Together with Captain:
Ok, listen up. No one enjoys FinTwit as much as I do. The problem is that Twitter doesn’t really give us the tools to make FinTwit work for us. Enter Captain.
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It’s time to stop scrolling and start trading with Captain at your side.
What Happened This Week:
Scion Asset Management, LLC founder and manager Michael Burry made waves again last week after he made claims that a crash was coming for meme stocks and crypto. He then promptly deleted (or deactivated) his Twitter account, again. For those familiar with the matter, he has had an on-and-off-again relationship with Twitter. If there was a GIF that represented Michael Burry and how he uses Twitter it’s definitely this:
Here are a few of the tweets he rattled off before deleting his account on Monday:
"All hype/speculation is doing is drawing in retail before the mother of all crashes,"
"When crypto falls from trillions, or meme stocks fall from tens of billions, #MainStreet losses will approach the size of countries."
Burry added that people's fear of missing out has propelled asset prices to unsustainable levels. "#FOMO Parabolas don't resolve sideways," he warned.
"The problem with #Crypto, as in most things, is the leverage. If you don't know how much leverage is in crypto, you don't know anything about crypto."
For those completely out of the loop, Michael Burry made his claim to fame by shorting the 2006-2008 housing bubble and was the main character portrayed by Christian Bale in The Big Short. Burry ended up raking in $750 million in profits for his investors (the ones that stuck with him) and $100 million for himself.
As someone who has been investing for a while and has made just about every mistake possible, it’s hard to argue against Burry’s logic. The meme stocks and cryptos have outperformed, outlasted, popped and reinflated, and made a mockery of even the most seasoned investors who thought they were smarter than a bunch of apes (see Melvin Capital). Side note: Did you know a group of apes is called a shrewdness?
Here’s how much the big 5 (Bitcoin, Ethereum, Dogecoin, AMC, GameStop) are down off their highs this year—with Dogecoin taking the brunt of the blow this week.
Looking at this chart, you may think Burry has won. He nailed another one. Well, not so fast. Crypto fans know all too well the severity of dips that can occur. Especially when leverage gets involved and people get liquidated.
Every single one of the big 5 is still up YTD (Bitcoin briefly dipped negative on the year on Tuesday). So even though the meme stocks and cryptos are well off their respective highs, they are also still crushing it this year. Dogecoin is down 60% from the highs and still up 4,500%. WTF.
Internally, I think I’m more of a meme stock skeptic than a crypto skeptic (but that comes with a caveat). Meme stocks seem to all be created equal. In essence, they are stocks with high short interest and bad fundamentals (near bankruptcy, in a dying business model, burning cash, etc). Everyone knows they aren’t sound investments but it’s the psychological play that they’re after. The so bad it’s good play.
The ape mentality is if we can band together (ape together strong) we can turn this company around by collectively buying shares, initiating a short squeeze on the evil hedge funds, then allow the company to issue shares to the latecomers. Thus allowing these zombie companies to continue roaming the earth but more importantly, completing the meme cycle.
With regards to crypto, it continues to be a confusing and convoluted space—even for some of the most experienced investors—but, it has the possibility to change the world. AMC and GameStop don’t have this opportunity and I think it’s an important distinction.
A big problem for crypto, in general, is the fact that it is so complicated to understand—especially for the retail trader who may not even know how stocks work. So if someone says “[insert shitcoin] is the next Bitcoin”, who is to say they are wrong? Does it pass the sniff test? As one Twitter follower responded to the question I posed below, “it’s all bullshit until proven otherwise”.
Time will tell if Burry ends up being right again. When he talks my ears perk up. This may very well be his Big Short Redux.
Performance Update:
Now let’s see how the People’s Portfolio did this week…
We rattled off five straight weeks of gains. Top? No. A rising tide lifts all boats as the market also rallied to new all-time highs this week, shaking off the Fed meeting volatility from last week.
On Friday, we voted Coinbase (COIN) to remain in the portfolio. COIN has been our worst performer on the year, currently -33.17% since our first purchase 10 weeks ago.
Another loser, Penn National Gaming (PENN) is on the chopping block next week for the 1st time. We’re currently holding onto a -15.21% loss over the past 9 weeks as the sports betting stocks have cooled off in the past few months.
Our portfolio is currently -3.52% on the year and we’re slowly getting close to getting back to even on the year. Just need a few more rippers and we’ll get back.
Captain put together this Regatta of WeRamp stocks to see how the conversation has changed over time.
Keep an eye out for the new Twitter poll every Friday. Follow along in real-time with nearly 300,000 others on Public.
Portfolio News Highlights:
The biggest stories affecting our portfolio this week:
Coinbase Global enters Japan, poised to offer five cryptocurrencies (SA)
Nvidia’s Success Selling Chips Could Make It a Challenger to Intel (Barron’s)
Exxon (XOM) Plans to Eliminate US Employees to Reduce Expenses (Zacks)
Square, Inc. is continuing to Grow and Expand their Business Model (Yahoo)
How Shopify Grew by Being the Anti-Amazon (Barron’s)
What Else We’re Reading:
Blogs/Articles:
Harder Than It Looks, Not As Fun as It Seems - Morgan Housel (Collab Fund)
On Negative Oil and Futures Prices - Drew Dickson (Albert Bridge Capital)
Inner Game with Steven Cohen - (Stray Reflections)
Millennials, the Wealthiest Generation? Believe It - Allison Schrager (Bloomberg)
Books:
Atomic Habits - James Clear
Need new reading material? Visit my Amazon page for my most purchased book recommendations.