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Hello, this is Mike Swanson, Wall Street. I'm speaking with David Skera, who runs the website addictprofits.net. How you doing today, Dave? Hey, good, Mike. How you doing? Oh, I'm doing good. Well, this is a interesting day. It's Wednesday, December the 28th. We only got two more days left of trading.
And uh it's common place for people to sell losing positions going into the year for tax reasons and hold on to their winners and wait to sell them to next year to defer taxes. Uh however, last year that didn't really happen and there's a little bit of a drop the last three days of last year and then of course we had the decline into February and now uh today it almost seems like the market could could uh start to come off the high already not wait till next year.
One thing that has me concerned about the market action day is the stock Nvidia. one of the most popular stocks now on Fast Money in the Kramer show. Uh, but it was up 5% yesterday. It's actually the top gaining stock in the NASDAQ 100 year to date, but it was up like 5% or something yesterday and it had a huge reversal, gave up all the gains of yesterday and did so on 50 million shares of volume.
And if a stock like Nvidia, which is like the big fad stock of the moment, if those people aren't going to wait to defer taxes till next year, then maybe the market's topped for now. What do you think? Well, the thing about Nvidia, which is interesting. Now, just as a disclosure, this is actually a stock that we have puts on in my service.
We just bought some January 2018 puts on it. But one reason I started looking at Nvidia as a bubble stock last year because this stock has had like three three defined booms and busts in the last 20 years. It it blew off during the dot bubble and then it uh blew off during the ' 07, you know, top and the the housing bubble and then it also had a mini blowoff in 2011 and then now it's had this this this is the biggest actually just so you know.
is even bigger than the.com bubble blowoff that it's had recently. So, this kind of seems to be a boomer and bust uh stock that and just so you know, in 2002, this stock went from $22 to like $2 a share. And then in 20078, it went from like $35 to about $4 or $5 a share. And then it went from about $25 to $10 a share in 2011 to 2012.
So this stock has this history of having these huge ramp ups and then these huge collapses and this is easily the biggest of the ramp ups and and there's there's the reason being is they do a lot of the electrical uh work uh computer systems and chips for Tesla's cars and of course with Tesla having this new car coming up there's excitement that they're going to get a lot more sales in those and they also do a lot of chips that are done in uh like computers and laptops you play video games with and that's really the only segment of kind of the PC market that's growing and and so that that's kind of, you know, where people are getting really excited over the stock now.
But it's it's if you go look at a chart, it is the craziest, most parabolic chart you've ever seen. This stock was still a $20 stock in the middle of 2015 and it's now 109. And like you said, there was a big outside reversal on huge volume where the stock was up $7 um on the 27th and then it was down $8 on the 28th.
And that technically usually is pretty bearish. So I would think that this stock is has kind of blown off like that and and and really these stocks can go down fast. There was some similar kind of blowoff stocks I was shorting in 2014. Um there was a stock called Bida uh Bit uh Bida Auto which is um a a Chinese uh online company that sells cars online.
And then there's another company called Sketchers which is a shoe company which blew off like this in 2015. And Sketchers went from uh 55 to under 20 in a year after that. and Bid Auto went from almost 100 to uh about $167 a share. So when you usually have these kind of parabolic moves, the move downside can be quite vicious and and Nvidia's going to have competition like they're kind of the first to the gain in the electric cars, but uh uh Blackberries really getting into electric car technology, etc.
But I think what you're talking about is really interesting, forget the fundamentals of it, are the psychology that yeah, Jim Kramer pumps this stock every day that everyone is bullish on this stock. And if you just looked at the stock's chart, you would think this is completely crazy. This stock is going to crash.
But you look at the commentary on the financial pages every day, people are really bullish on this company. Well, December of last year, I remember very vividly watching a CNBC segment and they people on there were saying, "You only need to own five stocks." At the time, the market internals were very bad in the fall of 2015.
Most stocks weren't doing very well at all. The Russell 2000 actually declined in December. And in December, someone on there said, uh, you only need to own five stocks. Facebook, Amazon, Netflix, Google, and the rest of the market's bad. And now those five stocks aren't really doing anything anymore.
