{"id":1470322,"date":"2024-06-09T20:20:00","date_gmt":"2024-06-10T00:20:00","guid":{"rendered":"https:\/\/bugaluu.com\/news\/?p=1470322"},"modified":"2024-06-09T20:20:00","modified_gmt":"2024-06-10T00:20:00","slug":"did-roaring-kitty-just-kill-the-bull-market","status":"publish","type":"post","link":"https:\/\/bugaluu.com\/news\/did-roaring-kitty-just-kill-the-bull-market\/1470322\/","title":{"rendered":"Did Roaring Kitty Just Kill The Bull Market?"},"content":{"rendered":"

Did Roaring Kitty Just Kill The Bull Market?<\/span><\/p>\n

\n

Submitted by QTR’s Fringe Finance<\/a><\/em><\/p>\n

My intuition is telling me this is it. This is the end of the bull market.<\/p>\n

Before I get into my reasoning, I want to remind my readers that this is not financial advice, and I have been wrong about the market being overdue for a pullback over the last 2 1\/2 years since interest rates have started to rise.<\/p>\n

About a year ago, I corrected myself and began a series of mea culpas, explaining that it was my\u00a0timing<\/em>\u00a0that was off, but also that I still believed the mathematics of 5.5% interest rates were all but a guarantee that the market and other financial assets, including things like real estate and commodities, at some point would have to deflate.<\/p>\n

I didn\u2019t set out this past weekend with premeditated intentions of writing an article about why I think the market has peaked for the time being. Rather, it was a string of events that took place over the last 48 to 72 hours that have my spider senses tingling.<\/p>\n

I think the shark has been jumped, the tab has come due, and the American consumer, as well as the retail investor, are completely exasperated, out of options, and out of ideas. Here\u2019s my reasoning.<\/p>\n

It was just a day or two ago that I\u00a0wrote about Nvidia and why I thought it had become a disproportionately large risk to the overall market<\/a>. The stock now represents 6.5% of the S&P 500, an astronomical amount for one name to make up a 500-name index, and appears to be hitting peak levels of hysteria, as evidenced by CEO Jensen Huang\u00a0signing autographs on the breasts<\/a>\u00a0of women at computer shows.<\/p>\n

On top of Nvidia’s mind-numbing S&P concentration, single-handedly driving broader market moves, I\u00a0raised the question<\/a>\u00a0of whether or not the growth that the market expects from the company could be far overshooting the company’s actual trajectory in years to come, despite the fact that artificial intelligence will likely remain in a secular bull market for years to come.<\/p>\n

No sooner did I publish that article than all eyes turned to \u201cRoaring Kitty\u201d on Friday.<\/p>\n

<\/a><\/p>\n

For those unfamiliar with Roaring Kitty, also known as Keith Gill, he is the man that stoked the flames of excitement with GameStop\u2019s astronomical short squeeze higher some years back, and the man who profited the most handsomely \u2014 about $40 million to $50 million in the first run up \u2014 as a result.<\/p>\n

He has become somewhat of a legend among retail investors and saw his fellowship increase exponentially in the days, weeks, months, and years after the initial GameStop squeeze higher. They even made a movie out of his story, called\u00a0Dumb Money<\/em>, with Paul Dano in the starring role.<\/p>\n

<\/a><\/p>\n

At this blog and at QTR central, we have no beef with Gill. I though the movie\u00a0Dumb Money\u00a0<\/em>was great and I generally find any type of anomaly in the system that temporarily shifts the power back to the people interesting (hence\u00a0my curiosity around bitcoin<\/a>). And I generally root for any story that takes away from\u00a0Cathie Wood\u2019s CNBC airtime<\/a>.<\/p>\n

GameStop stock has been bubbling higher over the last couple of weeks, making retail investors wonder whether a repeat of history\u2014and subsequently their chance of getting rich\u2014is possible again. Hell, on Thursday night last week, GameStop shares had reached all the way into the $60 range before it was announced Friday morning that the company would be selling stock to raise cash at the company\u2019s inflated prices.<\/p>\n

As usual, price becomes a rationing mechanism, and GameStop is getting the deal of the century by selling into this retail euphoria. The company added more supply to the market and GameStop wound up finishing the day on Friday at $28.<\/p>\n

<\/a><\/p>\n

But the last few runs up in GameStop haven\u2019t stopped roaring Kitty from taking what used to be around a $50 million bankroll and parlaying it into what appears to be a nearly quarter-of-a-billion-dollar bankroll.<\/p>\n

It\u2019s difficult to try and figure out how he could have amassed such wealth\u00a0without<\/em>\u00a0trading in the name after recently reactivating himself on his Twitter account and posting this Tweet-gone-round-the-world.<\/p>\n

\u00a0<\/p>\n

<\/a><\/p>\n

One thing driving the euphoria in GameStop shares heading into Friday was the expectation that Gill might do something crazy on his live stream. Would he come out and buy another couple million shares live? Would he introduce some grand plan that would help shares skyrocket even higher and punish shorts even further? Is it possible he would exercise his options live on the air, leading to the entire stock market breaking? People were waiting with bated breath to see what his plan was.<\/p>\n

But while everybody was waiting for Gill to answer this question, reality was already setting in with GameStop shares. The company\u2019s issuance of new stock was diluting existing investors and making it more difficult for the stock to move higher.<\/p>\n

As the stock percolated around the $30 to $35 level before the live stream began, a queue of interested investors, analysts, and market participants lined up to see what Gill had to say. By the time he went live at about 12:20 Eastern time on Friday, there were over 600,000 people watching his live stream.<\/p>\n

The format was reminiscent of the original live stream Gill used to do before the first GameStop run-up: the screen was structured in the same way, he poured himself a beer, he gave everybody a look at his portfolio holdings, and he ran back a half-assed thesis on why he thinks GameStop could turn around its business for the long term.<\/p>\n

It was what\u00a0he didn\u2019t do<\/em>\u00a0that made his appearance a “sell the news” event. He didn\u2019t say anything unexpected, he didn\u2019t offer up a war cry or a price target, nor did he reveal some intricate trickery to try to further stick it to \u201cthe man\u201d in the hedge fund industry. The appearance was devoid of hype, devoid of actual analysis, and uninteresting enough that the number of live viewers started to dwindle as quickly as 10 or 20 minutes into it.<\/p>\n

<\/a><\/p>\n

I\u2019m not saying there won\u2019t be an audience for Gill in the future, because there will be. And chances are, it\u2019ll always be a multiple of my outreach. His stream sits at the intersection of the stock market, the roulette table, a late night Mountain Dew fueled Dungeons and Dragons game and the underdog plots of the movies\u00a0Rudy\u00a0<\/em>and\u00a0Rocky\u00a0<\/em>combined. And there\u2019s always going to be an audience for that.<\/p>\n

But there was something about watching the number of viewers on his stream dwindle in real-time that caused a thought to wash over me with a calm resolve as though I had been a Buddhist monk in seclusion, meditating about it for years:<\/p>\n

\u201cIf this isn\u2019t the absolute peak of this market cycle, I don\u2019t know what is.\u201d<\/em><\/p>\n

Leading into the stream, I was taken back by how 600,000 people could be watching.<\/p>\n

\ud83d\udd25 24 Hours Only80% OFF<\/a><\/strong>: Offering up my largest discount of the year for\u00a0Fringe Finance.<\/em> Subscribe in the next 24 hours and you can take 80% off an annual plan.\u00a0<\/p>\n

I am never going to offer a larger discount than this and the discount stays for as long as you remain a subscriber:\u00a0Get 80% off forever<\/a><\/strong><\/p>\n

The enormity of the number of people tuning in to watch somebody host their own version of stock-market-ComicCon was fascinating to me.<\/p>\n

On one hand, I loved it because it was probably 10 times the amount of viewership CNBC got at any point during the day Friday, which furthers my long-held belief that the mainstream financial media is generally useless and can be easily replaced, but on the other, I started to wonder if this could be the biggest “sell the news” event in retail investor history.<\/p>\n

If one wanted to generalize and put a bow on the retail investor base from this most recent market cycle, there would be no better way to do it than the people that hang out on r\/WallStreetBets.<\/p>\n

The Reddit crowd and the people who started the meme stock frenzy are the quintessential examples of the everyday investor for this particular market cycle. And, frankly, they\u2019re outright amusing: they have a gripe with \u201cthe man\u201d, they love a good underdog story, they\u2019re slightly less informed than they probably should be but are doing their damndest to learn, they ridicule the industry\u2019s norms and they\u2019re self-deprecating \u2014 all of which, the last two especially, make them tough for me to hate.<\/p>\n

<\/a><\/p>\n

But they\u2019re still arguably the lowest rung of retail money on the Wall Street totem pole \u2014 a designation I\u2019m sure they\u2019d embrace.<\/p>\n

I\u2019m not trying to poke fun at them in the slightest, but only to make the objective point that its fair to think that once\u00a0they<\/em>\u00a0have fired their last bullets or have psychologically capitulated, we could be seeing this lowest rung of market investors lead the charge of others out of the market. Once the necessity of raising cash and de-leveraging starts, it has a tendency to snowball as price pressure comes in. First it\u2019s the meme stocks \u2014 and then its very easy to see how it can move to more serious names like Nvidia, which, again, I\u2019ve said is basically the entire S&P 500. Here\u2019s a post from r\/WallStreetBets this weekend:<\/p>\n

<\/a><\/p>\n

Now, multiply that by a couple million investors who just got trounced by GameStop to end last week.<\/p>\n

I couldn\u2019t quite put my finger on what felt different about this last GameStop run-up, but now I know.<\/p>\n

While the first squeeze higher in the name was fueled by a tidal wave of excess liquidity and downtime as a result of the Covid pandemic, the latest run-up felt like one last desperate attempt to chase losses.<\/p>\n

