Malt Liquidity 7
Catfish! the musical chair market continues
Bold Antiks
After the instant classic exposé on NKLA (by the aptly-named “Hindenburg Research” to boot), I was pretty convinced that was the short report of the year. However, yesterday, I happened to see PEN down about 18%
and found perhaps the most ridiculous case of identity falsification (Courtesy of “Quintessential Capital Management”) in a public company I’ve ever seen:
…a substantial portion of scientific literature produced by Penumbra appears to have been authored by a fictional character in a sophisticated, multi-year gross deception.
The document goes on to show that Lead Scientist “Antik Bose” had a fake LinkedIn page, a fake Researchgate page, and Everipedia page which is just too ridiculous to not scroll through, in which he claims he is “a billionaire living in Seattle, Washington. He is well known for his work in the medical field and for being the owner and CEO of Antik Hotels.” The page is riddled with spelling errors, but curiously enough, his entire “List of Supercars Owned in Sammamish (why even specify this??)” is meticulously sourced with the MSRP next to the model name:
Frankly, all the images are of someone who looks like they’re trying to sell me a scam trading subscription and “the Forex Lifestyle”, not a brilliant scientist running a billion dollar medical device company. I fully recommend scrolling through the report, solely due to the absolutely hilarious doctored images of “Bose” working in labs in images featured on Academia.edu, Researchgate, and Fred Hutchison. (Spoiler alert) In a plot twist, you find out that the man portrayed as “Antik Bose” is, in fact, a real estate broker in Orange County, California. Soon after this report was released, a bunch of “Bose’s” social media accounts were deleted. I gotta say, public company catfish scandal shows that even in the final hour, 2020’s craziness isn’t slowing down.
Valuation is not a Short Thesis
“Valuation is not a short thesis” is one of my all time favorite sayings about markets, which ties back into the “theoretical valuation” discussion from yesterday: as long as speculators are still biased towards the upside, the price of a stock will continue to be bid up. As such, shorting a stock requires both the valuation to be high and a catalyst to bring the stock price back to reality - in essence, betting on the downside requires being correct both on the price and the timing.
But what more signals could possibly be given that Tesla is overvalued?
The car company said on Tuesday morning that it plans to sell up to $5 billion in stock just two weeks before it is set to join the S&P 500. It would be Tesla’s second such share issue since September.
To reiterate from last week, if your company’s stock is overvalued, you can either try to acquire something with your equity or sell stock at the market’s valuation. But Tesla keeps on going up even when every single trade, research report, and CEO statement says it’s too high! However, retail trading volumes obviously show that traders don’t care:
“Tesla stock price is too high imo,” Chief Executive Officer Elon Musk said in a May Twitter post. The stock has more than quadrupled since that proclamation.
I will never fail to be amused by such deadpan juxtaposition.
Tesla has pushed far beyond what I thought retail traders could ever do to a market simply by pushing the fundamental axiom of finance - “everything is just sort of made up” - to absolutely bananas levels. Bankrupt companies are surging in share price, stocks down 99.9% from their ATH are now rocketing up, and every single institution in the universe is screaming at people to stop buying TSLA, yet the fervor is so wild that even the most successful shorters in history are giving up. I myself am watching positions I hold in stocks like XOM (disclaimer: am long) zoom around more than IPOs did in 2018. 2020 truly might be the wildest year of trading in history - perhaps this is what “democratizing markets” really looks like.
Catfish Capital
It’s nice to know that in finance, much like love, bots aren’t fully adept at mimicking humans yet:
The SEC said BlueCrest created the proprietary fund, BSMA Limited, in 2011 and moved a majority of its best traders to work on it. Their work picking assets for BlueCrest’s flagship fund was replaced by an algorithm that was supposed to replicate their decisions but wound up performing worse, the SEC said.
The people investing in BlueCrest thought they were getting a human-managed fund, but instead got a shitty bot trying to replicate what they were doing. Now, I won’t wax poetic about the extensive philosophy I have on algorithmic trading, but this is just flabbergasting to read:
The algorithm failed to perfectly replicate the human traders’ decisions because it followed their moves one day later, the SEC said. That delay caused “slippage,” particularly during volatile markets because the algorithm waited too long to respond to sudden market moves, the order said.
Uh… no shit?? Apparently a multi-billion dollar hedge fund overlooks something an introductory Medium article on algorithms and markets would tell you. The funny part is, this isn’t even what slippage is, and algorithms are used to reduce it: slippage is simply the cost of the liquidity (which is the difference between the intended purchase price and the actual purchase price.) This is everyone at BlueCrest’s brain lagging by precisely a one day interval, and it cost them 9 figures.
On that note…