Not since the Trump election. Most of them are on support levels and look like they could break them and and have some sort of a a dip. Uh, so now it seems to me like instead, actually, I've heard someone say this. I can't remember if it was Kramer or or someone else or might have been someone on Yahoo Finance, but I saw someone say, "Forget Fang, only buy Nvidia." So, we've gone from only owning five stocks to only owning that one stock.
But the real important thing is those five stocks are no longer five stocks you must own. And the one stock, you know, you can't just, you know, think, oh, I'm going to buy this one thing or these five five individual stocks and, you know, it just doesn't work. 12 months later. Yeah, I think that's what's kind of interesting.
And now you're seeing people change up and it just shows you how these people are momentum players and just follow stuff that talk because now people remember too like in 2014 and 15 people were pumping stocks like Fitbit and GoPro and now these stocks are completely dead and have collapsed and you don't hear about them anymore, right?
like like Fitbit went from 50 to 7 and GoPro went from 90 to 9, right? So, these stocks completely collapsed and you haven't you haven't heard about them anymore. Sorry, GoPro went from 60 to 9. Sorry. Um but but but anyhow, or did it was it at 90? I'll check it. But anyhow, you got that's what kind of happens.
Yeah. No, GoPro was 90. Yeah. So, you know, that's what happens. These companies collapse. I remember people people two years ago, three years ago, pumping the 3D printing stocks and they've collapsed, too. So, this is what seems to happen is that you get a stock or a sector that's hot and then everyone just wants to tell you to chase it.
And remember, there's a a great saying by John Templeton, not just maximum pessimism, but bull markets die on enthusiasm. And you can just see that in these individual companies that the news is always fantastic at these top tops, right? And so you can't think the stock can go down because you'll be like, "Oh my god, it's earnings are growing.
This company's blah blah blah blah blah blah. It's so great." And then but that's when the good news is all priced in, right? So that that is usually when those stocks top and then will tumble a great deal. And I always think about Blackberry because it was funny. I was just watching a over the holidays I watched a couple of those movies about the financial crisis like Too Big to Fail or The Big Short.
And it's funny because when you watch those movies, everyone's using a Blackberry in the movie, right? Because the movie is supposed to take place in 2008. And you just think to yourself, well, a Blackberry then was like an iPhone now. Everyone had them. It was like the dominant thing. No one ever thought they were going to lose this market share.
And what usually happened then actually is a BlackBerry was tied into a companies or a government system. So you kind of had to use them because you couldn't get your own phone in on their system. So that's what I'm saying though. That's when all the good news was in. I think Blackberry was $130 or $140 stock and now it's seven.
So that's that's kind of my warning now is you may think that this stocks the dominant player and that it can never go lower. But history sh tells us that the these these things especially in technology are very fickle and you're going to get competition and people are going to come in. Like you look at Tesla, this is another hot stock and it has to do with Nvidia because Nvidia does some of like I said them the computer systems for them.
Well, now we look at Tesla and we see that GM and Ford and BMW, all these companies are doing electric cars. So, they're going to have a huge amount of competition in the arena and they're going to lose market share in that arena and then the stock price is probably going to tank, you know, and uh you know, look at Netflix, you know, you've got Amazon and Hulu and all these other companies uh doing streaming video as well.
So, they're going to lose market share to them. So a lot of times these companies which are you know the hot companies because they're dominating some sector kind of can fall off you know. Well I think the chart of Amazon is a good indication of the stock market right now. It's got support at 750 and it's just floating above that level and you know resistance at 800 and I think if it breaks 750 it's probably go down to 700 or 650 and and so will will the rest of doesn't mean we're going to get a crash, but I think, you know, we could easily see a dip.
And um and I think you know people should get themselves positioned to take advantage of a dip by doing some selling now so that they can buy back later or buy whatever is holding up what the sectors are that are the best because I think stocks like Amazon net uh Facebook and these things that were touted so much for so long they've kind of run their course and there's new leadership ship that people should buy or just move their money and the only way you can do it is to do some selling and you know you either sell now or sell you know you don't want to be one of the people that always chases you know as you mentioned the video is so popular I think it's just popular because it goes up because it's gone up and the more something goes up the more people want to buy it when they should be you know looking to buy dips and the perfect example as I mentioned sketchers is people like don't need to have some fancy new technology to get excited about these stocks.
