Unholy Mackerel

Feb 01, 2021 | Mark Ryan


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Bonkers! Never mind fundamentals. Will the business ever make money again? How’s the management team? Prospects for sales growth? Supply management? Is demand for the product somewhere between 8-track tapes and floppy disks? (Those really floppy, big old floppy disks, not the smaller, decidedly not-floppy disks we still called floppy despite their unfloppiness… not sure why.)

 

It’s been said an asset is worth what somebody’s willing to pay for it. Fair enough, but if the idea is to trade it back for money at some point, and its precious price rests entirely on the shoulders of an unwieldy swarm of basement-dwelling, neck-bearded gamers, it’s basically a Ponzi scheme. I predict pain.

An online-driven short squeeze: Over the past few days a few obscure, dead-in-the-water stocks virtually soared up the Niagara Falls, thanks to a large online community making a concerted effort. The crowd aggregately bought massive positions in vulnerable stocks, forcing short sellers to unwind their shorts, (i.e. buy the stock), which then exacerbated the upside pressure creating a feedback loop.

 

I was just thinking that the last time I unwound my shorts it created a feedback loop too, but…

 

Anyway… Ultimately, fundamentals have a way of being fundamental, and in due course, some unfortunate google of thirty-something smarty-pants’s will lose their shirts, never mind their shorts. As one of our analysts said in this morning’s reading package: “We are seeing something akin to a religious schism... GameStop remains weak as a business… for this momentum crowd, fundamentals do not matter. Until they do, and they will do.”

He went on to explain that we haven’t seen the end of this yet. A dead fish makes a splash, but it still stinks.

 

Other Big Bubble trouble? Given the exuberance in different pockets of the market, it’s fair to wonder if we’re seeing a bubble inflating close to a bursting point. We take stock of the signs of excess and look at how to position portfolios through this period.

 

Regional developments: S&P review threatens Canada’s energy sector; U.S. stock market volatility spikes on conflicting narratives; Pan-European equities in risk-off mode; Recovery gathering momentum in South Korea.

More Here: Global Insight Weekly

 

And Lastly, Shorting Ribs: Over the past 40 years, American mean consumption has shifted decisively towards chicken at the expense of beef and pork (see chart below). According to the Wall Street Journal, “at least 10 major U.S. fast-food chains have introduced fried-chicken sandwiches in the past three months, or are set to shortly.”

 

 

Enjoy your weekend!

 

Mark