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When Biotech Was the New Tech


Remembering 2000, when this sector was a considered a safety play.

It was May 1999 and I wrote the first of what would come to be 29 consecutive months of daily market commentary. We had a website, a plan, enthusiasm, but no subscribers. I was doing technical analysis and the bulk of the daily writing, and my business partner was handling the longer-term stuff -- with a bias towards biotech.

It was a heady time. Subscribers started rolling in and we were absolutely knocking them dead. Not too far after that, I found this dude name Todd Harrison who talked the straight dope from a trading desk. He was really cool about helping out a newcomer to the business, even though our websites were competing for the same subscriber base. He hooked me up with this guy named William Meehan, and by the time 2000 rolled around people were making money hand over fist.

February 2000 broke like the most beautiful surfing wave you can imagine. George Soros had very publicly abandoned his bearish bet on the markets; Barton Biggs had started being bearish. In sum, everything was right with the world for the bulls.

We were blowing out five to 10 new chart ideas a day and banking astonishing gains on each. Subscribers were rolling in. The good thing was we were able to invest in the business. The bad thing was our cash had gone into the firm and we were not really able to place any personal money in the markets. Even when we did, our policy of investing behind our customers (we were mandated to wait 15-30 minutes to invest in a name we published on) narrowed our gains in this incredibly fast-moving market.

So March rolls around and I think most of us knew the good times couldn't go on forever. Then Mister MSTR (MicroStrategy to those with no sense of style) reported accounting fraud. It was trading in the $300 range and opened down 65%. Nobody who owned it at the close the night before had anything they could do.

The actual market top came later, but those who had a good sense of the market knew that was the day the morons killed the golden goose.

I didn't know it at the time, but that was the beginning of the end for our business model as well. At the time, I actually thought the April sucker's rally would hold. That summer we created the "Fire Sale Portfolio." If I told you to choose eight "pick and shovel" tech names from that era, I bet you could replicate the portfolio. The parameters were for a small position and an exit if they got down 50% -- which frankly I didn't give much chance of happening. It happened, of course, later that year if memory serves.
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No positions in stocks mentioned.

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