Just when you thought it couldn’t get even more insane than the Alice in Wonderland world I have been describing these past few months, it has.
“Investors” have been filling their boots with shares of bankrupt companies such as the stricken 100-year old Hertz rental car giant (among others). Poor old Hertz ran out of customers (pandemic shut-downs) and money.
In fact, they were in such demand that on Monday, the shares were a ten-bagger! Yes indeed, those savvy millennial ‘investors’ pushed the Hertz share price up ten-fold from the low. So after reading a website urging them the secret to investing was simply to Buy Low, Sell High, they looked for the cheapest most beaten down stocks they could find – and voila! They found one in poor old bankrupt Hertz. It was surely a no-brainer as they were totally familiar with the name. What could possibly go wrong?
Maybe they should have googled ‘bankruptcy’ first that would have told them that bankrupt shares are cheap for a very good reason (something to do with running out of revenue, I believe. In Hertz’s case. they just ran out of gas).
There is no shortage of idiocy stalking the market and the lands. I am spoiled for choice. I see that the BBC – that achingly PC outfit – has pulled the ‘don’t mention the war’ episode of the classic 1970s comedy series Fawlty Towers from iPlayer for ‘racial slurs’. As I remember it, the people-hating hotel manager Basil Fawlty (John Cleese) had some German guests in his hotel and obviously still carried a grudge against all Germans – the exchange in the restaurant was hilarious (the first time round).
Considering the historical fact that the Nazis (aka Germans) kicked off the whole thing, I fail to see how this 50-year old comedy sketch could be classed as a ‘racial slur’. But we live in unusual times, I grant you, when a perceived racial slur carries a heavier penalty that vandalism or even physical assault or murder.
As that greatest of futurists, George Orwell said: If liberty has any meaning, it is the right to tell people what they don’t want to hear.
And liberty is certainly in steep decline with authoritarian governments ordering us all how to behave during this pandemic as the ideal smokescreen. I wonder how many of our liberties will still be constricted after this whole thing is over. And it is all for our own good, naturally.
Meanwhile, back to the new rules for investing. Here is the amazing Hertz chart:
Why does everyone believe the Fed controls the market? Today they are controlled by idiots. Consider this – the bankrupt Hertz which is in the bankrupcy courts is now planning to issue up to $1 Billion in new shares as they see what’s going on!!! What?? And since being bankrupt now is a magnet for today’s ‘investors’, they will probably sell out – if they get permission to go ahead.
We have all heard of IPOs (Initial Public Offering) by start-up companies. We now have the novel reverse offering for an end-of -life company – let;s call it an IBO – an Initial Bankruptcy Offering? Seems the more sarcastic you are, the more reality imitates you.
If anyone out there is in any doubt today’s capital markets are totally $&*%$-ed, then surely this must dispel any lingering doubts. Crucially however, they still do obey the age-old laws of sentiment and they still form lovely wave patterns that we can analyse.
Of course, this kind of idiocy only occurs at the end of huge financial bubbles when considerations of value go out of the window. Its all about momentum and so long as a greater fool will take the rubbish off your hands at a higher price, why not play the game?
But there is perhaps a natural explanation for this behaviour. One of the most popular US trading platforms is Robinhood where it is mostly millennials who inhabit it. Since the lockdown, the number of active ‘investors’ has rocketed as couch potato furloughed workers have turned to their screens (what else?) to while away the time – they are either playing a computer game or trading shares. So which is it to be?
In their torpor, maybe they are getting it all mixed up – they think they are playing a hot new game while in fact, they are trading shares! That must be it.
What did the Fed say on Wednesday? Was it for even more stimulus?
The Fed did exactly what was expected – nay, demanded! Asset purchase volumes will be maintained while rates will remain near zero for the next 2 years.
Then so why did the Dow crater by over 1,800 pts (8%) directly after the press release in the Thursday session after they promised more juice? Or has everyone got it wrong all along? Could it be that the supposedly all-powerful Fed is not in control after all? Or is it the man behind the curtain in the City of Oz?
I have accurately followed most of the twists and turns of many markets this year. We are racking up major profits already in both services. Don’t delay – take a two week Free Trial to my VIP TRADERS CLUB where we trade stock indexes, currencies, gold and much more. Or take a generous three week Free Trial to my PRO SHARES service where we trade individual UK and US shares .
The dollar rallies – against consensus
As I have been forecasting, the US dollar is advancing. Of course, most pundits have been trashing the dollar as they see the tsunami of Fed ‘funny money’ about to swamp all markets. But guess what? That forecast is being proved false.
So will they abandon their ‘Fed controls the markets’ theory (see above for my debunking of it). Of course not! They will come with some rationalisation that pleases the masses – and create a great story in the process. Of course, when your salary depends on believing the impossible, what are you to do?
Luckily, my rewards come from making good forecasts. When they fail to chime with the ‘experts’, I suddenly gain more confidence in them. Here is the euro
We had a terrific rally in May (which members took full advantage of) but it advanced in a classic five-wave form and along lovely tramlines. The momentum divergence at the high was a major clue the rally was about to reverse and when it broke below the lower tramline, that was a textbook signal to go short (and take profits on longs, which is what we did).
So now we are positioned short for a decent swing trade. Why not take a Free Trial to my VIP Traders Club to discover what I have in m ind for this trade (and also in GBP/USD, USD/CAD).
We are also positioned short in many tech issues including Apple and Netflix in my PRO SHARES service. A three week Free Trial is available!