THE ASTOUNDING SIMILARITIES BETWEEN FACEBOOK AND YAHOO POST-IPO: PART 4
The counter-intuitive nature of the markets is one component of speculation that is without dispute. Human intuition is an asset in many situations we face on a daily basis. However, in the markets, it is a tool that investors use to deceive themselves into and out of positions they have no business being in, around or near.
Our natural intuition or tendency as people is to want an explanation for not just some things, but for everything. This want has proven beneficial to consistent progress of humankind. Even when things are inexplicable, we tend to make up explanations that allow us to rationalize the situation, whether supernatural, spiritual or otherwise. That want of an explanation for everything that occurs transfers into the financial markets, as well.
There are certain things that simply can't be explained. In fact, the need for an explanation inhibits the ability of the investors to profit from the situation. The most profitable opportunities in the markets are always those seem absolutely crazy because they fail at logical explanation. To take that one step further, it is often times the most logical investment thesis that will fail miserably because it attracts a consensus of intuitively driven investors who only choose to view the landscape in black and white without looking at the vast contrasts of grey that surround them.
The relationship between FB and YHOO some 18 months following their IPOs fails explanation. It is, however, something I have been following since only a few months after FB came public.
It started with the not so subtle headline of Facebook Is The Next Yahoo And That Makes It Very Bullish in August of 2012 when FB was trading at 20.
In September I followed up with The Astounding Similarity Between The Yahoo IPO and Facebook IPO Continues To Be...Astounding in September.
Part 3 of this study was posted in November with article titled The Facebook IPO in 2012 And The Yahoo IPO in 1996 Continue Their Strange Relationship.
Now we have this...and it just gets more bizarre in the similarities as each month passes:
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YHOO - FB
What makes this study all the more plausible is the fact that we are following a very similar path as the market did from 1995-2000, when YHOO initially flourished. This is another study, although more macro-related, that has come in multiple parts over the past 12 months, the most recent of which was outlined here just this past week. The confluence of events that suggest FB is not just going higher, but much higher is simply too great to ignore.
The question of what happens next can probably be best explained by YHOO from October of 1997-October of 1998. Now I'm not sure if FB will be sporting a $400 billion market cap by this time next year as this chart suggests, but a $100 stock price is not out of the question in the least bit over the next 12 months:
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YHOO 10-97 - 10-98
