SPIDER-DEMONS
During the trading day I tweeted the following:
SYNC was initiated on March 29th. While I believe the upside remains substantial from here, my intermediate term trend indicator flipped to sell today. My job isn't to fall in love with companies based on my analysis. But rather to manage risk appropriately based on prevailing market conditions.
I am in the process of liquidating and will have more reports tomorrow before the close.
Currently, I am nearing a 50% cash position. It is always a difficult proposition to pick and choose between companies that you deeply believe in with every ounce of your analytical soul. I have, however, seen it too many times. When the market gets into THAT mode, it doesn't care about anything but devouring the hearts and minds of believers. It will take whatever faith you have in rational analysis - whether technical or fundamental - and turn that faith into your very own living nightmare.
While we could very well be nearing a bottom for this move down, we are also nearing a point where things get dangerous. When that danger approaches you had better be sure you have a fortified plan in place to deal with the repercussions of a market that moves swiftly and takes no prisoners.
I hate to bring up the Facebook IPO because it has become the only topic of conversation amongst every blogger, analyst and pundit since the IPO. I must, however, comment as there are some very real consequences for investors.
First of all, I will say that I believe Facebook as a company will flourish in the years ahead. Their revenue models are literally in the first inning of development. They bring together 500 million people per day that spend more time on the website than any other. Whereas Google is a tool that you use to discover information, spending no more than a few minutes at a time on, Facebook is a destination.
The uses of this virtual gathering place for all peoples of the world is just being tapped. It will take vision to understand and stick with the company as an investment. All those analysts who are attempting to gauge the company using traditional earnings models may look like geniuses now, but I assure you that they will look like fools in the coming years.
Over the short to intermediate term what has occurred over the past few business days is nothing short of a disaster for both the market and the company.
An already jaded retail investor that literally considers the stock market a playground for demons with suits and ties was gang-raped by them with the Facebook IPO. While I believe that the individual investor is 100% responsible for their own actions, raising an IPO price and the number of shares offered based on the fact that you will be feeding stock to an inexperienced group of investors is not an endearing act.
Neither are backroom dealings in which the CFO of the company quietly huddles around a group of analysts telling them to lower the companies estimates...privately. By privately, I mean that the information is meant for those with portfolios in excess of $1 billion AKA private money managers.
Now the lawsuits begin. Then the investigations begin. All the meanwhile overhead supply on Facebook will be tremendous as those who bought over the past few days will be the first to get out on any uptick. Not to mention insiders who will have their shares available for sale in the coming months.
It's a confidence suck. A leech the size of Manhattan that will suck whatever confidence individual investors have left out of the markets.
And it comes at a time where we needed the exact opposite of this to occur. We needed a superhero to emerge to save us from the European Armageddon part VI. Instead we got another spider demon that quickly sucks the life out of those attempting to create value for themselves by being involved with the capital markets.
Play on playa. Goodnight.
