Machine Learning Engine Predicts 20% Rally in AMC in Next Month

September 16, 2021 tremendousblog Leave a comment

I came across a fascinating little tool today. It’s a machine learning program designed to forecast returns in stocks.

It’s called the Trefis AI Engine and it draws from 8 years of past stock returns.

Given the intense interest in stock of AMC Entertainment Holdings, Inc., I had to see what the oracle would say.

AMC is up 34% in the last month. Based on past scenarios, what does the next month have in store?

The machine learning engine predicts a 20% return over the next month in this scenario.

Machine learning is a series of algorithms that can be used to identify patterns and make predictions. It powers Google search, Netflix recommendations, and even self driving cars.

Will the genie be right? I honestly don’t know. But I find the tool an interesting thing to play with.

Type in some scenarios of your own and let me know what you find in the comments at the very bottom of the page!

Kudos to Forbes for the tip.

New Data: AMC Fails to Deliver Down 85%

September 15, 2021 tremendousblog Leave a comment

New data from the SEC today shows fails to deliver in stock of AMC Entertainment Holdings, Inc. dropped 85% in the second half of August:

AMC fails to deliver from 8/13 (last day of prior reporting period) to 8/31 (last day of current reporting period), from SEC data

Investors have closely watched fails to deliver in this popular stock. Its large and persistent fails to deliver, or trades that don’t close, may be a sign of naked short selling.

Let’s review what short selling is and how naked short selling fits in. Short selling is borrowing a stock to sell, then giving it back to the owner later.

A short seller is betting the stock’s price will drop. That means he’ll make money because the shares he has to return aren’t as valuable as those he sold.

Naked short selling is selling short shares without borrowing them first. It’s generally illegal.

Naked short selling can powerfully push down the price of a stock. If you never have to find shares to borrow, you can sell as many as you want!

A long term pattern of huge fails to deliver, which we see in AMC stock, often happens because of naked short selling. Trades don’t close because the shares never existed in the first place.

Hedge funds have been short selling AMC shares all year, and have taken some brutal losses along the way.

I suspect they are using illegal naked short sales to drive down the price and save themselves.

I suspect hedge funds are using illegal naked short sales to drive down the price and save themselves. $AMC #AMC
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Just because fails to deliver dropped at the end of August doesn’t mean the problem is gone. As you can see from the chart above, when they become extremely elevated the market makers tend to clear them up, only to see them rise again.

AMC still has a huge amount of fails to deliver compared to other stocks. With 140,978 shares failing to deliver on August 31st, AMC has 28 times the fails to deliver of Apple.

Apple is the biggest stock in the market, at over 100 times AMC’s size.

The SEC and market makers have a long way to go to make the market in AMC shares work properly.

What will it take to get their attention?

Should Anyone Own Bonds?

September 14, 2021 tremendousblog Leave a comment

I used to love bonds. Especially government bonds. Guaranteed income, easy liquidity, and stability in a crisis.

What’s not to like?

But my old flame hasn’t done much for me lately. And I’m not the only one.

The Problem

Bonds have hovered at or below the rate of inflation since 2009:

Just barely keeping up with inflation might be enough, given that I have much riskier positions in stocks, real estate, and tech startups.

But if an investment pays a yield below the rate of inflation, you’re essentially paying someone to hold onto your money. Instead of getting even a modest return, you lose a little of your cash every year, like clockwork.

Today, I own long term treasury bonds and medium term treasury and mortgage bonds. The long term bonds pay 1.73%, and come with a big risk of decline when interest rates increase. Which they’re just about bound to do, given that that they’re are sitting near 0.

The shorter duration bonds pay even less: 1.28%.

What Kind of Return Do We Need to Keep Up With Inflation?

Recent inflation numbers have been scary: over 5% a year. But, if we look at the longer run averages, the picture brightens a little.

Over the last 20 years, inflation has averaged 2.16%. Over the last 10 years, the figure is 1.89%.

I don’t know how long the sudden higher inflation of the last couple of months will last. But it appears that a floor for a return that will keep up for inflation is no less than 2%.

Where Can We Get Our 2%?

The attractive features of government bonds are liquidity, stability, and a modest income. Let’s review a few alternatives, with that in mind:

1) Corporate bonds. Returns aren’t much better than government bonds, at around 1.7%.

