Anyone that has ever purchased a stock or bond knows that the market never goes in the same direction forever. This past week was a prime example. Worries about international peace, trade agreements between China and the United States, Uber’s IPO, Rocket man firing missiles again and whether President for life Mr. Putin’s eight goals scored in a hockey game that featured some retired NHL players should constitute a record.
In any case, the equity markets suffered through their worst week of 2019. The first four sessions were basically down, and Friday started out like it was going to top off a nasty week, but buyers came to the rescue late in the day after Treasury Secretary Steven Mnuchin told the press that talks over the tariff of Chinese goods were “constructive”. In addition, our favorite Tweeter said that tariffs that he had just introduced “may or may not be removed in the future”. As usual the markets never announce themselves, they just happen.
Information technology stocks led the way on the downturn with shares of the big tech companies off more than 3.5% for the week. Of course, they also led the equities up for the first four plus months of the year. Even after the bad week, the S & P 500 average is still up more than 15% in 2019. People have a short attention span and all of the negative news will be forgotten when something good happens on Monday or Tuesday. Technicians would view Friday as a near term blow off and an excellent buying opportunity.
On the other hand, 2109 is starting to resemble 1999 when it comes to initial IPO’s. Uber was the most anticipated release so far this year and it fell flat on its face. Even with lowered expectations it took almost three hours to find enough liquidity to open the stock that was priced at $45. When the first trade hit the tape, it was at $42 down roughly 7% from its initial asking price and closed out the day at that level. Lyft, the other big tech IPO is still struggling with its shares down more than 17% from opening day.
Why do I think that 2019 is starting to look like the dot com bubble in 1999? Because none of the big IPO’s are making any money and their business models don’t seem to work. Unless they can find a new way to deliver their product, they will continue to be the new Tesla. People are buying into the idea again that you don’t need to make money, you just need to have a good idea and take it public. Remember “new economy old economy” from the late 90’s? Well don’t be surprised if you are seeing it again!