This is Normal...The World is Not Ending

It has been painful to watch my portfolio get smacked every day, but I’m staying invested.

If you look at financial media, you’ll think the world is ending. I actually feel more confident after seeing earnings from Microsoft, Atlassian, Salesforce, Amazon, and Google – they have all seen GREAT demand for SaaS and enterprise cloud software.

Looking a few years back, these drops are completely normal for our companies on their journeys to incredible success. Check out the history of Netflix, Amazon, Priceline, Apple, and pick the name of the best performing companies of our time. Volatility is something they all share.

So anyways:

Up 190% since May 2017
Since Sep 2017: Dropped 20% or more from high three times
Currently 27% off high

Up 120% YTD
YTD: Dropped 16%+ four times
Currently 16% off high

Down 3% since Jan 2017
Up 2% YTD
During 2017 was down 60% from high
Since Jan 2017: Dropped 20% or more from high five times
Currently Down 43% from high
At one point was up 80% YTD

Up 125% Since May 2017
Since May 2017: Dropped 16%+ from high 5 times
Currently 28% off high

Up 20% since Jan 2016
Up 21% YTD
Since Jan 2016: Dropped 30%+ six times. Two of those times were 45%+ drops.
Currently 33% off highs

TTD, TWLO, SQ, ZS all have similar cycles.


I’ve been investing since 1997 do at this point I can say I’ve seen volatility. This fall doesn’t really bother me. What did bother me was the record numbers of IPOs since the internet bubble, companies like SurveyMonkey going public and seeing a big pop for no other reason than being in SaaS, and the returns of the stocks that you mentioned. Those are danger signs not green lights. The tech bubble didn’t pop because there was a slowdown in companies like JDS uniphase, rather the slowdown occurred because the tech bubble popped. Things were fine at the peak just as they are now.

The whole SaaS market could be mature by the time the next recession ends and that recession could very well start tomorrow.

I saw warning lights flashing but I didn’t do anything like sell because the best course of action is to remain steady. I did make a priority to pay off debt instead of putting more money in the market this year however.

But other than that market timing will lead to lower results. You’ll hear about people who sold out at leaks but what they don’t tell you is they sold out many times on the way up any time they got the jitters.

Best to accept you’re not going to use this money any time soon anyways and just deal with it. But in a few years you could be in totally different stocks. On to greener pastures.

I’m not saying this is the tech bubble all over again. The quality of the ipos are better, and the ascent much milder. We had garbage stocks like Xcelera (meat packing plant turned into an internet company with no clear product on the market) going up 100,000% in a single year. At the same time aside from the last year, returns have been pretty tepid since the end of the 2008 bear. This has not been a runaway bull.

I guess what I’m getting at is to remember to keep your emotions in check on the way up as well. All we can do is keep focusing on the best stocks to own.


Absolutely agree with everything AND @#$$% today was particularly painful for my portfolio.

Sometimes you just need to share.



“I guess what I’m getting at is to remember to keep your emotions in check on the way up as well. All we can do is keep focusing on the best stocks to own.”
I would say ‘on the best business to own’. You should sell the Xceleras and the IPOs that overshot, and the unsustainable businesses. We should always be doing that anyways whether the general market is heading up or down. A bubble would imply that many businesses stocks are inflated, and running on fumes. Are they?
I don’t think we can know if we are in a bubble or not. But I think there needs to be a confluence of circumstances which consequences travel through the market to bring the market into crash mode. We do not know from where that will come or how it will happen. We would be talking about unknown unknowns. You can be worried about that but you would not know how to be. There are known unknowns that you can worry about. If there is a general greying of outlooks, investors can become more jittery and maybe less willing to pay up for expected growth. Consequently, the thing that occurs might be some pull backs and maybe some periods of non-performance but not a crash. With uncertainty, growth may become less expensive but that does not mean something like 2000 would occur if most businesses have cashflows and are selling into a growing demand. I don’t think the few IPOs we’ve had is a dominant factor in the market at this time.


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There is a New York Times article today linking the increase in interest rates to the now increased and expected return on stocks as the risk-free rate (basically U.S. bonds) have risen. Mathematically this is sound. I did not have the patience to read through all of it, but the article stated that the change in the expected return of profits for every dollar invested in an S&P stock increased in a similar proportion to the increase in interest rates.

The effect has been far more extreme in the tech markets. But since the economy is still good, this is a transitory adjustment period. Stock markets have gone up with much higher interest rates than this. It is all a matter of perspective and adjusting. Once adjusted, as an example, a Minnesotan might enjoy the cold but do poorly in the peak heat of Atlanta, or vice versa. Same sort of thing happening now. In the end fundamentals will control. Fundamentals are companies that increase their value. Nothing has changed in regard. In fact, for many of us, we are 2 or 3 months of return removed, others perhaps close to the entire year, but none of us wiped out or really at risk to being wiped out, even with margin calls at this point in time, unless you were really margined up.

It is amazing how generous brokers can be with margin. The amount of cash I can take out on margin (if I so chose - and I never have used margin to do anything but pre-buy stocks before my cash traveled and was made available to me) is enormous. I am sure there are some who could not resist. Be that as it may, a crash like 2001 or 2008/09 would cause huge margin covering. What we have had here is a readjustment and most probably, like it does going up, it overshoots going down.

Worth the cost of admission, but it does put some real world facts to explain the current phenomenon.

As for Nutanix, Nutanix had issues with earnings that preceded this crash. AMD, their earnings were simply awful. So there are some company specific things. But for the others, it is simply a realignment when the risk-free rate of interest materially increases rapidly. It takes a while for money to reallocate itself and go where the now needed even higher returns are necessary to take money away from risk-free U.S. Treasuries.

A bit of the MBA in me, but I think it is simple enough for everyone here to understand.