First of all, what was #Scotland thinking:
If #scotland had been smart they would have filed for IPO as a server farm not separation
— howardlindzon (@howardlindzon) September 19, 2014
But enough about Scotland…
I have long underestimated and underappreciated China. I like the good ‘ol’ USA.
My thesis has always been if you can’t find investments in America you are not working hard enough. Furthermore, you can own China by owning great American companies. Today’s Alibaba IPO does not change my thinking, but does put an exclamation point on how profitable investing in China can be. Alibaba is worth more than $200 billion and raised $20 billion in cash.
My good friend Michael Parekh created this stack of good reads on Alibaba.
The Informerly team created a good e-book on Alibaba.
It’s not just the money and size of Alibaba that I underestimated, but the public’s interest in the stock and IPO. Alibaba blew up Stocktwits for an hour this morning. Here is a chart of Stocktwits interest from Google:
Until today, Stocktwits was used to Apple and Facebook like ticker interest, not Alibaba. It even caught Google off and puts an exclamation point on the phenomenon:
Google was always fresh & current but now they don't even get a historic IPO $BABA. But there's @StockTwits! pic.twitter.com/0HeiF2Uz0y
— Rakesh Agrawal (@RakeshAgrawal) September 19, 2014
What does it all mean for investors?
In the USA…despite CNBC ratings being in the toilet, the stocks market and passive ETF investing is on a rampage.
The NBC ‘excitometer’ is at all-time high levels. I don’t watch, but I trust the people reporting that to me. At the same time, this chart shows that investors are at record levels of exposure to equities:
Over the past 65 years or so investors have rarely been this bullish $SPY http://stks.co/t0nHY
— Jesse Felder (@jessefelder) Sep. 19 at 10:37 AM
Yahoo turned out to be an amazing proxy for Alibaba bulls and it was available to any investor that was willing to take some risk.
Investors (I have to think a lot of them Chinese) have been swapping out of Gold,Silver and even Bitcoin for months in exchange for equities. All three assests have imploded recently. Take a look at Bitcoin the last few days:
Bitcoin cutting through the 400 level this morning. Trading 395 USD, atm. $BTCUSD $BCOIN http://stks.co/d11eI
— Kas (@jackdamn) Sep. 19 at 04:52 AM
As for what happens next?
Yahoo has immediately sold off on the IPO.
Fear and greed never go away. This snapshot of the Alibaba price at the time of the IPO is perfect:
$BABA chart (1m) profit taking under way http://stks.co/s0nAO
— Antonio Costa (@ACInvestorBlog) Sep. 19 at 10:13 AM
I am an optimist and find no real value debating tops and bottoms, but I would not be surprised to see a big correction start soon. I have no skin in that ‘correction’ call other than more cash than usual and a strong network to help me manage the risk of it all. As usual, I do recommend people avoid chasing assets. Take a deep breath as the markets are always going to be there serving up opportunities.
PS – Thanks Ross Levinsohn for the great mention on CNBC this morning as he discusses Yahoo and Alibaba. He’s a total diplomat and I am glad to be learning from him.
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