This week in Laughing Stock, we look at Buffett's letter to shareholders, pump-and-dump schemes, and profits
11-Mar-2023
This week has been really dull actually. No big news, no big moves, no frauds but just as we write this, we came across news about the crash of Silicon Valley Bank's shares. The major reason for this was because the bonds that it had purchased have plummeted in value as interest rates rose and the risk free yield was much higher than the bond yields. At this point, we think something happens around the world just so that people have something to write or talk about, you know. Too bored? Bankrupt a company. Too silent? Accuse a group of fraud which, with time, turns out to be true. While this is a nightmare for an analyst to comprehend it all (basically describing our job), as someone who just gossips about it, it's a dream actually.
We aren't reminiscing about the good old days but maybe, just maybe companies should be consistently profitable before entering the market. Just for their own sake.
We are not trying to troll the legendary Warren Buffett. But come on, how many times have we read the line? Maybe he's saying it again and again because even after decades, we behave like kids in the market.
Silicon Valley Bank opens down 40% after investors discover that providing loans for cash-burning startups in a bear market that can't get funded is a bad business strategy pic.twitter.com/o2zr4ksytC
— Dr. Parik Patel, BA, CFA, ACCA Esq. (@ParikPatelCFA) March 9, 2023
People are calling this the next Enron and Lehman Brothers. When did we start having benchmarks for falls?
Did no one learn their lesson? "But the P/E has fallen. So valuable right?". Five to ten or even 20 per cent fall from time to time is normal but an 80 per cent fall? Something has to be inherently bad. What to do if a company has inherently bad fundamentals? RUN!
Higher expense only to underperform the index. Wow! What a deal, right? Give me some of that. (Active fund managers, please don't kill me).
Tempting, isn't it? Just a quick pump and dump, and you can run away with lakhs. People ask so many questions about blue chip stocks only to lose money in random microchips.
If they are supporting and hyping a stock so much, there has to be some benefit for them. We literally wrote an essay in our meme story last time asking investors to take precautions.
