🍋 Ryan Cohen's P&D

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Short Squeez
August 30, 2022

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"An institution is the lengthened shadow of one man." — Ralph Waldo Emerson

Good Morning! Elon Musk said the world needs more oil and gas as it moves towards renewable energy, with Europe grappling with its worst energy crisis in decades. Number of Americans living paycheck to paycheck has fallen as inflation has eased. Inflation tamers at the Fed have also given a timeline for FedNow, a payment platform with nearly instant payment settlement within the US, expected to launch between May and July 2023. You won't have to wait till then for PSLs though, as Pumpkin Spice is back in Starbucks today!

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1. Story of the Day: Ryan Cohen's P&D

I get that Bed Bath & Beyond sells restroom products, but Ryan Cohen (Chewy founder and GameStop Chairman) may have misunderstood, pumping and dumping the stock, right after a filing came out saying he had done no trading.

On August 16th and 17th, Cohen sold his entire position in BBBY, just months after adding it to his portfolio. The aforementioned disclosure filing was an update on the size of his holdings and said he hadn't done any trading in the past 60 days. Less than 48 hours later, Cohen had liquidated his whole stake.

Shares have nearly lost half their value since Cohen's sales came out on the 17th. He sold $178 million of BBBY stock during this time, while many retail investors bought it. In classic meme stock fashion, retail investors were left holding the bag as the stock nosedived.

Joshua Mitts, a law professor at Columbia University, said individual investors had, "no idea he is dumping the stock against them. It's a legal grey area, but it doesn't seem like Cohen will face any regulatory repercussions."

The question is one that everyone who's single and dating hates. "What were your intentions?" Keith Higgins, a former director at the SEC, said, "The question here is at the time that Cohen filed that trivial update, had he firmed up his decision to sell?" While Professor Mitts says, "If his intent was truly to do nothing, then that is a hard enforcement case."

Short Squeez Takeaway: Ryan Cohen is only too aware of the power of the retail traders with his role as GameStop's chairman. Looks like Ryan Cohen executed this coup (heist?) to perfection. Leading people on (thousands of Reddit traders stoked about the BBBY pump) and then ghosting them (selling the whole position, without so much as a text). Hopefully, meme stock enthusiasts learn a lesson here, before their next relationship... I mean wild stock pick.

2. Markets Rundown

Stocks continued to fade after the sharp drop lower Friday because of Fed Chair Powell's comments. Crypto was up as the markets prepare for "the Merge" on the Ethereum blockchain.

Movers & Shakers

  • (+) Pinduoduo ($PDD) +15% after topping estimates on the top and bottom lines last quarter.

  • (+) Honda Motor Co ($HMC) +2% because it teamed up with LG Energy Solution to build a battery production facility for EVs in the US.

  • (–) Catalent ($CTLT) -7% as the pharmaceutical company reported disappointing earnings.

Private Dealmaking

3. Top Reads

  • Dealmakers wince at Jerome Powell’s “economic pain” (Axios)

  • Will student loan forgiveness make inflation worse? (CNBC)

  • Mortgage rates expected to fall to 4.5% in 2023 (CNBC)

  • CFOs see ‘pivot shift’ as hiring slows (Axios)

  • Musk subpeonas Twitter whisteblower, seeking info on spam and security (Reuters)

  • Teens are snagging whatever jobs they want as desperate employees fill seats (YF)

  • September historically worst month for stocks, but recent trend suggests difference in 2022 (CNBC)

  • Central banks can’t tackle inflation without more sensible fiscal policy (Fox)

  • Housing expert suggests this is the worst time to buy (YF)

  • Honda and LG Energy to build $4.4 billion plant in US (CNBC)

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4. Book of the Day: The Price of Time

In the beginning was the loan, and the loan carried interest. For at least five millennia people have been borrowing and lending at interest. The practice wasn’t always popular—in the ancient world, usury was generally viewed as exploitative, a potential path to debt bondage and slavery.

Yet as capitalism became established from the late Middle Ages onwards, denunciations of interest were tempered because interest was a necessary reward for lenders to part with their capital.

And interest performs many other vital functions: it encourages people to save; enables them to place a value on precious assets, such as houses and all manner of financial securities; and allows us to price risk.

All economic and financial activities take place across time. Interest is often described as the “price of money,” but it is better called the “price of time:” time is scarce, time has value, interest is the time value of money.

Over the first two decades of the twenty-first century, interest rates have sunk lower than ever before. Easy money after the global financial crisis in 2007/2008 has produced several ill effects, including the appearance of multiple asset price bubbles, a reduction in productivity growth, discouraging savings and exacerbating inequality, and forcing yield starved investors to take on excessive risk.

The financial world now finds itself caught between a rock and a hard place, and Edward Chancellor is here to tell us why. In this enriching volume, Chancellor explores the history of interest and its essential function in determining how capital is allocated and priced.

“If wealth is placed where it bears interest, it comes back to you re-doubled.”

5. Short Squeez Picks

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6. Daily Visual: Serena Williams' Last Dance

Serena Williams' top singles rank by year

Source: Axios

7. Daily Acumen: Blind Spots

“The source of problems is blind spots. There is something hidden from us that, if we knew, would change how we thought and acted.

One of the best ways to reveal blind spots is simply to lengthen your time horizon.

A lot of good advice simply boils down to thinking longer term.”

Source: Farnam Street

8. Crypto Corner

9. Memes of the Day

 

 

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