2) Fundrise. Love it, but not a good substitute for bonds. Real estate development just isn’t as stable. It’s not very liquid either. However, returns are good. I’ve notched around 7% since I started investing.

3) Single Premium Immediate Annuities. A rather exotic choice. Rates can be good at around 3.5% in some cases. And the income is guaranteed. But they’re not very liquid: there’s a 10% IRS penalty for withdrawal before age 59.5. But if you’re older, they could work well.

4) Dividend Aristocrats. These aren’t just any high dividend stocks. These have a history of paying higher dividends every year for at least 25 years. That’s a surer bet than many stocks with even higher dividends, because those huge payouts may not last.

The yield on some of these large, stable companies is impressive:

ExxonMobil: 6.5%

Chevron: 5.5%

IBM: 4.8%

Consolidated Edison: 4.2%

Of course, the stock prices could go down.

But if you’re buying for income, and the company is large and stable and has increased its dividend of decades on end, you don’t care. You just collect your check and head to the golf course.

What’s more, you can buy a basket of these stocks, rather than just one, insulating yourself from the chance that one of them cuts its dividend.

Wrap Up

Dividend Aristocrats seem like one of the best options to replace the income bonds no longer offer. They are also less likely to fall with higher interest rates.

What do you think the best option is? Leave a comment at the very bottom of the page and let me know! I just might use your idea. 🙂

Why is the SEC Threatening Coinbase?

September 13, 2021 tremendousblog Leave a comment

The SEC has threatened to sue Coinbase Global, Inc. over its plans to introduce a crypto lending product called Coinbase Lend :

The U.S. Securities and Exchange Commission has told Coinbase Global Inc (COIN.O) that it plans to sue the cryptocurrency exchange if it goes ahead with plans to launch a programme allowing users to earn interest by lending digital assets, Coinbase said.

Coinbase was working with the SEC prior to the surprise lawsuit threat, per CEO Brian Armstrong:

6/ They refuse to tell us why they think it's a security, and instead subpoena a bunch of records from us (we comply), demand testimony from our employees (we comply), and then tell us they will be suing us if we proceed to launch, with zero explanation as to why.
— Brian Armstrong (@brian_armstrong) September 8, 2021

Why is the SEC Doing This?

It’s not every day that the SEC privately threatens a lawsuit against a major American corporation. What is the SEC’s motivation here? From Cointelegraph:

The Commission could have a reason for not being forthcoming with information related to cryptocurrency lending products and this stance could be related to upcoming enforcement actions against the interests of BlockFi.
If the SEC is preparing to go after BlockFi and other players in the crypto lending scene then perhaps responding to Coinbase’s request for guidance might have constituted revealing its enforcement playbook prematurely.

Behind the Crypto Lending Boom

Behind the rush into crypto lending: incredibly low interest rates. Whether you look at bank deposits or treasury bonds, returns on safe assets are well below the rate of inflation.

Coinbase planned to offer 4% interest in its Lend product.

Is the SEC Right?

It seems likely to me that Armstrong is wrong in saying his Coinbase Lend program isn’t a security, and thus need not comply with typical securities laws. Banks have an exception from these laws when they pay interest on an account.

But Coinbase is not a bank. So it’s hard to see how this product isn’t a security.

SEC Shenanigans

That said, I think the SEC’s behavior here is extreme and bad for American business. If the SEC has determined that Lend is illegal, they should tell Coinbase that. At least Coinbase could move on to other projects.

Instead, they’ve left Coinbase in regulatory limbo. They don’t know if their product is legal or not, they don’t know what the SEC’s standard is, and they can’t launch anything without being sued.

This is a recipe for stagnation, not innovation. How can American businesses compete in the global economy when regulators won’t work with them?

As part of its threats to Coinbase, the SEC is even digging into private citizens:

Apart from the threat of legal action, a move seemingly out of left field from the Commission’s usual approach to enforcement, the SEC also asked Coinbase to provide customer details from its Lend waitlist.

On what authority are they doing this? And what are they planning to do to those prospective customers?

Keeping investors safe has its place, but bringing business to a standstill and snooping on average Americans isn’t part of it.

The SEC needs to clean up its act.

New Jersey’s Jelly Donut Heaven

September 10, 2021 tremendousblog 3 Comments

I just had a jelly donut. And it changed everything.

