This morning, I sold all my Google and Facebook stock. Regular readers will know that for a long time my official bio at Business Insider has carried two conflict-of-interest disclaimers, that I own two shares of GOOG and 30 shares of FB.
I’ve sold the lot because I’ve recently become convinced that the tech boom has fully boomed, and thus I ought to sell at what appears to be a market top.
First I’ll discuss the technical matter of the sale, and then I’ll explain what I think is happening with tech stocks more broadly.
Sure, the market may yet go higher.
This tech boom may go cruising onward for years, and maybe I’m missing out on the sweetest gains either company has yet to provide.
But I’m pretty happy with my decision. I bought Google about four years ago when it was ~$561 a share, as it started to recover from the 2008 crash. It was trading at ~$1,125 when I sold it. (That means I turned a stake of about $US1,122 into $US2,250.) That’s a gain of almost exactly 100%.
As for Facebook, Business Insider readers laughed at me when I picked it up at ~$31 in 2012, because the stock promptly collapsed to ~$17. My investment “thesis” (modest cough) came true, however. Most people didn’t understand how Facebook makes money, and as Facebook piled on the revenues quarter by quarter, investors piled in after me, bidding up the price nicely. I sold it at $US54.69, a gain of 74%. (That means I turned a stake of $US944 into $US1,640.)
And yes, I’m aware that I’m not exactly Warren Buffett when it comes to the scale of my trading.
What I think is happening with stocks generally and tech stocks specifically can be seen in these two charts.
First, the S&P 500 index:
And here’s the more tech heavy NASDAQ:
Both charts show something similar — stocks have once again neared the peaks they hit in the 2007 real estate bubble and the 2000 dot com bubble before it. If you believe that stocks are a simple matter of buying low and selling high, then now is the time to sell and walk away.
Then there is this chart of the Fed’s effective interest rates:
The Fed has held interest rates at zero for a long time. That’s an awful lot of cheap money. It’s a good assumption that a lot of that cheap money is ballooning the stock market right now. So the moment the Fed raises rates — to battle inflation or just to cool down an overheated period of growth — it’s likely that money will pour out of stocks and into cash savings, where higher interest rates are more attractive. I’m simply getting out before the Fed does that — it’s already “tapering” its support for the economy.
There is nothing fundamentally wrong with either Google or Facebook.
I want to make this clear: both companies have a lot of revenue growth ahead of them. In fact, I’m slightly stressed about selling their stocks because I think that in 10 or 20 or 30 years, we’ll be talking about FB and GOOG the way people talk about AAPL stock from the 1980s — if you held it, you were smart.
I’m not selling either stock because I believe the companies are facing some fundamental period of weakness or retraction.
Rather, I’m selling them because I think they’ve both been buoyed by general market momentum, and when that momentum comes to a halt they’ll tumble along with everyone else.
At that point, when their prices fall, I’ll consider buying them again.
About that conflict of interest.
Usually, journalists are forbidden from investing in the companies they write about because it might make them biased. It’s a good rule. At BI we have a more liberal policy, merely requiring transparency and disclosure.
I wondered if owning these stocks might make me biased in favour of the companies. I don’t think it did. In part, it made me biased against them, because I was always on the lookout for events that might damage my holdings. And I broke my fair share of negative news about both companies.
More broadly, I found that owning stock made me much more sensitive to news about the companies and what was going on inside them. It made my understanding of them much more acute. Obviously, my stake was not trivial in terms of my personal finances but nor was it large enough to change my life in any way.
As a journalistic exercise I’d recommend reporters owning a small amount of disclosed stock simply so they can see how events make prices rise and fall, and to give them an incentive to stay educated on the companies they cover.
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