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This Time, the Shoeshine Boy Is an Actual Player

7 comments

The shoeshine boy is not just giving customers stock tips these days, he is also jumping on hot stocks himself, scalp-trading three or four shares of Tesla, at $1500 a copy, in his Robinhood.com account. That’s all the stock these penny-ante schemer-dreamers can afford, and it is why it is not the metaphorical bootblack operating out of his parents’ basement who has been driving a handful of stocks moonward, as a story-hungry news media would have us believe. Even so, the shoeshine boy’s gambling jones is having its effect on some big players, who for a dozen good reasons have been shorting stocks like Tesla and Moderna all the way up. Panicky short covering is always the most powerful force that drives rallies, since even a sea of Fed funny money cannot float stocks past resistance peaks and through prodigious layers of supply. It takes irrational exuberance and bear panics acting together to accomplish this, but also institutional shareholders who are smart enough to avoid getting in the way.

That’s why most of the gains in Tesla, Apple and a few other stocks leading the charge have occurred in the dead of night, when volume is practically nil. AAPL will gap up five wholly undeserved points in the wee hours, creating an additional $20 billion of wealth for size players who can afford to buy-and-hold stocks to satisfy their own easy-money jones. The magical result is that money is created even more efficiently than by the Fed, since no borrowing is involved; instead, the winnings show up instantaneously in traders’ accounts. This financial fattening occurs, as all manias do, without any real labor.  Stock-market rallies have become the true source of helicopter money, although they are probably not what Bernanke had in mind when he averred that the Fed could thwart deflation by conjuring up whatever measures were necessary. He didn’t know the half of it, since even a guy steeped in Keynesian quackery as he is could not have foreseen just how far his successor would go to keep the promise of good times forever.

Politicians Are Mum

And so we have a stock market that is rampaging for the most ridiculous and least sustainable reason of all: because…well, because stocks have been rampaging. Nearly every bet these days is a momentum play, since even the crazies understand there are no decent values to be had. There are plenty of indecent ones, though, and the handful of stocks tasked by Trump and Wall Street with making America great again have been climbing so ferociously since March that even the blinkered, benighted hacks who invent the news have begun to routinely question Wall Street’s sanity. We hear little from our political leadership about this, however, and even Biden has not tried to make hay with the argument that the stock market’s steep rally is the last reason you should want to vote for Trump, let alone take as a sign that the economy is returning to health. There are of course millionaires on both sides of the Congressional aisle, and for all we know they are closet momentum players too. Unsurprisingly, there will always be a few high-profile idiots shilling the case that Tesla is worth nearly $300 billion because sales are improving.  But it doesn’t take shills to push scratch-off plays like Moderna, since, as we all know, an effective vaccine is just months away.  More immediately, earnings are due out this week for some biggies, including Tesla and Microsoft. Not that the ginned-up  data, no matter how discouraging, will matter.

As an aside, let me mention that Microsoft, for all the hubris touting the company’s technological prowess, is ultimately just a corporate rat’s ass, ahead of even Google and Facebook in that category. I’ve spent 70 hours over the last month attempting to remedy a catastrophic error committed by one of their front-line techs. All I had asked him to do was free up some space on my hard drive, but he inadvertently moved my Windows 10 operating system to an external drive, where it functions like a bivalve immersed in cheese grits. The thing is, the next two techs who worked fruitlessly on the problem didn’t even realize that the operating system had been moved. My ‘ex’, meanwhile, is at three weeks and counting, trying to re-open an Amazon account with a hold on it that none of their customer support geniuses can figure out. I have seen the digital future and it doesn’t work. It is just Blade Runner and Brazil, with more than just a touch of Idiocracy. Celebrating our already fatally dysfunctional, digital future with outlandish stock valuations for the biggest players is one of the great follies of this age. ______ UPDATE (Jul 20, 9:55 pm. EDT): I’m sure the shoeshine boy and his nattily dressed customer agree that TSLA is going to trounce bears when earnings are announced on Wednesday.  Check my tout below for a precise price target if the psychotic explosion is full-blown.

Please do not ask trading questions!

  • muttata July 20, 2020, 4:46 am

    Yes it is!

    https://www.abc.net.au/news/2020-07-17/what-is-modern-monetary-theory/12455806

    Check this article out which I read today about Modern Monetary Theory (MMT). The theory is developed by one of the Economists (Bill Mitchell) from a department of the University of Newcastle (Australia), which I have taught at for 15 years. It is dangerous ideological claptrap, that makes Keynesian economics (QE) look like an amateur magic trick i.e. from ‘creating something out of nothing’ to ‘money is worth nothing’. I thought a feature was that one of the founders of the theory is “Professor Stephanie Kelton, one of the highest-profile MMT economists and a senior adviser to Bernie Sanders” – need I say more 🙂

    It tells me that reality has and is currently so distorted over the years in the markets i.e. devoid from economic realities, that even the most crazy theories put forward by ideologs in the academy’s ivory tower, seem palatable and feasible. At the same time, you have a president (small p since he is acting like a moron), denying the dire state of the Covid 19 pandemic. I love Americans, but if you put this guy back in the White House, you have lost my respect forever :-).

    I think that the opportunity here is for concrete thinkers as the few rational observers of the market behaviour, to maintain a ‘firm grip’ on what is real, but to trade the manic wave. I would normally think that this kind of thinking is the beginning of the end, but in the spirit of MMT, it is probably the beginning of the beginning! Whilst I am currently very bearish for the next day or so, that I plan to get long after that. I am learning to do the George Castanza from Seinfeld where he became successful by doing what is counter-intuitive (that’s why camo works)!

    Thanks for your article Rick. I have enjoyed reading your unique commentary over the years.

    • muttata July 20, 2020, 4:54 am

      I should add that if you don’t vote for Trump, Biden/Sanders might just try MMT! God help you all.

    • Ben July 21, 2020, 5:20 am

      “I love Americans, but if you put this guy back in the White House, you have lost my respect forever :-).”

      Well, prepare to hate and disrespect this American, because I’m choosing the plague (Trump), come November. It has a key feature that leftifa-style anarchy (Biden or whoever) never will…

      Trump will win because people want law and order. Period. We can wear masks and social distance to our hearts content, whether anyone orders it or not. But that can’t be said of law and order. No one enjoys peace and lawful order when those in charge order it to stand down! And you can have all the mask and distancing orders in place that you want, but put law and order on hiatus, and they won’t matter. How could they?

      So, Trump is still the better option.

      • Ben July 23, 2020, 9:32 pm

        Fair enough Ben. It is definitely a matter of choosing the best of the worst! You will still have my respect! – lol

  • Pan July 20, 2020, 1:10 am

    Sharp foresight yet again, excellent.

  • John Jay July 19, 2020, 11:07 pm

    Idiocracy+Pervasive Lawlessness=Portland, Seattle, NYC, etc.

    In the end, the overflowing Human Tailings Ponds will subsume the Paydirt of our High IQ driven Advanced Civilization.

    The daily news is too disturbing to keep up with, so I now retreat to the happy Elysium of the LA Kitten Rescue Cat Cam. Always makes me smile! So much better for my blood pressure and state of mind than the grim reality surrounding me that has taken on a life of it’s own.

    https://www.webcamtaxi.com/en/usa/california/kitten-rescue-cat-cam.html

  • Bruce Katz July 19, 2020, 7:14 pm

    Spot on. We are living in the age of lunacy.


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