Who Is Getting Crushed In This Bull Market?

By now, every tidbit about this wondrous bull market gets benchmarked against the dotcom bubble. It’s different this time, we’re ceaselessly told, even on NPR. For one, the “Tech Bubble,” as it’s officially called now, is not tied to the larger stock market this time. So its implosion will be contained. I remember hearing the same in 1999.

And “Tech” is a rubbery term, these days. It covers online retailers, anything in the social media space where the business model, if there’s one at all, is based on collecting and monetizing personal data; it covers automakers, such as Tesla which struggles to build a couple of thousand cars a month, chipmakers that have their microchips manufactured at some fab in China, or biotechs with big dreams and no drugs. The bigger the losses, the more upward momentum these stocks have. Or had. Because now they’re getting crushed.

The debacle has become part of the public debate even on NPR, which is a terrible sign. And KQED, one of our radio stations in San Francisco – a city that had been particularly impacted by the implosion of the dotcom bubble and isn’t naive about it – aired a one-hour show Friday morning, titled, “Are we in another Tech Bubble?” The discussion between the host and the guests didn’t leave much room for the title’s question mark.

The same day, we had the first hints of catharsis, albeit premature and incomplete. “I remember back in 2000 how I just watched my assets shrink on a daily basis, stuck in disbelief as an unrelenting market did permanent damage to me,” wrote The Fly, a sharp-eyed stock market blogger. This isn’t some young googly-eyed trader who hasn’t seen anything but the supernatural five-year bull market that might have culminated last year with a 30% gain, and a lot more for the highfliers. The Fly has been through this before: “It would take me more than 3 years to rebuild my business and I never forgot those lessons, until about 8 weeks ago.”

That’s what a supernatural bull market does to us, even after we’ve learned the lessons the hard way. It persuades us that the gains are our doing, that we’re smart and unbeatable, and that we know what it takes to ride this thing to the very end and then get out just in time. But before we get there, we get whacked.

“I sold almost everything today and now sit with 90% cash,” The Fly lamented. “My year-to-date losses were stopped out at about -32%, that’s another -13% for this week alone.” Then the same thoughts that everyone has afterwards: “It’s obvious that I should have sold long ago.”

If you’re down 32%, you’ve got to make 47% just to get back to where you were, not counting tax consequences, fees, anguish, a shortened life expectancy, and gray hair. While 47% may be easy when nearly everything is soaring, in the current environment it’s devilishly hard and requires boatloads of luck.

The Fly posted some of the biggest losers that once had been among “2013′s favorite stocks.” Biotech company Exelixis tops the list, down 61% from its 52-week high. It’s also down 93% from its all-time high shortly after its IPO in early 2000. In second place on the list: another Biotech outfit, Halozyme, down 60% from its all-time high in early January. It’s back where it was in mid-2013. Imperva, a Big Data security products maker, crashed 64% from its peak last year. And so on.

This sort of wholesale destruction makes the biggies look practically tame:

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