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Monday Musings 26/04/2021 – Experience V Market Madness
Two stories caught my eye this week which demonstrate that although in the main the markets are driven by current information and previous experience – there has been an outbreak of measles in Scunthorpe and last time this happened the cough mixture market took off- sometimes lunacy moves in. Experience V Market Madness!!
Story one. The people who made the most money from the Deliveroo float were the hedge funds that shorted the stock. Shorting means that you bet that the float will fail, and the share price will drop. Deliveroo’s shares have fallen by 40%. Of course, the team at Deliveroo and their advisers say that it was the “shorters” who caused the stock to fall. It sounds as if the folks who shorted knew more about the business model than the owners.
Story two. There is a company called Hometown International that owns a single Deli in New Jersey. This Deli generated $13.976 worth of sales last year but was valued at $113 million in February of this year. This is entirely due to the same sort of market mania that pushed GameStop values to ridiculous levels. I must say that these weird events are almost entirely due to amateur traders having a punt. By the way Hometown International has now been delisted.
This is part of the case for using Mutual funds where you have a fund manager making, in the main, investment decisions based on current information and previous experience.
So, to the markets