Red Flag Alert – Sign of the Times
The paradoxical battleground known as Marathon Digital
When I started Red Flag alerts, I made it clear the focus was stocks to avoid, not stocks to short. (Unless you’re a short seller, that is, who understands the risks. And even then...)
That said, the concept of easy- and hard-to-short stocks can provide a window into stocks that could be vulnerable to sharp run-ups – even if they don’t deserve it... and then, possibly falling off a cliff.
A great example is bitcoin miner Marathon Digital Holdings...
As one friend in my network put it...
No borrow available in January 2023 with a 100% cost to borrow.
Now millions available and no cost to borrow.
Quick Shorting Primer
Shorting involves borrowing shares, and then immediately selling them, with hopes if all goes right of buying them back at a lower price. If the “borrow,” as they call it, is tight, the so-called “stock loan fee” associated with finding and borrowing the stock can skyrocket. The fewer shares there are to borrow, the higher the cost... sometimes as high a 100% of the value of transaction.
The difference between now and then: Back then, bitcoin had crashed in the wake of the Sam Bankman-Fried fiasco, causing shorts to pile into all things crypto.