FEBRUARY 20, 2021
Link to the Real.
From our crew to You. Thank you for talking the time to give us a Like. It matters.
Perhaps you’ve noticed. Our market’s been active. Nice. NYC-based Melvin Capital Management has been suffering serious…management issues. Driven to the edge of extinction the hedge fund was forced to raise more than a billion dollars simply to keep breathing. Andrew Ross Sorkin grew a grim face and spoke gravely about “brittleness” in the system. Perhaps additional “regulation” would be necessary–in order to ensure stability. Pundits knotted and pondered the gravity of the “disruption” in markets caused by the “flash mob.”–term used by Joe Kernen(Leanin’ Joe), and Andrew Ross Sorkin, hosts of CNBC’s “Squwak Box.”
What truly occurred? Individual investors united and put the squeeze, and serious hurt, on a predatory hedge fund. That’s it. For the first time in history a Wall Street money mob had its’ ass handed to it by their prey, the retail investor. CNBC displayed on-air angst. Why? Because CNBC is just as much a part of the symbiotic financial machine as Melvin Capital.
Big money protects itself, actively. When “trouble” comes big money runs directly to the regulators and pols they otherwise never want to hear from. Make no mistake, we are their target, either directly as “retail” investors, or indirectly as owners of 401Ks or pension plan participants.
Barron’s told us yesterday that “equity investors aren’t troubled.” Article–“Rising Interest Rates Don’t Trouble Equity Investors–at Least Not Yet.”–Randall W. Forsyth; Feb. 19, 2021, Barron’s. Following ten mind-bendingly bland paragraphs the question of “why” remained mostly unanswered. So why? A portion of Sj’s comment to the article: “Institutional money mostly sets equity prices, yet it remains true that growth and momentum have flashed in startling ways recently. There are those who will tell you that a sizable flock of new retail investors are behaving in somewhat unprecedented ways now. Such are seeking rapid share price appreciation–immediately, regardless of the stodgy ceaseless numbing valuation squawking from ossified value players and hand-wringing worrywarts.
Fact. The voices of fear never cease, and will always claim validation, eventually. The only problem is that they can never put a time frame on their calls, thus will always claim accuracy when the correction finally occurs. Further, they rarely refer to the mountains of money others have sensibly made while they huddled in the bunker of concern and wisdom. History. Valuation is precisely what kept Buffet out of AMZN and tech in general, for years amen. Risk is the game and attempting to evade said altogether isn’t investing. It’s simply fear.” End of quote.
Melvin Capital Management and its’ founder Gabriel Plotkin are victims only of their own predatory short-selling strategy. Both equity trading and investing provide the working capital which allows public companies to exist. As such, investors fully deserve the gains they earn by risking their cash to the cause. Short selling produces nothing for the companies upon whose backs they operate. In fact, firms like Melvin Capital are responsible for having shaped the regulations that deemed short selling as allowable. Only when their cynical strategy exploded in their faces were there calls to look at legislation. Where else besides short selling can one sell something they don’t even own? And in any other context selling 148% of anything is known as “fraud.” In the financial industry it’s “just business.”
The savvy not only understand what they’re doing, but also somewhat comprehensively understand the context within which they’re operating. For the retail investor that means grasping their place in the savage mechanics of the financial machine. Individual investors are a commodity used by Wall Street. Most pay the street as powerless participants in fee-ridden retirement plans. Most also pay hugely as holders of ridiculously restricted and punitively expensive 401k “plans.” But then, it’s “just business.” Far fewer are the ones such as you and us that also aggressively invest personally. Either way, we are always the customers of, and routinely the target of, big money. Realizing that, can free us of the worst abuses of such. As always, good luck and savvy investing.