January 23, 2018 | Tips for Swimming in Shark-Infested Water

Here’s a Bloomberg headline that will have grabbed zero attention: Tech Stocks Are Showing Signs of Overheating.  I swear I didn’t make that up. Some guy on the copy desk, challenged to whet readers’ appetite for a gratuitous stock-market article written by one Luke Kawa, tried to oversell it as best he could. It reminds me of a Lenny Bruce routine concerning a supposed City of Miami pamphlet entitled Tips for Swimming in Shark-Infested Water.  “Are you ready for the first tip?” asks Bruce. “Get out of the water.” And the second:  “Try to ward off the shark with a stick or some sharp object.” “Yeah,” Bruce adds — “like the stump of the other leg he didn’t get.”

So what’s so overheated about the tech stocks? Consider the vertical (and steepening) ascent of Microsoft (inset). If anything, the pace of MSFT’s steep climb has lagged some other portfolio-wacko faves like NFLX, GOOG and AMZN.  This is not bad for a company whose latest operating system, Windows 10 (Creators Edition!), has more glitches than a Latvian shop manual for a Japanese sports car. This would hardly be a concern on Wall Street, where too much of a bad thing seems never to be enough.  Thus, the overheating Mr. Kawa has discerned may have significantly farther to go before it produces a meltdown. We’ll give him the final word, though — and caveat emptor:  “A net 39 of the Nasdaq 100 Index’s constituents are trading at a relative strength above 70 — the most since June 2. The last time the group was flashing an overbought signal that strong, the tech-heavy gauge took a 5 percent tumble over the next month.” Just so.

Rick Ackerman January 23rd, 2018

Posted In: Rick's Picks

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