Chart Of The Day: Biotech Bubbles

March 24, 2015 0 Comments

In a previous entry  I discussed whether or not the stocks in the NASDAQ has returned to the norms of the previous levels in 2000, especially with tech stocks reaching new highs. While a bubble may not actually be present in Tech stocks, there is definitely a bubble in biotech stocks, without a doubt.

And the XBI Biotech ETF isn’t the only one. The iShare NASDAQ biotech ETF (NASDAQ: IBB) has doubled in value in only a year, and its up more than 34% year-to-date.

The only reason I find this interesting because I remember coming across a less than interesting CNBC article, recording their attendance at the Adult Video News Awards (or AVN awards) and interviewing specific adult entertainers regarding how they would invest $10,000 if they had it lying around. One of these answers caught my attention:

Anikka Albrite:I’m a huge fan of biotechnology, so anything that seems like it’s good for the future and the health of other people.”

The purpose of this blog is not to trash Miss Albrite’s investment pitch or stock evaluation, because it’s not like she is in the porn industry for possessing such a skill. The purpose is to show how this sentiment relates to the flows of wall street and the ‘mentality of the herd’ when it comes to investing.

Clearly, biotech industry is experiencing a bubble. How many people actually acknowledge or deny this is unbeknownst to me. However, investors shouldn’t abandon their research, professional advice, risk tolerance and asset allocation models just because everyone else is doing it and jumping into risky assets.

Well, they should do it if they don’t want to lose money in the long-run. As far as I know, biotech stocks are surging, and as long as stock prices have outpaced consistent market fundamentals, they will most likely continue to surge.

Timing the top of the market will probably be difficult, but if done correctly, you can most likely dump your shares onto the next batch of suckers…

 

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