Where did the buyers go? What happened to all of the enthusiasm around the big themes like electric vehicles and fuel cells of all kinds and gambling and crypto derivatives? Where are all of the buyers of the SPACs? What happened to those who believed in Snowflake (SNOW) or loved DoorDash (DASH) ?
And, most glaring, what happened to those who loved GameStop (GME) and AMC (AMC) more than life itself?
I think these are all legitimate questions to ask.
Some of what happened, I believe, is that there was so much money being made so fast in common stocks that the more aggressive of the buyers decided to switch to call options or bought stock with borrowed money.
When things started to break down they demonstrated the same kind of staying power exhibited by Archegos when it got the margin call of a lifetime and had to dump its Viacom (VIAC) and a few other names into the maw of the market. In other words, none. There wasn't much capital behind these merrymen and when they didn't put up more capital if they were on margin or they saw their investment wiped out in call options, they didn't put up more to stay in the game. They didn't have enough.
Amazingly it looks like they may have learned a lesson because one thing is for certain, that last stimulus check didn't lure many back into the casino.
We also saw what the acceptance phase looks like in grief totem pole: a decision by those who got too excited to just sit with their positions, many of which were cut in half, until they come back. That really dries up the volume.
I think that many simply left the stock market and went on to other things, perhaps fractional bitcoin, which is a chief reason why bitcoin dealer Square (SQ) has done so well. We might see if these younger buyers come back in for the Coinbase deal.
The SPACs might have at last killed themselves with too many offerings. There was never any governor on this group and the losses started right after Churchill IV (CCIV) , the nascent Lucid, saw its stock crash after there were rumors that it was going to buy the very cool car company for an immense price that was unrealized.
Of course if Tesla's (TSLA) stock hadn't collapsed after it gapped up on its S&P 500 admittance I could argue that the EV balls would still be in the air. It's never too late for Tesla to rescue some EV names, but not all of them.
How about GameStop and AMC? When Reddit's WallStreetBets got involved there was a belief that democracy was at last coming to the stock market. The hedge funds had no more votes than the people.
But what "the people" seemed to not realize is that, in the end, the stocks are pieces of paper that are attached to actual enterprises and the enterprises do have a seemingly unlimited capacity to issue more stock. As long as GameStop's management chose not to issue more stock its militant backers could claim that Ryan Cohen, who is now the trigger puller after the Reuters story ran Monday that the CEO was on his way out, believed that the stock was undervalued.
But when the company filed to sell 3.5 million shares, then the notion that Cohen had something up his sleeve went out the window. What was the point of arguing that Cohen could save the company if he, too, thought the shares expensive?
AMC? When your CEO is urging shareholders to approve an authorization to sell 500 million shares, it's a tough sell to call the stock undervalued. Again, what's so intriguing about the interest in AMC and GME by retail investors is that neither relative valuation nor balance sheets meant much of anything if at all.
Adam Aron, the savvy CEO of AMC, saw his chance to sell his stock much higher than he might have thought it was worth as he battled with the bond holders to stay alive. A stock up 400% was a godsend not a gift horse. GME didn't need capital so the holders thought they were safe, but when it chose to raise money on the backs of the investors because it needed money to become something else, they felt abandoned.
In the end, that's the word these younger investors feel: abandoned. They don't know what happened to the gods of momentum. They don't know how fickle they can be. They want their money back just like they would get it back if it were a broken vacuum cleaner. They need to learn a new phrase: caveat emptor. It is far more fitting.
