This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Greenberg: The Golden Age of Momentum

By: Herb Greenberg | 10/22/13 - 08:42 AM EDT

NEW YORK (TheStreet) -- "The Golden Age of Momentum," was the way one guy on Twitter responded to something I posted about Netflix (NFLX).

And what I posted was something I hadn't ever seen: A CEO and CFO being blunt and candid about the momentum propelling their company's stock.

In a letter to shareholders co-authored by Netflix CEO Reed Hastings and CFO David Wells, the duo said:

"In calendar year 2003 we were the highest performing stock on Nasdaq. We had solid results compounded by momentum-investor-fueled euphoria. Some of the euphoria today feels like 2003. Despite the huge swings in our stock price since our 2002 IPO ($8 to $3 to $39 to $8 to $300 to $55 to $330), we've continued to grow our membership every year fairly steadily. We do our best to ignore the volatility in our stock."

Interpret any way you wish, but this much is clear: When the CEO and CFO of a company say on one hand they do their best to ignore the volatility in their stock, but on the other acknowledge that their stock's performance is starting to feel somewhat like "momentum-investor-fueled euphoria," we are at or near yet another golden age of momentum.

You know it when you see it: Stocks go higher in single-day leaps and bounds that confound even the company itself.

Billions in off-balance sheet expenses? Nosebleed valuation? The uncertainties over Hollywood angst about this new king of swing? Irrelevant.

Here's all you need to know: Netflix, especially with this quarter -- the sweet spot of this golden age of momentum -- is a company whose swift ubiquity and equally swift (no, make that impressive) rise in the number of subscribers has become legendary in its own time. (Hats off to Hastings for not just creating, but disrupting and executing.)

Now comes the hard part: Not just keeping it going, but outpacing even itself.

One of the rules in the golden age of momentum is that there can be no disappointment, and the bigger the beat the better.

When that fails to happen, the golden age of momentum can be as fleeting as stardom. Good luck trying to figure out when that will be. But it will be. Poker, anyone?

Reality: As long as the Fed feeds the frenzy with low interest rates, and high-frequency trading amplifies it, this golden age of momentum may go on longer than even the bulls expect. Or it may stop tomorrow. What Alan Greenspan coined in 1996 as "irrational exuberance" is today, as Netflix's top brass put it, "momentum-investor-fueled euphoria." Or as I recently put it, this is a greater fool theory of a market. It goes until it doesn't.

I honestly don't know if this is 1996, 1999, 2003 or 2008 -- and neither does anybody else. The best guesser is the next guru. Get out too soon and you feel foolish. Get out too late and you're the fool. In the meantime, the beat goes on...

--Written by Herb Greenberg.

Herb Greenberg, editor of Herb Greenberg's Reality Check, is a contributor to CNBC. He does not own shares, short or trade shares in an individual corporate security.

Other Posts In Herb's A Dose of Reality:

Get More Investment Ideas:

To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.

Markets

DOW 16,501.65 -12.72 -0.08%
S&P 500 1,875.39 -4.16 -0.22%
NASDAQ 4,126.9670 -34.4910 -0.83%

Herb's Tweets

Brokerage Partners

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
Real Money Pro

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Trifecta Stocks

Trifecta Stocks analyzes over 4,000 equities weekly to find the elite 1% of stocks that pass rigorous quantitative, fundamental and technical tests.

Product Features:
  • Model portfolio
  • Trade alerts
  • Recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
Stocks Under $10

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Dividend Stock Advisor

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Breakout Stocks

Bryan Ashenberg, using sophisticated stock screening and fundamental research, identifies potentially explosive small and mid-cap stocks.

Product Features:
  • Model portfolio
  • Small-cap and mid-cap focus
  • Intraday trade alerts
  • Weekly roundups
Options Profits

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
Top Rated Stocks Top Rated Funds Top Rated ETFs