You guys are going to start thinking I work for them. I don’t. But I could be persuaded for enough free donuts.

Francesca’s Bakery has locations in Clifton and Pequannock and also pops up at farmer’s markets across New York City. It was at a farmer’s market in midtown that I first encountered their scrumptious baked goods.

As you bite into their jelly donut, your mouth enters a cloud of cinnamon sugar. The outside is crisp and sweet. The inside: pillowy, soft and moist.

When you reach the jelly, you’ll find an intense flavor of fresh strawberries. And don’t worry, they don’t skimp on the jelly.

With Hanukkah coming up, I can’t think of a better place to get the traditional jelly donut. I may be a gentile, but something tells me I’ll be scarfing a few anyway.

Have a great weekend everyone!

What if Everyone on Earth Had Super Fast Internet for $1?

September 10, 2021 tremendousblog 1 Comment

Only about half the world has internet access. Even rural America lags behind in broadband penetration.

But what if everyone on earth had incredibly fast internet for $1 a month?

A fascinating company called Akash Systems just might pull that off. It is delivering internet 100 times more cheaply than its competitors.

Given that Starlink is charging $99/month for its high speed satellite internet, Akash may one day be able to do it for as little as a dollar.

“This is sort of where the internet was in, I would say, ’98, ’99.”
Felix Ejeckam

The key is a new type of transistor called Gallium Nitride (GaN)-on-Diamond. The founder of Akash, Felix Ejeckam, invented it.

The hottest part of a transistor is put within nanometers of a synthetic diamond. Synthetic diamonds conduct heat better than any other material.

This means that the transistor produces way less heat. Anyone who’s had a laptop on their lap knows it can get hot.

Electronics getting hot cause all sorts of problems, especially in space.

Excess heat means problems with wireless communication. It also requires large heat sinks to dissipate the heat.

This makes the satellite bulkier and more expensive.

Today, Akash focuses on building transmitters for other satellite makers. In the future, they plan to launch their own satellites and internet service.

I can’t wait to sign up and cut my bill down to nothing!

In an interview with the Ejeckam, I was fascinated to hear that he dreamed up this idea 17 years ago. It shows the persistence needed to make a dream real.

“The limits of your imagination today define the limits of space tomorrow.”
Felix Ejeckam

What a Hedge Fund King Fears Most

September 9, 2021 tremendousblog Leave a comment

Stephen Mandel, Jr., founder of hedge fund Lone Pine Capital, ranks #752 on Forbes’ list of billionaires.

His net worth: $3.9 billion. His fund’s performance is among the greatest in history.

So you might be surprised to hear what he fears most:

In late January, when retail traders swarmed into short targets of hedge funds like Melvin Capital and D1 Capital, commentators and industry experts called the moves unprecedented, but Mandel sees the parallels between the dot-com bubble excitement and today’s Reddit-directed investors.

“The day I feared the most, every year, was the day after Thanksgiving because it was the day when a lot of people were at home, echoes of what’s going on now — retail traders sitting at their desks,” he said.

He said that the firm’s ethos on long positions — investing in change, whether technological, regulatory, or otherwise — is the same, but shorting has become so expensive thanks to the additional competition in the markets that it’s impossible to make the same alpha in that part of the portfolio.

“There was no problem borrowing Pets.com and eToys and Onsale and all these crazy things. Today, when things like that appear in the markets, the borrow cost shoots up to ridiculous levels immediately, the access to borrow is very limited,” he said about the shares funds that bet against a stock have to borrow from shareholders to hold a short position.

He has a reason to be afraid. Other hedge funds like D1 Capital and Melvin Capital lost 20-50% of their fund trying to fight retail holders of stocks like AMC Entertainment Holdings, Inc. and GameStop Corp.

The cost to borrow and sell short shares of AMC and GameStop is not particularly high at the moment. However, in any new rally, that interest rate could easily shoot up, as GameStop’s did in January. This would make holding or adding to short positions very costly for hedge funds.

And all the while, they’d be losing money as the stock moves against them.

I find it fascinating that the most threatening thing for a billionaire hedge fund manager is a guy sitting on his couch.

Thing is though, there are a lot of them.

