David Collum's 2013 Year in Reviwe
short and is up 100% this year and 200% off its 2012 lows. Einhorn knows where the bodies are buried. This is a classic squeeze of traders who follow his lead but lack his patience. Other stocks that popped up like Uma Thurman include Tesla (320%), BestBuy (250%), and Fannie Mae (1000%). Those are
Tesla’s market cap ($20 billion) and number of cars sold (35,000 per year) corresponds to >$500K per car. Netflix is now sporting a p/e of 200, causing value investors to wince and momentum traders to just keep on clicking. Amazon.com shares are up 60% since 2011 whereas their revenues have fallen 50% over that same time period.
Shares in Tweeter, a bankrupt electronics retailer, briefly soared 1,800% on October 4th because some investors mistook its ticker symbol TWTRQ for TWTR, the shorthand chosen by Twitter ahead of the IPO. An NFL running back IPO’ed himself.
Running backs have career expectancies of four years, which may put his IPO life cycle above average. The stellar performer, however, was Bitcoin, everybody’s favorite virtual currency, starting the year at $13 per Bitcoin. And then it ran...and ran...and ran. A return of 100%
in 15 minutes
was upstaged by a
jump in the first
10 months of 2013
by mid November, at which point “profit taking” looked like it would cause Bitcoin to hurtle back to Middle Earth (65-fold as of ten minutes ago). Alas, Bitcoin took flight again, eventually attaining parity with an ounce of gold and causing some to equate the two.
We are watching history being made or history being repeated.
Although I endorse what Bitcoin represents—opposition to fiat currency—I am deeply skeptical of its success. I can, however, imagine a nickname if it tanks.
Flash Crashes and Market Glitches.
Last year we had some stellar market glitches; although Facebook got the press, the complete annihilation of BATS and Knight Trading brought comedic flare. This year was tame, but daily flash crashes and glitches documented by Eric Hunsader
at the research firm Nanex became truly voluminous.
Hunsader’s documentary entitled,
The Wall Street Code
starring high frequency trader (HFT) Haim Bodek is worth a peek.
The Nasdaq kept going dark for anywhere from a few seconds to a number of hours, inspiring Zerohedge to anoint it the Nasdark. Some blackouts seemed to be tied with trading in Apple shares.
Goldman reported a slew of bad trades (defined as any trades that lost Goldman money), which were immediately followed by a big-time Nasdark.
Not to worry: Goldman got the trades unwound. In some cases, envoy-class traders still managed to adjust their portfolios while everybody else was blocked out.
That probably included Goldman. Fannie Mae did a 50% spike and return,
all on low volume in 15 minutes. Industrial conglomerate Tyco did a sub-second 10% face plant.
Natural gas flash crashed 8%.
This is all in good fun. If you haven’t done so already, listen to Ben Lichtenstein giggling his way through the May 6, 2010 Flash Crash.
This frothy market behavior emanates from the Federal Reserve’s perverse monetary policy in collaboration with algorithmic trading platforms (“algos”) guided by HFTs—
Algos Gone Wild
. Hunsader has been trying to alert the SEC but failing for a very simple reason: the SEC is worthless. For years now the algos have been
carpet bombing the markets with fake quotes designed to disrupt trading. Up to
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