We saw yesterday that — like it or not — leaves fall in the cool autumn air. Like it or not, the stocks that rise the most in the bubble…tumble furthest in the bust.
And, boohoo, the greatest geniuses of the low-interest era turn out to be the biggest dumbos when rates revert to normal.
We watched the meteoric rise of Sam Bankman-Fried (SBF), for example. Readers wondering who, exactly, is in the ‘elite’ that we keep talking about, have to look no further than SBF. James Kunstler explains:
‘The Bankman-Fried extended family is the quintessence of Woke aristocracy. Dad Joe Bankman and mom Barbara Fried are both law professors at Stanford. She also acted as a money-bundler for the Democratic Party and ran two non-profit “voter registration” orgs (against the IRS laws which only permit non-partisan organized voter registration).
‘Brother Gabe Bankman-Fried headed a non-profit named Guarding Against Pandemics (funded by Sam), which lobbies Congress to construct new platforms for medical tyranny. Aunt Linda Fried is Dean of Columbia U’s Public Health school, and is associated with Johns Hopkins, which ran the October 2019 Event 201 pandemic drill (sponsored by the Gates Foundation) months before the Covid-19 outbreak.
‘Sam’s girlfriend, Caroline Ellison, ran the Alameda Investments arm of the FTX empire (that is, FTX’s own money laundromat). Her dad, Glenn Ellison, is chair of MIT’s Econ School. His former colleague on the MIT Econ faculty, Gary Gensler, who specialized in blockchains there, is now head of the Securities and Exchange Commission, an agency that Sam Bankman-Fried was attempting to rope into a regulation scheme to eliminate FTX’s crypto-currency competitors.’
But all those illustrious, Deep State connections didn’t stop Mr Market from kicking SBF in the pants. And lo! Mr Market now has his butt-kicking boots on.
Beyond hope
Yesterday, the major indexes rose; the bounce continues. But it won’t save the disruptors. They’re getting disrupted anyway. Bankman is bankrupt. Carvana crashed when used car prices went back to normal. Zillow, the real estate database, was wrecked when its algorithm failed to notice mortgage rates heading back to normal. Meme stocks — like GameStop — are being un-memed. And Beyond Meat — the turkey’s great hope — is almost beyond hope.
During its heyday…which was only about a year ago…GameStop lovers would buy the stock just to show themselves how cool they were. All it took was a suspicion on Reddit that a big, savvy investor — preferably a hedge fund — was selling the stock short and they were on the case like flies in an outhouse. The little, un-savvy guys bought the stock. The price soared. And the ‘short’ lost money. (Or the ‘short’ had merely given out the word that he was short, while actually having a big, long position, and made a lot of money as the stock went up.)
Now, we’re still far from ‘normal’, but we can see it from here. GameStop has lost 70% from its peak. And in ‘normal’ times, investors don’t buy stocks just to spite the pros. They buy them because they think they offer good value.
Which brings us to Beyond Meat.
Anytime a company advertises itself as doing good…rather than merely trying to make a buck (such as FTX, which claimed to be only making money so it could contribute to charities)…watch your wallet. Beyond Meat makes plant-based food that looks like meat. For people who like meat but don’t want to eat dead animals…it offered a solution. And for investors who worried about the flatulence of bovines…the energy required to raise animals…or the cruelty of slaughtering them, Beyond Meat offered an opportunity. They could put their money where their mouths were.
Beyond reason
The trouble was…they didn’t seem to want to put their mouths where the Beyond products were. But we’ll come to that in a minute.
The Wall Street Journal (WSJ) reports:
‘In May 2019, Beyond launched one of the most successful initial public offerings by a major company in more than two decades…’
Then:
‘While Beyond’s sales grew 56% to $465 million between 2019 and 20121, its costs and debt grew far faster.’
In May 2019, the stock was trading at US$66. By July it was more than US$200. Another Bubble Epoch success story. Beyond was disrupting the whole animal protein business. Why go to all the trouble — not to mention incurring the environmental costs — of raising, feeding, and slaughtering animals if you could get the same taste and nutrition from something produced in a factory?
But while the Bubble Epoch sows success stories, the Bust Era reaps failures. WSJ continues:
‘US grocery sales of plant-based meat substitutes are declining, and rival imitation-meat makers are capturing market share. Beyond’s stock is down 83% in the last 12 months.
‘Beyond’s losses deepened from $12 million to $182 million while its debt climbed to $1.1 billion between 2019 and 2021. The company’s losses in the nine months that ended Oct.1 were $299 million…’
Let’s see…
Falling sales. A profit margin of about NEGATIVE 80% (for every US$1 in sales, the company loses 80 US cents). More than a billion in debt. The sales and margin figures make Beyond’s debt very high risk. And the carrying cost of high-yield business debt is rising fast.
Too bad for the turkeys, but Beyond Meat may soon be dead meat.
Regards,
 |
Bill Bonner,
For The Daily Reckoning Australia
