Tuesday, May 11, 2021

I'm A SPAC Cowboy....

Bet you weren't ready for that.

Because shorting stocks based on valuation (vs fraud) in a bull market is so dangerous, we don't talk about it all that much. There have been a few, the Great Kinder Morgan short of '14* being a wonderful memory, along with a few tactical i.e. quick shorts of Tesla over the years (in direct violation of the decade-long "Don't short TSLA" admonition), but as a general rule, on the blog we only short frauds in a bull. In a bear, "Short 'em all" as one of my mentors used to say.

The fact we don't put every last thought that pops into our collective heads out in public actually benefits our readers as a couple of things that hurt results in 2020 never made it to the blog.

But I don't like blind pools.

And I especially don't like SPAC's with PIPES

And with that confessional we'll turn the narrative over to the professional.

From FT Alphaville: 
This is nuts, this is the trash crash
The garbage truck has arrived.

To say we’ve been banging this drum for years is an understatement, but what’s going on in equity markets at the moment is truly nuts. 

Following a start to year when stupid was at the steering wheel of stocks — whether it be the GameStop faux-revolution, Spac Jesus Chamath Palihapitiya framing himself as the next Warren Buffett, or any number of unproven electric vehicle companies coming to market and then exploding higher on no news — the trash trade seemed to have spun out of control.

After a pause in April, following February and March’s aggressive sell-off, the trash crash is back with a vengeance. 

On Monday, the tape looked like the elevator scene in The Shining. The Nasdaq was down 2.55 per cent, with the FANG+ index — which includes Tesla, Alibaba and Baidu alongside Facebook etc — fell 3.61 per cent. However, below the surface of the mega-cap technology stocks there was even more carnage. Chamath Spac names like Open door (-10.32 per cent), Virgin Galactic (-8.47 per cent) and Clover Health (-4.32 per cent) all dipped under severe selling pressure. While once popular retail names such as futuristic insurer Lemonade (-10.18 per cent), software-as-a-service prom king Snowflake (-5.93 per cent) and Chinese electric car market Nio (-7.07%) also got caught in the crossfire. The pattern repeats across popular funds tied to these names, with ARK Invest’s ETF names suffering further losses, and the thinking man’s overpriced tech play — the £16bn UK-listed Scottish Mortgage Investment Trust — falling 6 per cent (and another 4 per cent this Tuesday morning.) The theme continued in Europe this morning, with the Stoxx 600 Tech down 2.7 per cent.....


*August 18, 2014

Companies that engage in great amounts of financial engineering are always worth looking at as potential shorts. A lot of skullduggery can occur when the razzamatazz really gets going.

This week both Barron's which has been skeptical for a while, and FT Alphaville which has, until today, been neutral take a look at all the moving parts.

Regarding a short on KMI, I hate paying dividends on short positions.
Hate it, hate it, hate it.
But I might be tempted in this case. And the rate of ascent on the stock is definitely rolling over.....

December 3, 2015 
"Always remember: In the short run balance sheets don't move stocks, in the long run they rule."
That's me, quoting myself.
Here's the monthly chart via FinViz:

KMI Kinder Morgan, Inc. monthly Stock Chart
The roll up was done in August 2014.
After trading down 7.85% yesterday the stock is down again. Today's low: $20.03.
If that little bit of support from mid-2011 doesn't hold there's no technical reason the stock couldn't see $15 or even $10.
See also today's "Kinder Morgan: In Which Izabella Kaminska Declines To Take A Victory Lap And Instead Highlights Recent Analysis (KMI)"