AMC in Top 4% of Stocks for Fails to Deliver

September 8, 2021 tremendousblog Leave a comment

There is a lot of strange activity in stock of AMC Entertainment Holdings, Inc. Fails to deliver have been huge and persistent.

In such cases, a common culprit is an illegal practice known as naked short selling. This involves selling shares you don’t actually own without ever borrowing them first.

The trade is never completed (or “fails to deliver”) because the shares never existed in the first place. This tactic is a powerful way to drive down a stock’s price.

I’ve written about this issue often (see here and here). But a thought occurred to me: what if I’m just cherry picking data, even unconsciously?

So I decided to run a little experiment.

The latest SEC data for the first half of August includes the following dates, since there is no data on weekends:

August 2-6
August 9-13

I picked a random date within this period using this tool:

August 5th it is!

Then, I took all the SEC data from August 5th and dumped it into a Google Sheet. After a little spreadsheet magic to get it in the right format, I sorted by which stocks had the most fails to deliver.

AMC is in the top 4% of all stocks for fails to deliver on this randomly chosen day. Thousands of stocks are below it. Many are much larger, such as Apple and Facebook.

The pattern of huge numbers of failed trades in AMC has gone on for so long the stock has repeatedly been listed on the NYSE’s Threshold List. This lists problem securities targeted for a cleanup in their failed trades.

AMC has been heavily shorted for most of the year. I suspect hedge funds are doing illegal naked short sales in this stock to drive the price down.

When will the SEC look at its own data and act?

How Solana Could Wipe Out Visa and MasterCard

September 7, 2021 tremendousblog 2 Comments

Solana is all the rage in cryptocurrency markets these days. Its price is doing this:

Looking at that chart, it would be easy to think that this new cryptocurrency is all hype and speculation. But I spent the afternoon digging into its capabilities as a platform, and they are incredible:

Solana can handle 65,000 transactions per second
Visa can handle 24,000 transactions per second
Doing a transaction on Solana costs $0.0001
Doing a transaction on Visa or MasterCard generally costs about 1.5-2.5% of the total transaction value

Let’s assume you’re a merchant with $1 million in transactions to process. You can do it on Solana for virtually nothing. Or you can do it a little more slowly with Visa or MasterCard for $15,000 to $25,000. Which do you prefer?

Granted, most merchants won’t have the slightest clue how to use Solana. But it’s not hard to imagine a new startup doing what Square or Stripe did: quickly going from unknown to ubiquitous processors of payments.

If a new company handled your transaction using a stablecoin like USDC on the Solana platform, it could offer incredible speed and dramatically lower fees than the incumbents, while still keeping a nice margin for itself.

Visa’s market cap is $496 billion. Mastercard’s is $340 billion. What happens to those companies when a competitor shows up doing what they do for a tiny fraction of what they charge?

I don’t own Solana, though perhaps I should. And if someone builds a company that makes payment processing on Solana easy for merchants, I just might have to wet my beak.

NYC’s Best Chinese Noodles

September 2, 2021 tremendousblog Leave a comment

A wiry young man takes a small baton of dough from a tub. He flattens it and gives it a little stretch. Then, he quickly yanks it out to a length of several feet and dramatically slaps it back down. Whack, whack!

This is Very Fresh Noodles in New York City. Found inside the cavernous Chelsea Market, it’s served chewy, hand pulled noodles to drooling patrons since 2016.

I visited last Friday with my wife. I pretended to pore over the menu, but I knew what my stomach really needed: La Mei Taiwanese Beef Noodle Soup.

The bowl was soon in front of me, steaming and filled to the brim. Just picking up the noodles with your chopsticks will whet your appetite. They’re thick, luscious, and glistening from the broth.

I greedily shoveled them into my mouth. The texture and flavor were perfect. The soup was aromatic and spicy, tasting of star anise. The beef is rich, incredibly tender, and falls apart in your mouth. At first I looked for extra chili oil, but soon realized I didn’t need it. These spices have a delayed reaction!

Very Fresh Noodles also has a scorching Dan Dan Mian and numerous vegetarian dishes, including the toothsome mock duck my wife ordered. There is counter seating inside and lots more comfortable seats along the sidewalk, some covered.

I’ve never had better Chinese noodles. If you’re in the area, give it a try!

Have a great Labor Day weekend everyone!

Tremendous

Monthly Archives: September 2021