Is This 1999 All Over Again? Semiconductors Partying Big Time

There has been so much chatter lately that this is a repeat of 1999. It’s not. People are all over Twitter comparing AI to the Dotcom stocks. They’re dead wrong. Other people are forecasting financial Armageddon worse than Dotcom and 2008. That’s laughable.

When I push back on the notion that this is 1999 again, people call me a “perma-bull” or tell me that I am not analyzing it correctly. For decades I have said that bubbles are generational. The word itself is the most overused word in investing. I can’t go a single day without people declaring that something is a bubble. Add in the word “crash” and you have most letter writers two favorite words. This is a bubble. That was a crash. Tell you what; these people are clueless. They have no idea what they’re doing. It’s just clickbait and nonsense.

Below is the semiconductor index. Look at the vertical move in April and May. Is that a “bubble”? No, it’s not a bubble. First, the index didn’t even double in short order. Second, ask yourself how many semi stocks you own. Are your friends bragging about theirs? Are there semi IPOs flooding the market? This is a parabolic advance that will not end well, similar to silver a few months ago. We own Nvidia and have for years and years. I prune big rallies. I replant declines. We haven’t been overweight with semis since 2023-2024 when the risk/reward was so heavily skewed in our favor.

And if it really is 1999 again, using the same price analog, it is only 1997.

1998 was not kind to semis and the masses said the rally was over when the collapsed 50%.

But the fun was just about to begin. Look at the percent gains below from 1999-2000. Now THAT was a bubble! At a previous firm we owned semiconductors in a sector strategy. I knew we were in trouble when people legitimately asked if they would EVER go down, like I heard from the Bitcoin cult.

Investing money during bubbles or parabolic advances is really, really difficult. It is so easy to say, “just hang on”! In real time, it is very tough. I learned later in my career to always prune position size during behavior like this. People don’t pay me to buy the bottom in size and try to hold for every last cent. They pay me good money to try and responsibly manage their financial life which includes their portfolio.

On Friday we bought QLD, more COIN and more XOP. We sold RYTNX, XLE, HYG, some DWAS and some INTC.