timwest
Short

Biotech Bubble Chart - IBB - Monthly

NASDAQ:IBB   ISHARES NASDAQ BIOTECHNOLOGY INDEX FUND
1325 25 30
Janet Yellen has warned about the bubble in Biotechnology, and rightly so since prices are up 10-fold from the lows in 2002             .

Stories of biotech companies getting acquired and then having their drug prices multiplied overnight by unscrupulous owners is going to backlash into new Gov't regulations, at least a rational mind would think.

The game of developing drugs and ripping off customers of their lifesavings is akin to highway robbery. Time for the sheriff to come around and help. Well, the sheriff has spoken: Janet Yellen has warned about the bubble valuations of Biotech stocks and they have rallied 75% since her warning. I recall Greenspan warning about Real Estate in 2002-2003-2004 and then finally by 2007 it was falling apart as new regulations shut off lending. How do you shut down the biotechnology bubble?

I don't know, yet.

IBB             342.59 last 342.52 last 1:22PM EST Sep 21, 2015
Comment: I think the rally is about at the end here - worth re-shorting again here after this massive bounce.
Comment: Massive "Yellen correction" carefully orchestrated. Yellen speaks again this week, perhaps she will mention this again.
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Lots of 25% corrections could get it down by 50% over the next 5 years...
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Good point. I'm sure Obama and his folks are distributing up here after 8 years of Enormous ObamaCare gains. Time for Defense/Oil&Gas
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LastBattle PRO Market_Masta
Wait for Republican to be the president, then you'll get defense oil and gas rally with the bombing of countries like Iran.
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timwest PRO LastBattle
I don't think that is a fair representation of how decisions are made in America. I can imagine that is how it looks outside of the US. Either way, let's try to time the entry into any of these concepts. Nothing is "good" or "bad" - rather think - "How should I position myself based on the evidence?"
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I should have posted this idea first thing this morning, so don't think I am performance chasing the market's decline in IBB today.

Here's what I added to my "KEY HIDDEN LEVELS CHAT ROOM" after I posted this chart:

I have the MOST CONSERVATIVE PERSON I KNOW telling me that some biotechnology stocks look like good investments now
This is what bubbles look like - when people change their opinion about risk after a long period of outperformance.
Imagine someone who thinks that it is too dangerous to have more than 2% of their money in any one stock now thinks that
having 10% of their money in a biotechnology stock is ok.

THAT is a bubble.

I kid you not.

This is REAL.
+5 Reply
Great insights Tim, really valuable.
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claydoctor timwest
It is called chasing yield and return. I deal with money people, and the biggest question now is, ALL TOGETHER NOW, "Where do I put my money"? This euphoria at its worst or best. And IBB represents it to a "T". I have a chart of the DOWI that I will post soon, and I heard today of an HS developing, with a downsloping neckline and I agree. Same thing happened 2008. Catalyst to the greatest decline ever? Brazil collapses, currencies fail, large cap 3rd qtr earnings terrible, IBB panic sell signal, SOX panic sell, etc. to below 2008 lows. And all the king's men could not put it back together again (or stop it).
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timwest PRO claydoctor
It's been a year and a nice 30% + correction and now I haven't heard a thing about Biotech in a long time, perhaps months. The person who gave me the unbelievable sell signal ended up selling the biotech position and didn't tell me. But I just found out that it was sold about a month ago. I can't get an exact date. The Mylan Labs rip-off of the Gov't settled way too quickly and for far too little money, in my opinion, but I don't have all of those details. Only a pattern of behavior which is unbecoming of a company providing an essential service that the world relies on.

Now, I see the Biotechs as basing out as the uncertainties around the election are disappearing. The biotechs look constructive here, but I'm not "all-in" long, just seeing very constructive action in a handful of names.

October 12, 2016 1:56PM EST
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http://www.rt.com/usa/316046-pharma-daraprim-price-hike/

most recently. Pharma firm hikes life-saving drug price by 5,500%

snapshot

The trend is now broken.
+1 Reply
Janet Yellen was late ----
Risk Averse Market - 2015 First and Second quarters
+3 Reply
this price is like an Eiffel Tower, many of them ^_^
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LastBattle PRO jangseohee
History does not repeat itself, but it rhymes. ;)
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G13Man LastBattle
i believe a Mark Twain quote
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I smell blood in the streets here.... IBB down a lot this past week... getting dragged down....
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ANOTHER way to look at this bubble....
snapshot
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snapshot


Almost hitting my take profit level via ZBIO (3x nasdaq biotech short).... never had a stop at all, since this trade is so obvious
+1 Reply
IvanLabrie PRO LastBattle
3x, nice.
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timwest PRO LastBattle
Well done!
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Short again on rallies :D I'm out of biotech now...
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This is collapsing right on target... over 13% in less than a week!!!! The reasons I mentioned are what is going around in media circles and is justification for "lightening up" by insiders and those close to the inside of the "game of biotech" investing. Price is only a function of "at the margin" activity of buyers and sellers and at the MARGIN, there are sellers.
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Shorter term update....
snapshot
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snapshot


Reaching re-short level. Just taken 30% of my expected position in short via ZBIO.
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Things are not quite so dramatic if log scaling is used. In this case, rather than an increasingly rapid rise the increase is actually linear since 2011. I think that is a more appropriate way to view things.
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Very interesting - thank you for sharing!
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