Back to the Future: It’s 2021 Again!
Also this update: The next company being pumped in the China stock scam?
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▶Had to chuckle when I saw the Wall Street Journal story yesterday on the return on meme stocks – and how it’s like 2021, all over again. That has been a theme here now seemingly for months... and likely will be for months more. Even longer. Maybe it’s a new world. Maybe it isn’t. But as a friend reminds me... “Like they said on bitcoin - if it has no intrinsic value, how can it be over-valued? If that is true for all crypto, isn’t it true for meme stocks since everyone knows they are junk?”
▶To be honest, I don’t know what to believe anymore, but what appears to be apparent is how the rapid push of today’s AI is likely playing a role in all of this... and that it would seem the quants and algos are smart enough, thanks to AI, to use what happened in 2021 as a template for how the machines should trade today... in turn pushing this whole thing to levels that are not just extreme, but also likely unsustainable. Or put another way, when the game changes, they change the game... and do so with speed a velocity never seen before. Add in a new wave of retail speculators, who view this little differently than sports betting – and even a South Korean component, which I've written about before – and suddenly it feels as though the quaint old days of "playing" the markets are more like a ride on a pitch dark Space Mountain.
▶Sticking with the theme... One thing we know about so many of today’s meme stocks is that they’re little more than proxies for a bigger theme. Like Oklo ($OKLO) on nuclear, and AeroVironment on drones. The big difference between Oklo and AeroVironment ($AVAV), which I red flagged before it tumbled 40%, is that AeroVironment is a real company with real revenue, real earnings and real products. Still, its recent rise of 50% in a matter of days was a bit excessive - or would be considered so in any other market than one like this. It has since sunk back a bit. The reality for many of these is that it would take years to grow into their valuations, not that whomever or whatever is currently driving this market cares about valuations. Because they don’t. After all...YOLO! For Oklo. (Sarcasm, folks.)
▶Turning to the Golden Age of Grift... Emails continue to roll in from around the world by investors caught up in that China stock scam. They’re all similar in explaining how they got snared... and the tactics that lured them in. There even appears to be a Discord group devoted to victims... and based on what they’ve told me, plenty have been trying to rattle the Feds. I’ve asked them to let me know if they hear anything. And if you’re keeping score: According to several, the next one on the list being pumped and likely dumped: Park Ha Biological Technology ($PHH), another Chinese stock that trades on the NasdaqCM, or Nasdaq Capital Markets. To quote myself: That’s the Nasdaq’s come-one, come-all version of the Vancouver Stock Exchange. The company went public and did a $4.5 million public offering in January at $4; it now trades at $40, with a market cap of $1 billion. The only finger I lifted was to check out Park Ha’s investor relations site. Interpret at will. And if you're keeping score, the scam I wrote about – Ostin Technology ($OST) – is now trading at around 16 cents. That's 71% lower than the 55 cents it traded for when I first wrote about it a week ago. And that was 90% lower – within hours – than its $9 price just before the pumpers dumped it. Interpret at will.
▶If you missed it: Yesterday I ran my report on Post Holdings ($POST), which I had hinted at a few weeks ago. If you missed it, you can read it here. Post is the antithesis of anything anybody cares about today. But that doesn’t mean it should get a pass, even if the report translates into zero clicks. I would argue, in fact, there are plenty of those kinds of companies that are flying under the radar of scrutiny and for their holders (or those seeking hiding places) may very well be traps. And all are potential candidates for the next Red Flag Alert.
▶Finally, this word about creating shareholder value... In yesterday’s report on Post, I wrote that there’s no question that creating shareholder value is the No. 1 job of CEOs. But that can be taken to extremes.
Have a great week, everybody.
DISCLAIMER: This is solely my opinion based on my observations and interpretations of events, based on published facts and filings, and should not be construed as personal investment advice. (Because it isn’t!) I do not have a position in any stock mentioned here.
Feel free to contact me at herb@herbgreenberg.com