While the first run-up felt like it may have been motivated to make some type of statement against Wall Street, however misguided, this second run-up feels like the sole purpose is to try for everybody to repeat the rare success that Gill himself had during the first run-up.<\/p>\n

This time around, it feels as though hundreds of thousands, or millions, of retail investors are simply hoping that history will repeat itself and they will be positioned at the right place at the right time for one last bite of the apple.<\/p>\n

Put simply, as is the case when trying to relive any great moments of days past, it simply isn\u2019t the same the second time around.<\/p>\n

And in the wreckage of the failed experiment this time around, people are not going to be replete and flush with cash like they were at the end of Covid. As I have consistently pointed out on this blog, consumer credit and personal savings metrics look nothing short of atrocious, with consumer credit ballooning to all-time highs and personal savings hitting lows.<\/p>\n

<\/a><\/p>\n

Source: Zero Hedge<\/em><\/p>\n

And as this below chart about retail sales indicates, the American consumer is simply tapped out.<\/p>\n

<\/a><\/p>\n

There is a huge difference between taking a wildcard shot on GameStop and still having a job or savings to fall back on and firing your last bullets of desperation with literally no other plan and no other option for replacing the capital destroyed as a result.<\/p>\n

The entire idea that short sellers were repressing the company to begin with and that manipulating GameStop stock higher was somehow going to save the company was\u00a0partially misguided to begin with<\/a>. Now, in order for GameStop to save itself as a result of its ballooning stock price, it\u00a0has<\/em>\u00a0to issue shares and dilute holders.<\/p>\n

The more shares it issues, the tougher the squeeze becomes, and it soon becomes very clear that \u201cinvestors\u201d following Roaring Kitty now are one half of a Chinese finger trap that, at some point, they\u2019re not going to be able to get out of.<\/p>\n

I can\u2019t predict what\u2019s going to happen to GameStop over the next few weeks: maybe we do some type of repeat of history, maybe Roaring Kitty becomes a billionaire. But extrapolated over a longer period of time than a couple weeks, reality, mathematics, and the macroeconomic environment are going to take hold and eventual gains for those who hold will, in my opinion, be limited.<\/p>\n

There\u2019s always ways out of bear markets. It used to just be recession and then eventual growth in productivity. Nowadays it\u2019s excessive money printing. I\u2019m not saying we\u2019re heading into a Great Depression that will last decades. But its foolish to think there won\u2019t be\u00a0any\u00a0<\/em>rough road ahead for markets. And Friday\u2019s fiasco was a warning sign, in my opinion.<\/p>\n

In fact, Friday was a shining beacon at the very peak of the mountaintop for the market if you ask me. What better way to justify attempting to call a short-term market top than watching those who can least afford it shell out what little cash they have left? When you combine this with the backdrop of pure euphoria in Nvidia, the one stock that is seemingly driving the market by itself, combined with lackluster retail sales data, rising delinquencies, defaults, supply and demand in the housing market starting to rebalance, and the fact that any cuts to rates to \u201csave\u201d a crash will likely take 18 to 24 months to work their way through the system \u2013 you have, in my opinion, the best case yet for arguing the worst is yet to come.<\/p>\n

Now read:<\/p>\n

Nvidia’s Animal Spirits<\/a>
\n\tU.S. Economy Is “Finally Cracking”<\/a>
\n\tLacking Finesse, Lacking Mindfulness<\/a><\/p>\n

<\/a><\/p>\n

QTR\u2019s Disclaimer<\/strong><\/em>:<\/strong>\u00a0Please read my full legal disclaimer\u00a0on my About page here<\/a><\/em>.\u00a0This post represents my opinions only.<\/em>\u00a0In addition, please understand I am an idiot and often get things wrong and lose money. I may own or transact in any names mentioned in this piece at any time without warning. Contributor posts and aggregated posts have been hand selected by me, have not been fact checked and are the opinions of their authors. They are either submitted to QTR by their author, reprinted under a\u00a0Creative Commons license<\/a>\u00a0with my best effort to uphold what the license asks, or with the permission of the author. This is not a recommendation to buy or sell any stocks or securities, just my opinions. I often lose money on positions I trade\/invest in. I may add any name mentioned in this article and sell any name mentioned in this piece at any time, without further warning. None of this is a solicitation to buy or sell securities. These positions can change immediately as soon as I publish this, with or without notice. You are on your own. Do not make decisions based on my blog. I exist on the fringe. The publisher does not guarantee the accuracy or completeness of the information provided in this page. These are not the opinions of any of my employers, partners, or associates.\u00a0I did my best to be honest about my disclosures but can\u2019t guarantee I am right; I write these posts after a couple beers sometimes. I edit after my posts are published because I\u2019m impatient and lazy, so if you see a typo, check back in a half hour. Also, I just straight up get shit wrong a lot. I mention it twice because it\u2019s that important.<\/em><\/p>\n<\/div>\n

Tyler Durden<\/a><\/span>
\nSun, 06\/09\/2024 – 16:20<\/span><\/p>\n

\u200bhttps:\/\/www.zerohedge.com\/markets\/bull-market-just-died<\/a>\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

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