Let's talk euphoria. Or actually, the lack of it.
Let's talk Lyft (LYFT) .
I have had to think long and hard about Lyft, the stock, not the ride-sharing company. I have had to play whack a mole with the haters because I said I thought the stock could be a good one and, not that long after it fell, disastrously through its offering price, even as the rest of the market did well.
Initially I was too focused on me, or as my wife always says, "You always think it's all about you." Actually, that's a bit of a wife theme if you know what I mean.
But once I got over that JP Morgan allowed the stock of Lyft to slice through the $72 offing price like a Dewalt Buzz Saw through butter, I realized that, wait a second, what really happened with Lyft isn't negative for the market, it was positive. With the help of a grizzled vet I used to trade with, I realized that the collapse of Lyft could definitely be interpreted as a sign that there is no irrational exuberance here. The enthusiasm is constrained. Rational behavior is right in our faces.
Now, while I like Lyft as a good play on a secular growth theme I love, ride-sharing, and I like any company that is in a slap happy duopoly, with Lyft owning 39% of the market and Uber owning 60%, which typically means ever rising prices, I understand that it's losing a ton of money.
Remember, as a commentator, not a trader, it is my job to try to game the gamers, try to figure out what the big accounts were going to do with Lyft. I thought that the quality of buyers seemed high, that the parceling out of the stock was well done, and that there would be good holders.
Sure enough, there was some irrational exuberance at the beginning of trading. I heard that the stock could open at $80, that's fine on a $72 offer. Then I heard $84-$85, and that's getting up there. Next thing you know I am hearing it could be $90, it could even be $100, way, way too high if you were thinking that it could be justified by its comparisons at about $75.
Then the brokers released some of the portfolio managers that said they would hold it, because they didn't' want to lose control of the issuance. That drove the stock back to $87, which I said was a good opening because we sure didn't want $100.
But no matter. It was in weak hands, the hands of small holders who bought the stock using market orders not limit orders.
Next thing you know the sellers predominate and after a stand at $80, it's a total breakdown, just a jailbreak of sellers and short-sellers who went along for the ride.
And the bids got obliterated. The underwriters, and here I am talking about JP Morgan, seemed to make a halfhearted attempt to stabilize the stock at the offering price but that didn't work and the $70 price was just a weigh station on a destination to the mid-$60s.
So what's so positive about that?
Think of what we learned here.
First I was right a week ago when I said that there's so much money going from managed funds to index funds that there's enough money to save a deal from oblivion. You should have had funds coming in at $72 to finish building their positions. But there was no money to be had.
Second, I was very concerned that this deal would go off without a hitch. That would encourage the Palantirs, the Caspers, the Slacks, the Pinterest and the Ubers to rush to the market to sop up that money, take it when the taking's good.
Now, can you imagine the discussions between the brokers and these companies, most of which are losing money at the same clip as Lyft? How about something like, "Look, unless you want a Lyft, unless you want to look like idiots and have us look like chowderheads, we are going to get this thing under control and we aren't going to allow these kinds of pops. We are going to sate the market at a level where we believe we can control it. And the companies are going to say, don't be too greedy. It failed with Lyft.
So, what happens? How about the preservation of a bull market, which tends to die from exuberance, not ennui, which rolls over because of too much supply and too little rigor, not a sobering reflection of the botched Lyft job.
I will go one step further: when I see the anger on Twitter from those who got burned on Lyft, and then blame me, not syndicate head JP Morgan or the investment bankers who courted LYFT, but me, I know that there's going to be a total tamping of enthusiasm. I am not saying bring 'em on, like President George W. Bush said about militants in Iraq back in '03. I am saying like I told Elon Musk when he said I couldn't take the heat, go make cars, I will go make shows. More important, the faster these rank amateurs get out of the game the better it will be for the rest of us.
Now, it's not just the fiasco that was Lyft that makes me feel more positive about this market. It is also the Love slash Gowanus canal that is the Walgreen's Boots Alliance (WBA) . Here's a company that reported a number today that showed a company that is oblivious to pretty much every trend happening in retail AND health care, whether it be the insistence of continuing to sell tobacco to the huge declines in prescription and front of the store sales. On the pathetic conference call, management repeatedly talked about digitizing. Are they kidding me? They are so far behind I don't even know what their omnichannel is. Only Ollie's Bargain Store has been able to go without digitizing, whatever that really means. Now I understand how the government wants reimbursements cut back. I understand that the company was going against difficult compares because we had a hellacious cold and flu season. I even get how they couldn't make as much money on generics. But let's face it, the front of the store is getting crushed because customers simply aren't coming in like they used to. It's called Amazon (AMZN) . Walgreens, unlike Costco (COST) , or Walmart (WMT) or Target (TGT) or Home Depot (HD) , seems to have no strategy for dealing with the death star of retail. At least CVS Health (CVS) bought Aetna to save itself, even as it hasn't panned out yet.
Walgreen's, the outfit that wanted Theranos labs in all 8200 stores, according to Elisabeth Holmes, has distinguished itself as the Lyft of drug store chains. Like Bed Bath & Beyond (BBBY) , I have no idea how to save this one but one thing is certain, buying back $3.8 billion of dollars when your cash flow by your own CFO's admission is "pretty rocky" isn't one of them. I like the idea of clinics in stores, like CVS is doing, although the Theranos clinics seem, in retrospect both ill-advised and suboptimal.
Sure, there's bizarre good news today from an unenthusiastic place, none other than Facebook (FB) . Saint Mark Zuckerberg nailed his theses in the op-ed page of the Washington Post, talking about how Facebook is no longer a hired gun stage with all the men and women Instas merely players. That's how you could see the stock rally five points on a benign push by Deutsche Bank.
But in the end we had a rational lack of exuberance for a loss-making company even as it looked like the company's stock would be red hot. Or as those stock sages Outkast so eloquently put it "No what's cooler than being cool. Ice cold!" That's what Lyft was, and that's what the rest of then will be if they screw it up again.
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