The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
BEIJING (TheStreet) -- One year ago, shares of Molycorp (MCP) and Rare Earth Elements (REE) were each up by several hundred percent in a few months due to an investor-buying frenzy for all things related to rare earths. Many investors piled into shares of tiny fluorite producer Shenzhou Mining (SHZ), which was trading below $1.
Within weeks, SHZ ran to over $10 -- a quick return of more than 1,000%. More stunning was the fact that SHZ wasn't even in the business of producing rare earths, it was just mistakenly lumped in with the sector. For a while the "greater fool theory" held and the stock continued to skyrocket, but once the party ended, shares of SHZ plunged back to $1 to $2. For those who piled in at the top, they are looking at potential losses of 80% to 90%.
We are seeing the exact same thing again with "social media" stocks. The hot stock driving the space is now the impending IPO of Facebook.
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