Blog : Alibaba Back Draft Crash
by Peter Leeds on September 16th, 2014
Alibaba Back Draft Crash- Friday's Initial Public Offering of Alibaba stock will likely be the largest I.P.O. ever (valuing Alibaba near $200 billion).
- Many investors will take money off of other positions to put funds towards Alibaba shares (Some pre-IPO, but mostly post-IPO).
- The back draft of money coming out of other positions may put pressure on all shares.
- Combined with highly positive investor sentiment, the Federal Reserve decisions this week, and a market that has performed so well for so long (without a correction), the Alibaba I.P.O. may be the pin which pricks the stock market balloon.
With Friday's Alibaba I.P.O set to be the largest Initial Public Offering ever, I have personally grown a little concerned. This is my own opinion, and certainly not a suggestion that anyone else do or not do any thing specific.
A few headwinds have me concerned right now. Ahead of what I term a potential Back Draft Crash, I will be moving a massive amount of my personal portfolio into cash for the next week or so. If everything keeps going well, my downside will be the opportunity costs, meaning any money I would have made if I had still be fully invested in stocks. This would probably be 1% at most. It could also be a loss. Either way, it won't be too significant.
Some of my concerns include:
- Investor Sentiment is highly optimistic right now. (Sentiment is a contrarian indicator).
- The FED makes a few decisions and comments this week. This could potentially be clarity that they will begin raising rates sooner than previously telegraphed.
- Quantitative Easing is the real reason stocks have been doing so well. That bond buying program is being wound down, soon to be zero.
- The overall markets have been trending endlessly higher, without any correction. Corrections are healthy. This market is not healthy.
So, I have and will personally adjust my mix of stocks. I will also reassess mid next week. If there's been no stock market stumble, then I will look at scaling back into various shares.
Remember, this is NOT trading advice. This is only what I am doing.
As of January 2017 we no longer publish the blog and it has been removed from the webiste menu.
You are reading this old blog entry because we still like to reference it. :-)
You are reading this old blog entry because we still like to reference it. :-)
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