“Buy on the rumor, sell on the news,” goes the old investing saw. Stocks are a discounting mechanism, which is why they act so perversely, often rallying after headlines turn gloomy and declining when news is glowing.
It isn’t often that financial bubbles burst, so the recent carnage in so-called momentum stocks ought to be front page news. Former highflyers Tesla Motors, Netflix, Twitter, and 3D Systems are 24%, 28%, 45% and 50% off their recent highs respectively. Biotechnology stocks are in official bear market territory, down 21%. Gracing the covers of popular business magazines, one might expect to see an irritated bear, dejected trader, or stock chart headed south, background in black. Yet a quick scan of the financial headlines this past weekend shows little concern:by