Golden age for pump and dumps

Pump and dump will never be the same again

On one hand, the most important thing that came out of the GameStop saga was that we all became experts on US market microstructure and Gamma Squeezes for a month. On the other hand, a malnourished narrative that the GameStop charade showed is that pump and dumps will never be the same again. Typically, the pump dumps we know go something like this. Some Gujju in Gujrat or Mumbai who wears a lot of gold chains or maybe not, I don’t know corners shares in some shitty BSE listed stock with an office in Kolkata, sends mass SMS blasts and dumps the stock on patient long term investors.

But that’s back in the dark ages. Social media is far more efficient when to comes to mobilizing zombies to act in a concerted manner.

The SEC (US SEBI) brought charges against a dude who was pumping Arcis Resources Corporation, a company with no operations 😂 on Twitter.

Here’s how the genius went about the pump and dump:

Andrew L. Fassari used the Twitter handle @OCMillionaire to tweet false statements about Arcis Resources Corporation (ARCS), a defunct Nevada company with publicly traded securities, during December 2020. Specifically, the complaint alleges that, on Dec. 9, 2020, Fassari began purchasing over 41 million shares of ARCS stock shortly before tweeting false information about ARCS to his thousands of Twitter followers, including falsely claiming that ARCS was reviving its operations, expanding its business, and being backed by “huge” investors.

The complaint further alleges that, over the next several days, ARCS’s share price skyrocketed, ultimately increasing over 4,000%. The complaint also alleges that Fassari made false statements about his own trading in ARCS. Between Dec. 10 and 16, 2020, Fassari allegedly sold all his shares in ARCS for profits of over $929,000, all while continuing to publish false and misleading information about ARCS and his trading in ARCS.

Like I said, pump and dump will never be the same again after GameStop. This nonsense happens even on Indian Twitter and Telegram, albeit on a small scale. But if Twitter grows in India, this nuisance will play out far frequently.

Bubble, bubbles

‘Tis the season for calling bubbles. Typically, there are 2 ways to call a bubble. One – you can call a bubble because valuations are stretched. But you and I both know that the Federal Reserve proved that valuations, fundamentals, etc were all made-up nonsense that wasn’t true. The second way is you call something a bubble because you went to cash in March and missed the rebound.

If you call a bubble and you get the timing right, you’ll be appointed as the official messiah of all investors and your hedge fund will get billions of dollars and you can comfortably underperform for the next decade earning 2 & 20 while you bleed assets. If you get it wrong, you’ll become the equivalent of this meme 👇

season 13 GIF

Jeremy Grantham is the equivalent of the meme. Here’s a piece The Boy Who Cried Bubble on his recent call that apocalypse is coming through Bangalore traffic at 7 miles per hour.

But, my issue with this is that he has been calling bubble for the last decade.  Therefore, it’s only a matter of time until he is “proven” right. For example, in November 2010 he stressed the importance of holding cash when he said:

“It buys you the right to buy the U.S. market if the S&P drops from 1,220 today to 900, which is what we think is fair value.”

Since then the S&P 500 is up 335% (not including dividends).

Ray Dalio hates cash and doesn’t like bonds

If bond prices fall significantly that will produce significant losses for holders of them, which could encourage more selling. Bonds have been in a 40-year bull market that has rewarded those who were long and penalized those who were short, so the bull market has produced a large number of comfortable longs who haven’t gotten seriously stung by a price decline. That is one of the markers of a bubble.

Will the pandemic be the start of a Zoom Boom?

If the internet was going to generate a burst of productivity growth, wouldn’t it have already done so? Well…maybe not. Looking back at history, we see that general-purpose technologies often take a long time to start lifting productivity by measurable amounts. The reason is that when new technologies appear, you can’t always just swap them out for existing ones — you often have to entirely reorganize your systems of production around the new technology, and that’s a difficult and expensive process.


A pile of links

The Lies We Tell Ourselves

Known Unknowns

Moore’s Law for Everything

Investor Mistakes, 1980’s Japan, and Michael Kim

High outflows hit mutual funds as investors flock to direct equities amid market rally

Playlist

Recollections Of A Wild Man In The Wings – Noam Chomsky

Tweets

Some YouTube channels recommendations if you’re looking for interesting ones

Leave a Reply

%d bloggers like this: