Hard to Kill
Wow! That was quite the fun week for only four days. Did you think anything else would be the focus of this week’s post? Well, if you thought about this blog at all, I’d be surprised. I mean you can’t make some of this stuff up. The CEO even showed up pantsless to a Zoom meeting with a retail YouTuber. But how can you pass this stock up? There’s free popcorn dividends. I thought Andrew Ross Sorkin had a good post about this. He said that it’s not about these companies or their stocks, but more about the fact that the "public views the stock market (and economy) as something that is manipulated and not trusted." My friends were texting me again arguing that the man was trying to keep them down by halting the stock. It’s impossible to find a way to explain this to people that don’t want to understand. There’s more on AMC below. along with a lot on equities content with a bunch of charts & screenshots.
The US jobs report was one of the most anticipated economic reports in a bit. The May report released Friday was a moderate success. The US added 559k jobs, with the Reuters poll expecting 650k jobs, but markets seemed to like it. North American markets ended the week moving higher. Most European equity markets rallied off their lows after this report.
Another less publicized Economic number that caught my eye was housing prices from the UK. May’s numbers were +10.9%, which is the largest since August of 2014. On this week’s Econ calendar; GDP numbers from the Eurozone, Japan, South Africa & UK , ECB & BoC rate decisions, and US CPI numbers for May.
I’ve been watching Crude with a little more regularity lately. It’s starting to knock on the door of multi-year highs. OPEC+ is continuing to slowly increase production, as they forecast a tightening global market. I think it was the MacroVoices podcast mentioned that they probably continue this while US shale production remains muted.
When I left you last, we were still dealing with the Colonial Pipeline cyber attack, now JBS, which is the biggest meat producer in the US, and actually the world, had a ransomware breach. This was attributed to a Russian criminal organization. I think these people are really making some crazy decisions. First our gasoline, now our meat supply, I’m not sure there’s much Americans love more than gasoline and meat. If they hit a gun company next, people will lose their minds.
Earnings Watch
Last Week
There were some noteworthy reports last week. I think Zoom’s report on Tuesday was a positive sign. Maybe some of these WFH stocks have a real life after we reopen fully. The company beat on the bottom line quite handily and YoY grow was an astounding 560%. Other WFH names that reported good numbers last week were Docusign and Slack. DOCU had a monster close to the week. Moving 20% higher after reporting.
This Week
Well if it isn’t near perfect timing that GameStop is reporting after the frenzy of last week. GME has taken a back seat to AMC for now, but let’s see just how bad their earnings are. Not that anyone cares. A few other names of note are Marvell, Brown-Forman, Chewy and Campbell Soup.
Equity Capital Markets
Last week was quiet, but we’ve got some activity coming up this week. Marqeta is looking like a billion dollar raise. After that only LifeStance Health and Monday.com seem like they’re worth any time. The others are all much smaller.Of note as well, Krispy Kreme filed to go public again last week, but it was done on Tuesday. Timing was a little off in my opinion. They should have waited till Friday, because that was also National Donut Day in the US. How do you miss that opportunity?
This week I’ve got my eye on a few lock ups expiring. Dash is the largest with 33M shares or 10% of it’s outstanding shares coming available. 4D Molecular Therapeutics was smaller offering at only $200M, but that’s about a third of outstanding shares. C3AI is also noteworthy because of their large short interest percentage of 10% of outstanding shares and 21% of their share unlocking.
Nice article explaining some of the factors in the SPAC market. The biggest point I think that was made here by author was expecting the US volume of SPACs to slow. Yes, even Chamath. However, Singapore, Hong Kong, and Japan are noted to be at “various stages of getting their SPAC framework ready by 2021.”
Brent from SpotGamma went live and posted multiple videos last week around how the options were helping drive the stock performance. I’ve talked about this Gamma squeeze before. This link takes you to his channel because I recommend you see how this week played out. His newsletter also gave us a chart of some of the key levels to watch for AMC.
Everyone probably saw these headlines. Mudrick took a nice profit very quickly, but looked dumb when the next day it went up even more. Honestly though, I think the CEO is doing right by his company. He’s raising money by selling stock into this mania.
Who is the company selling stock to though? It’s not really institutions. This article talks about roughly 80% of its holders are retail “investors”. Look at this craziness though. More than 20% is held by index funds. Which index funds you may ask? Well, how about the Russell 2000. How about being the #2 holding weight in the most famous Smallcap index. Yeah, and it’s good buddy GameStop is #3, just behind the #1 holding Caesars Entertainment. AMC has accounted for almost 25% of the Russell 2000 return in the last month. Even crazier is that it’s #9 over the last week and #13 over the last month in terms of impact on the much larger Russell 3000, and that’s counting both classes of Alphabet in the index.
Russell 3000 - 1M Total Return
Russell 3000 - 1 week Total Return
It’s one thing to pick a stock and run it to the moon, just because, but when you can’t even get the stock everyone’s talking about right, that just shows the levels of insanity with this retail revolution. As we’ll see with Josh’s piece below, maybe I just don’t get it. It wasn't only the options, AMC Networks, or AMCX, was up 25% last week on nearly double its trailing 4w average volume. Maybe it was a gamma squeeze here too, I didn't look into that.
