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"Manipulation!" (Cestrian Stocks Bulletin #74)

Cestrian Stocks Bulletin
"Manipulation!" (Cestrian Stocks Bulletin #74)
By Cestrian Capital Research, Inc • Issue #74 • View online
In other news, dog bites man.

DISCLAIMER: This note is intended for US recipients only and, in particular, is not directed at, nor intended to be relied upon by any UK recipients. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Cestrian Capital Research, Inc., its employees, agents or affiliates, including the author of this note, or related persons, may have a position in any stocks, security, or financial instrument referenced in this note. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note’s date of publication and are subject to change without notice. Companies referenced in this note or their employees or affiliates may be customers of Cestrian Capital Research, Inc. Cestrian Capital Research, Inc. values both its independence and transparency and does not believe that this presents a material potential conflict of interest or impacts the content of its research or publications.
Burn It All Down, Or Learn To Speak Stock - You Choose
In most all major religions and many minor ones to boot, the notion of the fall of humankind features somewhere in the mythology. The shared and uniting principle is that there was a Dreamtime in the past when order was the order of the day; when goodness was the prevailing moral code and rules were both fair and followed. Whereupon humanity turned its back, fell from the pedestal carved by the God(s) and lives presently in the gutter, awaiting merciful salvation.
In the most popular religion of all, the worship of money, the structure of myth is identical. The notion runs thus: at some point in the past, perhaps when a young Warren Buffett was a keen student of Ben Graham, stocks were priced rationally and markets were ordered. You could value stocks based on things like discounted cashflows. And the market was fair - anyone with the time and inclination to study markets, companies, and stocks, could do well if they worked hard and placed their capital where their work led them.
Now, you won’t see this myth written down anywhere; nor hear it in stories told around the fire, for this is neither written text nor oral history. No, it can be observed by inference alone. Look at what is said all day long on most any stocks board you can think of. Reddit, Twitter, StockTwits, your virtual office virtual watercooler, wherever. “Manipulation!” is the cry. “ ‘They’ moved the price against ‘us’ ! ” comes the howl. “Why won’t the SEC do anything?” The notion being that, at some point between the Dreamtime and now, market morality was tossed out the window and the playing field changed from level to vertiginous. And lo shall the SEC redeem the meek on the Day of Reckoning.
This is very odd if you think about it. In any field of human endeavor, rules are written by the powerful to establish guardrails encircling the weak. Meritocracy, the rallying cry of the postwar Boomers and at least two generations thereafter, is simply the religion of those who have ability but lack power. And if this brutal truth applies to such fields as getting a place in college, landing a plum first job, or getting the best seats in the house at your favorite restaurant? Well, why would it not be true of the financial market where monies equivalent to the GDP of small countries is exchanged by the hour if not by the minute?
We have news, folks. The market is, was, and in our suitably dead-inside view, always will be, about as far from the Dreamtime as you can get. To misquote our very favorite stocks-Tweet of all time, “Yes, everyone IS trying to take your money off of you”. There is nothing ordered, rational or fair about the market and nor was there ever anything ordered, rational, or fair. The market is a gladatorial arena where combatants gather to relieve fellow pugilists of the fruits of their labors and, ideally, of their houses, livelihoods, wellbeing, families and jobs. The market is as brutal as it is psychopathic, lacking any kind of conscience when chewing up and spitting out its quarry. Dreamtime? Try the State of Nature instead.
There are three things you can do about this.
One, ignore financial markets. Concentrate on monetizing your time or assets in some other way. This is rational and can lead to success, fulfilment and happiness.
Two, keep screaming into the wind about “MMs” and “tutes” and “manipulation” and such on your social platform of choice. This is irrational and will likely lead only to a shortened and more impoverished lifespan. (If however this is the route you choose then we exhort you to at least do it properly. Read Epsilon Theory work by former hedge fund manager Ben Hunt. 120,000 followers can’t be wrong. Right? Just keep the antacids handy and check your health insurance before you sign up, because your blood pressure won’t be going down. On the other hand, your cost of living will go down, because your family and friends will desert you only a little more slowly than your heart turns black with rage).
Three, rather than burning it the flip down, as Mr Hunt exhorts you to, consider sucking it the flip up. Yup, the market is about as fair as you would expect it to be, given all you know about human nature and what happens to that already-debased set of tangled snakes within once you toss in truly unimaginable amounts of money which is there for the taking if you do it right. Because that sort of thing always brings out the best in folks, as you know.
If you choose this latter option, as we have, we think you then have two choices to make as regards your engagement mode with the Leviathan bearing down on your brokerage screen every day.
Either do as Mr Buffett tells you to, and just buy the cheapest most liquid most passive S&P500 tracker you can find - for most people that’s likely to be the SPY ETF - then forget all about it until a few years before you retire. History says that if you wait long enough and don’t sweat the small stuff, this can work out just fine for your retirement fund.
Alternatively, learn to speak stock. Because whilst it is undoubtedly true that stock prices simply reflect games being played by market participants that you don’t know or care about, that don’t know or care about you, and whose motives you cannot possibly know, it is also true that stocks move according to systems of signs and symbols which convey meaning and can be interpreted as such. Which as your friendly neighborhood semiologist will tell you is nothing more or less than a language.
And all you need to be able to do to make sense of stocks is to understand two things; the financial fundamentals associated with that security - in the case of a single company stock that means the company financials, which are available free to every market participant no matter how small - and the price history of the security which is also available to anyone for nothing. Teach yourself what good looks like in financials, for in times of joy and in times of trouble, underlying company financial performance is an important input to stock prices. And learn a little about what shapes on a stock chart tend to lead to that stock moving up or moving down. None of this is beyond you. If you can add up and subtract, if you can draw straight lines and on a good day count to five, you can learn to speak stock and use that language to make money.
Alternatively, find yourself a good translator, a service than can help you to understand why a stock is where it is and try to maximize the probability of calculating where it might move next. There’s a lot of these about, but if you want one we know is good - because we run it and we eat our own cooking so we know it’s good? Try our Growth Investor Pro service which, over and above covering 50-60 growth stocks in tech and space, over and above providing long- and medium-term stock picks, and the occasional short-term trade idea, beyond the real time alerts before we make trades in staff personal accounts in those same names, includes a whole lot of lessons in stock-language that members find helpful. Sometimes the education is from us, at least as often it’s from other members.
Our aim is that by being a member of Growth Investor Pro, you become a better investor - over and above any gains you might make as a function of reading our work.
We’ll leave you with a recent review from a member.
“Before 2019 I knew very little about investing. Our money was with a Private Bank (a well known one at that) and it grew very little each year, if at all. I decided it was time to take control of my finances and needed to learn how. I’ve subscribed to MANY services since and I not only rate their value by how much money I gain but by how much confidence I gain with my investment choices. (It’s hard to stay the course without the deepest conviction!) I want a service that shows me the deepest details behind their opinions. This is one of the two most valuable services for me on Seeking Alpha” - Annual member, joined 28 November 2020.
Cestrian Capital Research, Inc - 3 October 2021.
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