Few investors have a deeper understanding of the tech sector than Fred Hickey.

The renowned editor of the popular investment newsletter «The High-Tech Strategist» draws alarming parallels to the bursting of the dotcom bubble in the year 2000 and spots high risks in stock market darlings like Amazon and Apple.

For the industry veteran, one important reason to be concerned are rich valuations. He also sees troubles ahead with respect to the rise in interest rates and the growing mountain of debt around the world.

Against this background, the outspoken contrarian sees bright opportunities in gold and in attractively priced mining stocks.

About Fred Hickey

For many investors around the world, Fred Hickey’s monthly newsletter is a must read. It’s a unique treasure of deep knowledge that goes way beyond the tech sector. Having grown up in Lowell, Massachusetts, in the heartland of the computing cluster around Route 128, Mr. Hickey has been fascinated by technology since his youth. After graduating from the University of Notre Dame, he started working for the former telecom giant General Telephone & Electronics. In 1987, he began writing his newsletter for his friends and family. After just five years it went so well that he could make a living out of his investing tips. Today, Mr. Hickey who likes to take long walks in his rare spare time, lives far away from Wall Street in Nashua, New Hampshire, and in sunny Costa Rica.

Mr. Hickey, despite raising interest rates, global trade tensions and turmoil in the emerging markets the stock market in the United States is chasing one record after record. How long will this go well?

Today’s situation reminds me of the fall 2000 which was a very difficult time for me as a contrarian investor. The internet bubble had broken in March when the Nasdaq peaked at 5132 and all those crazy valued dotcom stocks had crashed. In the three weeks after the Nasdaq had peaked it looked like the whole stock market had broken. But it hadn’t because investors rotated into what they perceived to be safer big cap tech names. So, they piled into stocks like Intel, Cisco, Microsoft, Nortel, EMC and Sun Microsystems. And that’s what we’re seeing today in a similar way with stocks like Amazon, Apple and, again, Microsoft.
What happened next?
Once we got into September and October, the market started to roll over. Back then, I was short via puts a number of tech stocks. My biggest short position was Intel and the stock first went higher and higher. In August 2000, Intel rose 20% in just one month and pushed into a new high of almost 76 $ a share. For me, these were some of my toughest days trying to fight the mania. The maniacs were piling into the stock and had no clue. They were only chasing momentum – just as they’re doing it today.

But as soon as Labor Day rolled around, Intel’s shares started to fall because fundamentally the business was deteriorating. Intel had to lower its outlook and the stock crashed 45% in one month. Think about it: At that time, Intel was the second largest company in the world. It’s the equivalent of Amazon today which means that Amazon’s market cap would go from around $1 trillion to $550 billion in just one month. That’s a shocking thing. But the difference is that Intel’s P/E ratio was 55 back then. Amazon’s is 155 today.