The Wrap: When the Music Stops
Plus more AI insanity, a quick hit on Hims, and Red Flag Alert updates on Bloom, Erie and Paycom.
Something for everybody...
The market: What is normal, anyway?
Red Flags update: Did Hims jump the shark on press releases?
When will we know when the AI music stops?
Things you don’t see at a bottom.
Learning to say, “I don’t know.”
Bloom Energy update (from a bull).
Red Flag update: Erie Indemnity.
Red Flag update: Paycom’s pitiful new product.
▶Before we get going, a few appearances from last week...
Check out the Organized Money podcast I did with hosts Matt Stoller of the Big newsletter and the American Prospect’s David Dayen. The theme: Why the AI bubble might be more like subprime than the dot-com bubble. It’s running now on a podcast platform near you, or you can just click here.
I also had a fun chat with my old pal Chuck Jaffe on his long-running Money Life podcast, where he was trying to make sense of everything now going on. You can listen here – It begins at the 33 minute mark.
▶Maybe “not normal” is not really the new normal, after all? The theme of last week’s Wrap was that not normal may very well be the new normal. But after this past week… maybe not? Reality finally hit the crummy de la crummy, proving once again that the laws of gravity still apply – and that ultimately this time was/is/and will be no different. While so many elements of market structure may have changed – much of it turbocharged by social media-driven trading as a speculative sport – human nature hasn’t, thanks to the lure of fast and easy money that ultimately has a high risk of becoming dead money. So much for the days when people merely played the market. As Andrew Ross Sorkin wrote in his new book, “1929,” it’s really just variations on the theme…
Lengthy, uninterrupted booms, such as the one in the 1920s, produce a collective delusion. Optimism becomes a drug, or a religion, or some combination of both. Propelled along by a culture of hot tips, one‑of‑a‑kind deals, killer sales pitches, and irresistible slogans, people lose their ability to calculate risk and distinguish between good ideas and bad ones.
In the meantime, this market may very well go much higher, with even the crummy stuff staging a “we’ll show them” rally. But make no mistake, the music will stop.
▶Press release, press release, whosa got a press release? If you missed it during the week, I wrote a report on how press releases of deals are driving the all-things-AI narrative…
But this press release pandemonium goes beyond AI. Perhaps none is as audacious as this one from Hims & Hers HIMS 0.00%↑, with last week’s headline touting, “Hers Launches Menopause and Perimenopause Specialty, Taking the Next Step Toward $1B of Hers Revenue in 2026.” Sounds impressive, except – as best I can tell the company has never disclosed what Hers revenue is... or what percentage Hers is of its overall business. In a press release-driven world, saying that the unit will hit $1 billion in a bit more than a year appears to be little more than a ploy to play to stock market algos – nothing more, nothing less.
I first red-flagged Hims well over a year ago at much lower prices, based largely on the declining growth of its underlying core business – much of it obfuscated by the unsustainable growth of its tilt to compounded GLP-1s. It has gone on to be one of the nuttiest, most irrational stories out there... with the stock defying all odds.
Referring to its CEO, long-turned-short Paul Cerro of Cedar Grove Capital Management headline his report Friday…
Paul’s work on Hims is worth checking out especially since he used to work at privately held rival Ro and appears to remain well-connected to the industry. As I told him, the ultimate risk in this market with companies like that would appear to be the government taking a stake. Unless, of course, it opts to invest in one of Hims’ private competitors – assuming, that is, it takes a stake at all. And let’s not forget: It was a comment from President Trump a day after Hims stock had spiked – about lowering prices of weight-loss drugs – that caused the algo antics to backfire. Live by the algo, die by the algo, though with Hims we know, it has at least 9 lives. I lost count which one this is.
▶Speaking of press releases, the real question – What happens when the press releases stop? After all, they’re more than mere background music in this mania. A friend shot back, “What happens when the companies report?” What he meant was: What happens when they report results and there’s no there there? Or, put another way, guidance or growth or whatever metric has been driving its shares isn’t quite what investors (or the algos or whomever or whatever) expected. It’s impossible to know in this market – with any stock on any given day – what will shake the confidence of investors. While that’s always a risk, today that is the risk, especially when customers and suppliers engage in so many round-trip transactions of helping each other out that it’s hard to keep track of who’s on first.
▶Sticking with the theme, things you don’t see at the bottom...
▶Meanwhile, this quick update on Bloom Energy $BE: In the month since I gave a more-or-less bullish update on Bloom – courtesy of Paul Wick, chief investment officer of Seligman Investments – at its peak its stock spiked by more than 50%. It has since pulled back, but with the surge Wick filed to sell a slug, bringing his stake down to around 11%. Does that mean Paul changed his tune? Hardly.
I caught up with him the other day. His reason for selling…