AMC: Pump and Dump or Wall Street Blockbuster?
AMC to $100? $1,000? To the moon? Reddit and the rest of the armchair investors on social media are pumping up the troubled movie theater company, looking to slay the short-sellers on Wall Street and earn a few bucks in the process. Following its end-of-January spike that saw shares soar from a couple of bucks to as high as $19, the stock stumbled and hovered in the $7-$12 range for months. Out of nowhere, AMC ignited a whopping 116% rally to send shares as high as $36. But then the surge fizzled out and finished the session at $25.63. What happened? Did social media get tired of making money?
The holiday-shortened trading week should provide an answer if this were a pump-and-dump scheme or a genuine crusade among the memers a la the GameStop saga. That said, the investment community learned quite a bit about the astonishing volatility behind AMC.
During the May 28 trading session, AMC was the most active stock on the New York Stock Exchange, with approximately 650 million shares changing hands. This is six times the average volume from the last 30 days. It looks like everyone got in on the action, from professional day traders to Robinhood’s men in tights to institutional investors.
Short covering (buying back the investment to finish the open short position at a profit or loss) might have played a critical role in AMC’s substantial jump. To date, the company faces roughly 20% of its outstanding shares sold short, four times the average short interest in a typical U.S. security.
The short sellers lost $1.3 billion on Friday, while the new retail investors who own 80% of AMC’s 450 million outstanding shares may have enjoyed a handsome return.
The performance of AMC has defied everything the wolves on Wall Street have learned about in school and real-time trading. AMC is heavily shorted because its financials are a train wreck as the company has about $5 billion in debt, and the business will need to defer $450 million in lease repayments. But what do fundamentals matter when a stock has the power of Reddit behind it?
It’s Mad, Mad, Mad, Mad MMT World
Liberty Nation has extensively reported on the happenings inside the modern monetary theory (MMT) club. The late Robert Wenzel, the editor and publisher of the Economic Policy Journal, also provided tremendous insights on why MMT is not the soundest public policy pursuit from the priggish progressives. But the latest suggestion might eliminate any modicum of credibility MMT possessed.
The Australian wing of the MMT movement contended in a recent tweet that “government bonds are not debt” but rather “they are savings just as the reserves from when they came are savings,” adding that “they will never be a burden on our children.” Confused yet by this bizarre understanding of savings?
Here are some definitions. A government bond is a debt security to support public spending. Savings is defined as a net surplus of money after all obligations have been paid.
Savings are your production minus consumption. For example, if John Smith makes $100 in a month and has spent $95 on expenses, he has saved $5. This is savings. However, MMT purports that nobody has to produce anything to save. According to this economic prescription for eternal prosperity, savings can be created out of thin air, government spending is savings, and quantitative easing (QE) is savings.
Put simply, printing money is the only way to save.
Being Green Makes You Loonie
Central banks might have a new excuse to potentially restrict the use of cryptocurrencies: Protecting the environment from greedy miners.
Ever since Tesla Motors CEO and Dogefather Elon Musk called out Bitcoin’s environmental impact, observers have been going through crypto’s contribution to climate change. Indeed, bitcoin algorithms require substantial amounts of computational power to execute transactions, with some projections suggesting bitcoin mining was responsible for up to 51 megatons of CO2 emissions each year.
This has the Bank of Canada (BoC) claiming that any digital currency the institution might provide Canadians in the future would be better for the environment than bitcoin and its industry rivals.
BoC deputy governor Timothy Lane recently told the Canadian Chamber of Commerce that citizens already trust the organization and the banknotes, suggesting that it does not need a similar system to nudge Canadians into using a digital loonie, or central bank digital currency (CBDC).
“Clearly, there’s a high degree of public trust in what we’re offering, and so when we think about a central bank digital currency, that trust is an important thing we’re bringing to the table. That, of course, means that we wouldn’t have to rely on those environmentally, very wasteful methods of mining technologies that we’ve seen with cryptocurrencies.”
Forget drug dealers, terrorists, or cyber hackers. The main threat, the statists could potentially argue as they wave their regulatory wand, is bitcoin’s harmful effects on Mother Nature. Does Musk see the writing on the wall? Perhaps this explains why he is on a quest to get bitcoin miners in North American to rein in their energy consumption and publish their plans to transition to renewable energy. The almighty TechnoKing knows all?
Read more from Andrew Moran.