Stock Traders Buy Large Volume of Call Options on AMC Networks
I love this post from Josh Brown. So many Boomers and Gen-Xers are having a tough time digesting the behaviors of today’s retail traders. The successful investing and trading we’ve used for years is being overrun by these fly by the seat of their pants youngsters. Josh uses stories and statistics to put that all into context.
Where did this surge come from? Well, this ZeroHedge article uses some data from Goldman Sachs Prime to show that there was some serious short selling going on. Even TMT stocks were net sold. The article says that’s the first time in six months and was the largest notional net selling since April 2018. A report from BofA also shows outflows from tech funds being the largest since December of 2018. There are some industries being bought like Food products, Biotech, Hotels. 
The Fed began buying some of the most common bond ETFs in May of 2020. Without going through all their purchases, it looks like they’ve made a decent return on this investment. While some of these ownership percentages appear to be large, they’re really not all that large. As one example, holding 7% of SPIB. SPIB’s largest holding is $12M of BofA ‘24 bonds, which has $2B notional outstanding and trades about $4M a day for the last 3 months. This is not a large position. 
Time for a little self promotion. I joined Roger Hirst of Real Vision on ‘The Big Conversation’. Roger starts off with a summary of global macro trends in play. We get into the micro of trends of buybacks and dividends versus those in Capex for the S&P 500. Below are some of the charts we spoke about plus once additional. I thought about looking at the Capex of the global semiconductor industry after our conversation. In the chat, I mentioned Lumber and Energy having alligator arms when it comes to spending. With all the issues around Semis, I wanted to see what the analyst forecasts were showing for the forward 12 months for Capex. It’s actually good to see that they’ve increased those numbers by more than 30% over the last six months. Something I didn’t really explain well in the interview was the GAAP vs. IBES non-GAAP numbers. I wanted to highlight the differences that really show up in the Telecomm industry. The investment from Verizon, T-Mobile, and AT&T in the wireless spectrum was huge. Those don’t show up in the non-GAAP IBES estimates, but do show in the GAAP actuals for Q1. For AT&T, it does show in either because of the structure of their subsidiary that purchased those rights. 
This week I’ve got my eye on a few lock ups expiring. Dash is the largest with 33M shares or 10% of it’s outstanding shares coming available. 4D Molecular Therapeutics was smaller offering at only $200M, but that’s about a third of outstanding shares. C3AI is also noteworthy because of their large short interest percentage of 10% of outstanding shares and 21% of their share unlocking.
WILL THE 2020 SPAC IPOS BOOM CONTINUE?
Best of the Week
Using Dennis Rodman and the 90s Bulls as an analogy for proper portfolio diversification, there really isn’t anything better. Basically, if you had 5 Dennis Rodmans on your basketball team, it wouldn’t be a very good team, but if you add one Dennis Rodman to a team with two Hall of Famers, then you get one of the greatest teams ever. Chris uses this to apply a long vol strategy in your portfolio. Is it the be all, end all? No way, but using it along with diversifiers like gold, commodities and others allows more shots at the basket from your superstars, aka equities. I recommend listening to this and reading the CWARP paper. Chris Cole, Artemis Capital Management - You Want To Diversify Based On How Assets Perform In Different Market Regimes - Listening time: 81 minutesBest of the Rest:
Here’s where we get into the lunacy of last week’s AMC trading. Let’s take out all the basic things, easy to find things like volume of the stock and price moves. Before I share anything, I want to be upfront. Last week with the stock near its highs, I bought some puts. They were really expensive (322% implied vol), but I went way out of the money and gave it some time to work out. It’s in my face as of the end of the week, even with the stock down a bit.AMC Entertainment Holdings, Inc. Raises $230.5 Million of New Equity From Mudrick Capital
Russell 2000 - 1M Total Return
Stock Traders Buy Large Volume of Call Options on AMC Networks
I love this post from Josh Brown. So many Boomers and Gen-Xers are having a tough time digesting the behaviors of today’s retail traders. The successful investing and trading we’ve used for years is being overrun by these fly by the seat of their pants youngsters. Josh uses stories and statistics to put that all into context. Your father’s stock market is never coming back
As Reddit Rampage Began, Hedge Funds Unleashed Biggest Pile Up Into Shorts In 5 Years
Why SKEW index is 'hot garbage'
NY Fed says it will begin to sell corporate bond ETFs on June 7
Has the Tech Stock Buyback Bonanza Returned? | The Big Conversation
One for the Road
I saw this come across my Twitter feed. As the article mentions, DB joins GS and JPM in strongly asking, or recommending, its employees get back to the office. I immediately thought of this Tweet from a few months back. The first few weeks back at the office will for surely be weird, but we’ll be cool. Right honey bunny?Deutsche tells US investment bankers they must be back in office by Sep 6
Thanks for reading. I hope you have a great week. You can take that to the bank.
Michael
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