Sketchers make shoes, right? Crocs was a hot stock in 2007. They Hello. Yeah. Yeah, it was. They make shoes as well. And and so it's just more people get excited because the news is good and the stock is going straight up. But yeah, I agree. Like I really now think we're in danger of a pretty good size selloff because I look and both of you and I kind of turned bullish right after the election because we thought there would be this repositioning going on because of the Trump victory.
But the problem I have now is I look at every indicator I watch from investors intelligence showing three times as many bulls to bears. The VIX being in the twelves um uh having a 12 handle. Uh the Ryex ratio which is a ratio of bull funds to bare funds now showing six times as much money in bull funds as to bare funds.
even higher than it was at the 2000 top in the stock market. So now like I just think that when you're seeing these technical indicators and psychological indicators going to such an extreme, it's time to get really really cautious and maybe time to get defensive or even time to start shorting. I I think that now we can see this and look it crashes don't happen in February and March.
Just history shows us that that's not the case. They usually happen in the fall, but we could start again the topping period, you know, going on here in the first or second half uh first half of the year and then maybe really start to fall in the second half of the year. We don't know how it's going to play out.
What you got to really watch is on a correction, watch how these technical indicators act. If they just get slightly oversold and the market bounces and they get overbought again and the market doesn't go to new highs, it's probably a sign that we've talked. If if you you get a a correction and then everything gets really oversold and everyone gets really scared and the VIX really spikes, it's probably just a sign that it just is a correction.
But right now, I think we're kind of getting danger signs with how bullish everyone is right now. Well, if if you go back to the beginning of the year, if ever if me and you and everyone else listening to this could go back to January the 1st, 2016, the thing to have been done would be to have cash and so you're ready for the pullback that came at the beginning of this year to buy.
Instead, people were fully invested, the market fell, they got in panic and when those, you know, and it hurt people. But if people had been had some sort of cash at the start of the year, the whole year could have been set up for them differently. And I think that's the case right now for 2017. So that's I I've got some cash now and that's what I think people should do really have some cash to because that's a position that you can use later next year when the time's right.
Yeah. And in terms of like shorting like I mentioned Vida and I mentioned SKX you look at these stocks now these two stocks or you look at the 3D printing stocks the these stocks have absolutely collapsed even though the market has continued to go to all-time highs. So what's interesting about these kind of stocks and that's always tough to time it because you know Nvidia was parabolic at 60 or 70 and it's even more parabolic at 110 right?
So, but but it's always tough to time it, but once it looks like you've got that parabolic blowoff going on, those kind of companies are going to probably collapse regardless of what the market does. And of course, if the market falls, they'll collapse kind of even higher, right? And by the way, if you look at um Bida, for example, it kind of had like a similar blowoff and really heavy volume in the summer of 2014, and that ended up being the top.
And like I said, now the stock is $19 and it was over almost almost $100 at the top. So these, you know, these kind of stocks are really really going to collapse. And I would think that Nvidia is probably going to collapse regardless of what the market does, you know. So, you know, that's that's kind of, you know, that's that's kind of it right now.
So, it's just tough to time it, you know. Well, this will probably be the last time we talk the rest of the year is only two more training days left. So, uh let you go and unless you have anything uh final words you want to say for the year. No, I I think that's about it is that I think I would say really be careful right now because you know you don't want to be the boy who cried wolf like every time you know this market's refused to really go down in the last seven years been unbelievable.
But I would just say with the amount of enthusiasm I'm seeing, the amount of bullish sentiment, the indicators all being overbought, we are in danger of something really happening badly to the downside. So be very very very careful uh of that here kind of going forward. And I think that the other warning in that is again bull markets die with enthusiasm.
And the one thing we didn't get even though the market was going straight up for six, seven years, we didn't have that kind of climactic euphoria and enthusiasm. And I think this kind of Trump election and people think that all this stuff is going to happen because kind of now led to that enthusiasm uh where the market is going to be vulnerable to a goodsized pullback.
Well, that's going to I think make for great opportunities next year. You know, one thing, the volatility vanished in the summer and now we got it back and that makes a a great uh environment for people to trade. My final note that I really think we're ending the no volatility era. I know the VIX went back down on this rally, but I really think because central banks are now going to be less involved, um that is going to lead to more volatility because central banks try to take away all the volatility and we're going to have a more volatile time period uh in the markets.
Definitely. So, well, thanks for talking to me and everyone else and on to next year. Yeah, thanks for having
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