Historical past rhymes, however this time Robinhood (HOOD) stole from each the wealthy and the poor. ‘The Robinhood Market Prime’ could also be in and a -5% to -10% market correction appears to be an affordable expectation now.
The IPO reminds us of the earlier April 2021 direct itemizing of Coinbase (COIN) (high in cryptocurrency costs) and the LaBranche IPO (high within the markets) in July 1999
And, I view the Amazon (AMZN) miss as essential to the markets.
““You realize somethin’, Robin. I used to be simply wonderin’, are we good guys or unhealthy guys? You realize, I imply, uh? Our robbin’ the wealthy to feed the poor.”
– Little John
I see the Robinhood Markets IPO as probably marking a highwater mark for retail buying and selling in addition to doubtlessly representing a 2021 high for all the market – very similar to:
* The Coinbase International direct itemizing marked the cyclical peak within the worth of digital currencies again in mid-April, 2021 (when Bitcoin traded at about $61,500)
* The lower than memorable MF Global 2007 IPO (spun out of Man Monetary) represented a quickly to peak market and led to the only most important downturn in buying and selling exercise and one of many largest bear markets ever.
* The second half 1999 IPO of specialist, LaBranche & Company preceded the second most important correction in trendy investing historical past.
Based on the Enterprise Media All the pieces Was Coming Up Roses for Robinhood
As soon as once more the enterprise media failed us and let traders down because the dialogue and interviews main as much as the Robinhood Markets IPO had been superficial at finest, harped on the personalities of Robinhood’s management and materially failed to debate or analyze the issues in Robinhood’s enterprise mannequin (the outsized function of choices buying and selling, and many others.) or within the obscene market valuation of the IPO (which was priced at $38/share).
Importantly, it’s only after the actual fact (because the IPO fell in worth from $38 to $34) this morning – that Fin TV has begun to remind traders of the dangers to the Robinhood enterprise mannequin. As all the time this jogs my memory of Warren Buffett’s well-known phrase:
“Funding knowledge is all the time 20/20 when considered by the rear view mirror.”
The Church of What Is Occurring Now Has Begun to Lose Its Congregation
For a number of months (See “Code Red“ and “You Can’t Handle the Truth“) I’ve been cautioning in regards to the narrowness of the market advance, the deterioration in breadth, the unhealthy dominance of FAANG plus M(SFT) (MSFT) management and lots of different technical indicators that had been signaling hassle forward.
As all the time I supply up certainly one of Bob Farrell’s Classes of Investing:
“Markets are strongest when they’re broad and weakest after they slim to a handful of blue-c
Although I used to be not quick Amazon, I issued a transparent warning in regards to the 2Q2021 prospects for the corporate on Wednesday morning after I wrote:
A Cautionary Phrase on Amazon
Whereas the businesses’ business-based strains had been sturdy – the consumer-based outcomes had been weak relative to expectations.
This might put some close to time period stress on the shares of Amazon (AMZN) which had been -$73/share in Tuesday’s buying and selling session.
Once we mix the poorly positioned Robinhood IPO (in fact Cathie Woods’ ARK Make investments (ARKK) purchased over a million shares) with the startling miss and steering markdown in Amazon (the primary in over three years) — the stage appears to be set for the correction I’ve been searching for.
Certainly the correction may very well be deeper than the backyard selection 5% drop that I had beforehand anticipated.
Robinhood was a gorgeous and funky persona however Little John was a “bear” of a person.
(This commentary initially appeared on Actual Cash Professional on July 30. Click here to find out about this dynamic market info service for lively merchants and to obtain Doug Kass’s Daily Diary and columns from Paul Price, Bret Jensen and others.)
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