiculous, there is no fundamental valuation thesis behind the shares (and I’m long Tesla).
If we start losing these three companies and the speculative energies die, it could bode poorly for the market in terms of price, but it would be a victory for rationality in stocks.
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