Yesterday’s slump… The Merrill Lynch disaster… Intelsat (INTEQ) buying Gogo (GOGO)… the NYC debate continues… and postcards from the Florida Republic.
It was a wild Thursday of trading, wasn’t it?
The Dow Jones shed 807 points yesterday. The Nasdaq slumped 5%.
And trading volumes went through the roof.
I’m listening to a number of people pretend like this downturn was the result of some surprise situation. As if a few people were sitting at a bar with their laptops open, when one person – four and a half Goldshlagers deep – mumbled: “Sell tech.”
Maybe this drunk was among the few rational people left who said that a post-split Tesla – trading at 10 times its value from this same period last year without much to justify that rally – – was insane.
And then, someone heard him (perhaps they were sober – probably not) and said, “I think that’s a good idea.”
And this game of telephone suddenly traversed Twitter? And men were gnashing their teeth as they started to realize that maybe a Federal Reserve induced frenzy won’t last forever or end well.
That what goes up – will ALWAYS go down. When will it happen? Nobody knows…
But why not Thursday as a start?
Momentum went negative across the market. The Nasdaq took it in the teeth hard. Apple had its worst day in months, but it’s market cap is still worth more than multiple G-7 nations’ economies.
Why was everyone sitting around wondering how the market suddenly had a down day… after 11 straight wins?
How do I count the ways that Thursday’s Momentum switch is the first of many downdays to come?
Is it that Tesla was trading at a pre-split adjusted price of nearly $2,500?
No, that’s not the rub. Because Bitcoin is still trading above $10,000, and cryptocurrencies don’t have inventories. Sometimes irrational exuberance is just part of the day.
What about Relative Strength Index numbers? I’m seeing lots of stocks sitting well above 75 while trading volumes are decreasing. That’s a serious warning that something is about to give.
Was it the fact that the S&P 500 was on pace to double in six months? That this is all happening in the face of gruesome fundamentals and geopolitical tensions?
There’s civil unrest. There’s massive unemployment. And no matter what anyone says, there is a multi-sigma event that could impact investors called the election. Do ordinary investors know that Pennsylvania officials aren’t LEGALLY allowed to count mail-in ballots until the DAY OF THE ELECTION? In fact, there are several states that can’t start counting until that day.
This is going to create chaos. We’re not going to have a winner announced on election night.
We might not have a winner announced by December — let alone election day due to the complete uncertainty around legal proceedings that are sure to follow.
And while everyone THINKS that the Supreme Court might side with Republican arguments like they did in 2004, it’s fair to question if John Roberts would side with this administration.
I could go on and on…
I’d love to sit here and rag on Robinhood for the fact that the SEC is now investigating its operations after months of retail rookies driving bankrupt stocks into the sky…
But why complain about Robinhood’s total lack of regard for its customers, when Merrill Lynch is far worse?
Being a Robinhood user is like being a drunk gambler at 2 am off the Vegas strip.
But you need to be a masochist to be a Merrill Edge customer.
Yesterday, I and thousands of other Merrill Edge users could not sell stocks or buy the dip when momentum went negative for the first time in months. Merrill Edge went down 20 minutes before my market momentum crossover figures triggered. It was down for more of an hour.
Most users couldn’t sign on and get out of positions. I had two conversations with people who owned VIX puts and couldn’t get out of their positions until well into the after.
Can’t imagine that went well.
A lot of people said that customer service was hanging up on them whenever they called to complain.
Personally, I was stuck holding a bag of momentum stocks that got absolutely trounced. I would have exited the trades and timed that selloff when market gauges went negative. I could finally sign in right around the time news broke that China was dumping more U.S. treasuries.
What a joke. I had converted over to Merrill back in February and left TDAmeritrade because I liked having all of my money under Bank of America. That was an error from the beginning because I was locked out of trading most leveraged ETFs, which I do when market conditions are very positive or very negative.
But Merrill showed it can’t handle heavy volumes on down days. The whole system buckles.
I can count five down days now where the platform has stopped working.
I will be leaving Merrill Edge as a customer. I’ll probably leave Bank of America as a whole now as well after a decade of banking with them. It’s simply too frustrating.
That said, I’ve thought of a new marketing slogan for Merrill as I walk out the door.
“Merrill Lynch is bullish on America… but not on your portfolio.”
What Else am I Looking At?
Forget whatever the hell happened with Tesla (TSLA) on Thursday.
In any normal market, the High Water Mark of our insanity would be the deal that just landed on my desk.
Yes, you read that right. A bankrupt company with a market capitalization of $125 million is buying a $400 million division of another struggling company by getting access to $1 billion in funds.
Well, that’s just stunning.
