Sometimes I can't take how stupidly bullish the market can be. So often, when the market goes up when it shouldn't, people say that the whole darned thing is manipulated, maybe by an all-seeing president who is up for election or by a desperate Fed, who is printing money to keep the markets from going down.
Frankly, I bridle at that. On another day where the averages held in, I realize that it's my duty to explain another reason why stocks go up: clueless buying. I always say never underestimate the Wall Street promotion machine and how it can affect prices. At the same time, never overestimate the candle power of the buyers who so often take clueless actions that have nothing to do with the Fed or the president or politics or the fate of the republic for that matter.
I could rail against those who don't understand this and continue to think that I should do a rant about how the president or the Fed is clueless, like the one that just anniversaried 13 years ago. Others feel I have become too Jimmy Chill, not willing to call out people for stupid things, that I am more likely to put retiring Clorox (CLX) CEO Benno Dorer on the Wall of Fame than I am willing to put departing Ford (F) CEO, Jim Hackett on the Wall of Shame, that I have become some sort of Dali Lama disciple or a conscientious Wall Street objector.
I get that. I have had to suppress my anger many a day because the outrage at a Fed that has no idea that we are about to go into the Great Recession doesn't happen often and this Fed is particularly ahead of the game at every step. It's not like Jay Powell is an epidemiologist, but he often plays one at the meetings where other Fed governors think that we're almost out of the Covid woods.
No, today I am reserving my wrath for the clueless buyers who are not only working at home, but have taken a permanent intellectual summer vacation.
I want to start with Sorrento Therapeutics (SRNE) , a company I have championed several times including, the beginning of June, when the stock was at $4 and management talked about how it is working on both prevention and cure of Covid and then again, several weeks ago, when the stock was $8 and the company seem to be making a ton of progress, far further along than a lot of the larger companies in the space despite its tiny billion dollar size. I thought this company had many shots on the Covid goal and should be bought by those who are looking for a speculative way to invest in an out of the way company doing great things. I had been skeptical, called Meg Terrill, our biotech expert to be sure I wasn't off-track, and then listened to Dr. Henry Ji, the co-founder, chairman and CEO of Sorrento and I liked everything I heard.
Sure enough, last Wednesday at 9 a.m., Sorrento announced it is licensing a rapid on-site detection test for Covid-19. The test, from Columbia University, gives you a positive or negative color change in 30 minutes or less after contact with a person's saliva. The almost totally foolproof test does not need to be shipped to a reference lab, the big bottleneck that is stymieing the nation, and must, privately, be driving the president crazy. The product, to be marketed by Sorrento and called Covi-Trace, holds everything in a single tube and can be done right now on site, but potentially can be done at home. Oh, and it doesn't require a swab jammed up your nose for 12 seconds, and that's 12 "one Mississippi ... two Mississippi" seconds, with 97% sensitivity for the positive rate and 100% specificity for the negative rate.
When I saw this I told my wife, Lisa, there it is, we're gonna get out of this darned thing whole because Sorrento figured it out. Of course, I then heard that she always wanted to go to Sorrento, a favorite town of opera great Enrico Caruso.
No, I said, I am talking about Sorrento Therapeutics. But the stock, at $8 and change, did nothing. No reaction? I guess it's phony. I guess Columbia University's work is slipshod or Sorrento's being too promotional.
Tuesday, on the exact same news as last Wednesday, Sorrento's stock vaulted to $12, a 21% gain, before pulling back, on more than one hundred million shares, extraordinary given that there are only 200 million shares.
How stupid is that?
Or how about this one? On July 23, we learned that one-time semiconductor champion Intel (INTC) was having problems making the 7 nanometer transistor, the most hoped-for chip by all the hardware companies.
Anyone following the industry was shocked that this once-fabulous company couldn't make the chip but that Advanced Micro Devices (AMD) , owing to its tie-up with Taiwan Semiconductor (TSM) is ready. That means huge share gains for AMD. I thought it was gigantic and pushed it hard and also thought that the quarter would be good. The stock vaulted from $59 to $77.
Today, we come in and Jefferies puts out a piece titled "Advanced Micro Devices, Expect Share Gains to Accelerate." This piece does nothing more than reiterate what was said back on July 23.
Wrong. The stock rallies 7 points or 8%. On the same info. When I checked around, all I heard was that the stock was being re-rated, a fancy Wall Street term that means "boy were we wrong about this $100 billion stock, let's go buy it."
That's all well and good, but I would prefer to have caught it at $5 a few years ago when CEO Lisa Su schooled me about how her company had a road map that would make me eat my words that Intel could never be assailed by AMD. I was at Polo, one of my favorite restaurants, and I thought I was having the kale salad, what I was really eating was I-N-T-and-C.
Finally, in terms of the idiocy of the year award, the buyers of BP collectively take the honors. Back in February BP (BP) announced that the world of oil is getting better and better, and so is BP, so why not, when so many other oil companies were slicing their dividends, why not boost the dividend 2.4% to 10.5 cents. The stock immediately flew up almost 5%. Tuesday the company announces a record loss, pronounces prospects are dim, offers a pivot toward lower carbon, and cuts the dividend in half. Yep, not only does it say business is terrible, but it's trying to distance itself from crude while preserving cash including the additional cash that was given out eight months ago.
How much was it down? You kidding? It was up almost 8%. So let's see, you pronounce oil's prospect as fabulous, boost the dividend and the stock rallies and then you pronounce oil's prospects as awful, cut the dividend and the stock rallies.
Are any of these moves the fault of the Fed? No, the fault, as Cassius tells us, is not in our stars like Trump or Powell, but in the buyers themselves.