I’ve always been intrigued by how seemingly small events can trigger sudden downturns in overvalued market sectors. In March of 2000, a Barron’s cover story did more than anything to accelerate the bursting of the dotcom bubble. Last week, a single tweet sparked a major selloff in biotechs and pharmaceuticals.
Warren Buffett famously advised investors to “be greedy when others are fearful.” With stocks all over the world getting clubbed in recent days, there is no shortage of fear out there. The question is: will all that negative sentiment become another “wall of worry” that the markets climb to new highs? I can’t say for sure. No one can. I will say that during yesterday’s gruesome selloff, I spent more time adding to my fund’s short book than searching out potential buys. That’s because, even with the Dow and S&P suffering their worst weekly declines in four years, I still see wildly, even stupidly overvalued companies everywhere I look.