How much of the decline in the market has to do with the plummeting of all sorts of alternative currencies or assets or cult stocks or whatever? When you see Bitcoin or Ethereum or the stock of Tesla (TSLA) rolling over does it impact the entire stock market?
I would like to think that when tens of billions of dollars of an asset like Bitcoin gets obliterated there's a cause and effect between the S&P 500 and the losses sustained.
But I am coming to believe that while there is a correlation, the rational investor in these individuals comes out and they pullback and default into cash-not stock-or just take the pain.
What you really hear about is the money leaving the casino. When I said I sold a lot of my crypto and purchased a farm I created shock waves in the community of speculators because I had done something foolish. How does a farm go up? Is there a little flashing sign on the bottom right of the TV screen measuring farm land? Am I at least growing corn to help ease the commodity prices impacting the soda companies?
No.
Nevertheless, I can't call it a sideshow because there are huge gains here still and that money, unless cashed out and put in stocks, which I think is unlikely, causes people to want to pull out of the other high risk assets. The correlation between, say, the Woodstocks and bitcoin seems pretty clear. They have all peaked and her buying, as reported nightly, seems almost rearguard if not pathetic simply because if she were to have waited until the dust settled instead of having a feel for the market she could be doing much better.
Which brings me to an important concept. The conviction level on assets like the ephemeral (ARKK) funds or Ethereum or the conceivable hoax of non-fungible tokens - championed by the now quarter of a dozen billionaires - lacks any discipline whatsoever. When you see Cathie Wood buying down endlessly the same names while selling the so-called cash equivalent names, something that only she would, in a delusional fashion call cash equivalent, you see the same behavior as the crypto lovers: they love at any price.
That lack of discipline has historically led to horrendous losses once the momentum shifts. The money disappears.
Which brings me full circle to the impact on the markets. I think that, like year 2000, the speculative cohort gets blown out while the S&P is actually a winner because the big money managers fear the spillover, they fear that the money will at best, like in its coffin and at worst come up, Carrie-like from the dead.
In other words, if you want to trade the impact of all of the speculation you dump the Nasdaq along with crypto and non-fungible tokens, which have no secondary market to speak of - in other words you own a piece of nothing, not even memorabilia - and you move into the industrials and the mineral stocks.
As for Tesla, AMC (AMC) and GameStop (GME) ? Here's my take? Tesla's too big to keep in the air but AMC and GameStop aren't. It doesn't matter what Adam Aron, the CEO of AMC, does, the bulls suffered through the gigantic stock offering and came out the other side, regardless of the box office receipts, or lack thereof. The Take-Two (TTWO) numbers were fabulous last night, augmented by the wind down of sales to brick and mortar, think GameStop, but that doesn't matter either because the bulls in GameStop want it to go up and are willing it to go up with stimulus checks. They will go down without another stimulus bill. Maybe they should be called Biden stocks.
The overall impact is that you need to accept the beatdown for some greater good in all of the specs but buy the most solid companies, like April of 2000, and you should come out ahead but the vast bulk of capital, with the possible exception of MUSK, the four letter symbol for Tesla, the rejector of Bitcoin as a currency, should be considered a drag on the market no different from the undisciplined capital that had been full of those with conviction that betrayed them in the middle of March of 2000.
(Take-Two is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells TTWO? Learn more now.)
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May 19, 2021 at 06:13PM
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