Looking around, we see that a connection to Blackstone is advising the company, which isn’t surprising. I wouldn’t be surprised if a company like Blackstone is able to get its hands on Intelsat and Gogo’s tech for pennies on the dollar.
I was looking for a way to capitalize on this story. I wouldn’t touch a bankrupt stock with a 10-foot pole. And assuming that Intelsat ends up worthless, shareholders aren’t going to get a dime.
But there’s a chance that the senior debt holders are going to get something once Chapter 11 is resolved. I was looking into a way to play this. I found 2023 senior debt that traded at 34 cents on the dollar. However, this is something that only institutional investors would have access to purchasing given the complexity of the offering.
This acquisition isn’t remotely close to the insanity that lies ahead and the disconnect between the Fed’s actions and the underlying economy.
Postcards from the Florida Republic
Finally, a personal section that will fall under the umbrella of High Water Mark moving forward.
A postcard, if you will, from the outskirts of Bonita Springs.
It’s a long distance from the apartments I’ve rented on Wall Street, in the financial district of Chicago, or along Lobbyist Row in Washington D.C.
Did anyone have James Altucher against Jerry Seinfeld in a New York City opinion-section debate for 2020?
Seinfeld took great umbrage to Altucher’s argument that New York City is dead – which I addressed last week.
Seinfeld argued in the New York Times (with feelings). He really believes that New York will come back, as “it always has.”
Altucher rebutted Seinfeld’s column with more facts. That the financial numbers are ugly, and that improved bandwidth is driving people out of the city toward newer pastures.
I feel bad for a lot of people who are too focused on feelings and not using logic to understand what is happening.
The entire situation happening in Gotham is really a game of “reverse musical chairs.”
So many people in New York and San Francisco are now stuck with a chair (their property), and the music has stopped. Now, they get to watch their cities become engulfed in debt and civil unrest with virtually no plan to address the sinking politics that fueled their demise for the better part of 50 years.
The tax base is leaving. Sure, major corporations might step in. But is letting all the FAANGs and Private Equity companies scoop up all of the commercial properties on the cheap really going to create a vibrant city in the future?
Seinfeld’s biggest argument against people leaving New York was that no one likes working remotely. He wrote:
“There’s some other stupid thing in the article about “bandwidth” and how New York is over because everybody will “remote everything.” Guess what: Everyone hates to do this. Everyone. Hates.”
Speak for yourself, Sneakers.
I’ve worked remotely for seven years now. Even when I lived in Chicago, and I couldn’t imagine ever having to drive along I-94 from Chicago to Arlington Heights in bumper-bouncing traffic.
Or getting on the 1-2-3 from the Upper Eastside to Canal Street. Having to take the Yellow to the Green Line in D.C. and then a bus across a bridge to get to National Harbor. No, thank you.
I’m 39. I will NEVER live in a big city or work in an office ever again.
The idea that I have to live in Manhattan, or Chicago, or anywhere else to get some sort of magical overpriced experience doesn’t quite appeal to me anymore.
Down here in Bonita Beach, I found a clever little BAR/hideout called Lansdowne Street, famously named after the fan zone of Fenway Park.
Here in the Florida Republic, Lansdowne Street is a Boston-themed bar and restaurant with some of the best sandwiches that I’ve ever had. It has a Boston-pub feel to it. But it’s two miles from a pristine beach and I don’t have to jump on public transportation after I’ve had a meal.
Now, I can hear some people up in Boston saying – “A Bah-stin themed rest-a-rawnt in Ba-neeta Beech?” And others might scoff and say: “That’s not an authentic Boston experience.”
Do you also think I shouldn’t buy generic Aspirin because it doesn’t provide the full Tylenol experience? You know, the one with the 30% markup? And the same exact benefit of eliminating my headache?
With Lansdowne Street, I get my sandwich made with the same meat piled in the same fashion on the same bread. I eat it at a reduced cost. Then, I drive back to a private farm well away from other people. And I don’t need to step over someone sleeping on a cardboard box to fulfill my caloric intake.
I used to live in the city and go to a bar or restaurant to “be away” from the city. Pick a theme – any theme. A Mexican restaurant with a tiki bar in the back (sure those two things technically go together)… or Hampton Social in Chicago, which has the feel of being surrounded by the same snooty rich crowd you’d find out near Montauk.
Now I can have a New York deli-style sandwich, a Chicago style pizza, or Maryland crabs any time I want, at a lower price, at about 95% of quality and experience.
Because the people with the knowledge of how to recreate that delicious food have recipes and will travel. They have moved into the spacious wonderland that is Lee County, Florida.
We’ll create our own “authenticity” here in time.