Join the Bubble Stocks: Just Add Blockchain to Your Company Name
Need to put a little air under your stock price? Show earnings? Nah. Strong balance sheet? No way. It’s all in the name. Lisa Pham reports for Bloomberg, “On-line Plc jumped as much as 394 percent on Friday after announcing plans to change its name to On-line Blockchain Plc, following an initial climb of 19 percent on Thursday when it first announced the news.”
Insert blockchain, up goes the share price.
Meanwhile FAANG favorite, Amazon, is trading over $1,100 after-hours. This after cranking out a whooping 50 cent 3rd quarter earnings number. Bill Fleckenstein writes,
The fact that such huge companies moved that much on the news, for the most part, was a real headscratcher. Particularly in the case of Amazon where, about a year ago, the forecast for the current quarter was around $2, then at the beginning of this year it was down to $1.50, then three months ago it was $1, then a month ago it was a nickel. So when they reported 50 cents, that was deemed a huge success, despite the fact that operating income fell 40% (along with other bits of weak financial performance).
Wolf Richter writes on his Wolf Street blog that betting against the madness is a widow-maker trade. He quotes David Einhorn who talked about the three heroes that he considers “our three most well-known ‘bubble’ shorts”:
Amazon: “Our view is that just because Amazon can disrupt somebody else’s profit stream, it doesn’t mean that Amazon earns that profit stream. For the moment, the market doesn’t agree. Perhaps, simply being disruptive is enough.”
Tesla: “Tesla had an awful quarter both in its current results and future prospects. In response, its shares fell almost 6%. We believe it deserved much worse.”
Netflix: “On the second quarter conference call, the CEO stated, ‘In some senses the negative free cash flow will be an indicator of enormous success.’ To us, all it indicates is that Netflix is capable of dramatically changing the economics of stand-up comedy in favor of the comedians.”
Yet Amazon is up 30% this year, Tesla and Netflix 58%! This market simply doesn’t tolerate logic other than buy, buy, buy – until something changes.
So it has been for centuries.
"I can calculate the movement of stars, but not the madness of men," Sir Isaac Newton apparently said after he lost his fortune in the South Sea Bubble.
Jesse Colombo writes of the episode that bankrupted Newton.
As South Sea Company shares bubbled up to incredible new heights, numerous other joint-stock companies IPOd to take advantage of the booming investor demand for speculative investments. Many of these new companies made outrageous and often fraudulent claims about their business ventures for the purpose of raising capital and boosting their stock prices. Here are some examples of these companies’ business proposals (History House, 1997):
For supplying the town of Deal with fresh water.
For trading in hair.
For assuring of seamen’s wages.
For importing pitch and tar, and other naval stores, from North Britain and America.
For insuring of horses.
For improving the art of making soap.
For improving of gardens.
For insuring and increasing children’s fortunes.
For a wheel for perpetual motion.
For importing walnut-trees from Virginia.
For making of rape-oil.
For paying pensions to widows and others, at a small discount.
For making iron with pit coal.
For the transmutation of quicksilver into a malleable fine metal.
And the most outlandish (and cunningly clever!) of all:
For carrying on an undertaking of great advantage; but nobody to know what it is.
Stock promoters where more ingenious then; today all that is needed is “blockchain” in the company name.
