Imploded Stocks of the Day: Carvana, Twilio, Atlassian, Cloudflare – WOLF STREET




THE WOLF STREET REPORT
Imploded Stocks
Brick & Mortar
California Daydreamin’
Canada
Cars & Trucks
Commercial Property
Companies & Markets
Consumers
Credit Bubble
Energy
Europe’s Dilemmas
Federal Reserve
Housing Bubble 2
Inflation & Devaluation
Jobs
Trade
Transportation
Let’s just walk through some of the already Imploded Stocks that further imploded on Friday. There were quite a few of them, as is now usually the case during earnings season, but we’ll just look at a handful. They imploded even as markets rallied for the day. On Friday, the Nasdaq rose 1.3%, reducing its loss for the week to just 5.6%, that kind of week. But a whole bunch of stuff plunged after reporting “earnings” – I’m using that term loosely because they all reported huge losses on top of endless losses.
Carvana, an online used-vehicle retailer, is one of the earliest entries into my pantheon of Imploded Stocks. Thursday evening, it reported “earnings” – you know what I mean. Everything went the wrong way: The number of vehicles it sold to retail customers fell, revenues fell, cost of sales jumped, gross profit plunged, selling and administrative expenses soared, interest expense more than tripled, and the net loss exploded to $508 million.
The used-car startups Carvana, Vroom, and Shift “face an existential crisis,” I wrote in April 2022, based on the changing dynamics in the used vehicle market, the fading willingness of investors to keep fueling cash-burn machines, and driven by the used-vehicle startups themselves that were never designed to make money and never could figure out how to make money, not even in the hottest used-vehicle market ever in 2021.
They were designed to burn investor cash. And investors no longer want their cash to be burned. And so that existential crisis is now.
Back when I issued the existential crisis warning in April 2022, Carvana [CVNA] had plunged by 73% from the high to $100 a share. Since then, they’ve plunged further with relentless brutality. On Friday, Carvana kathoomphed 39%, to $8.76, down 98% from the peak in August 2021, and down 41% from its IPO price in April 2017. Buy and hold, folks.
The chart displays the now classic pattern of how the Fed’s trillions of dollars in QE and interest rate repression – the free-money era started in 2009 – mutated over the years into a virus that turned investors’ brains into mush, and after their brains had turned into mush, they inflated asset prices to ridiculous levels.
But the healing from the free-money virus has started. Interest rates are reverting to some kind of normal, QT is now working, and look what we got. Nearly all charts of my Imploded Stocks look similar (data via YCharts):

In a market where investors’ brains function properly, Carvana’s inability to make money selling used vehicles should have doomed the stock to the penny-stock realm years ago.
Armies of falling-knife catchers that thought they could make money after the shares had plunged by 73% in April 2022 have gotten their beloved fingers sliced off with another 91% plunge. Shares have collapsed so far that you can barely see the 38% plunge on Friday, that little dip at the end of the collapse.
Twilio [TWLO], a cloud communications platform, reported “earnings” Friday morning. Part of the problem was that revenues grew by 32% to $983 million while the net loss exploded by 115% $482 million. The company also issued disappointing revenue guidance.
How can a company that has been publicly traded for seven years, and has been around for 14 years, and had $3.5 billion in revenues over the past 12 months still generate a $482 million loss on $983 million in revenues? That was a rhetorical question.
Every year, the company has generated larger and larger net losses, reaching nearly $1 billion in 2021, and heading for well over $1 billion this year, following the free-money-virus-infected Silicon Valley model: the more they sell, the more they lose.
People that run companies in this way have no idea what it’s like to run a profitable company. It’s not even on their horizon, and it wasn’t on the horizon of their investors. But it’s starting to be.
Shares collapsed by 34.6% on Friday, and are down 91% from their high in that infamous February 2021, when this stuff started to come unglued.  Note the now classic Imploded Stocks bubble and collapse pattern. It’s just a simple fact: Free money turns investors’ brains to mush (data via YCharts).

Atlassian Corp [TEAM], a collaboration and productivity software company in Australia that is traded on the Nasdaq, is another one of those shining free-money examples that never figured out how to make money, never even tried, and is just losing huge amounts of money year-after-year: over the past four years alone, it lost $2.3 billion combined, even as its revenues surged.
In other words, it is just buying its revenues. And for a while, that’s all that mattered to investors whose brains had been turned to mush by the free-money virus.
But when it reported earnings on Friday, the company talked about feeling the impact of the global economy – the hiring slowdown at its existing customers resulting in slower demand for collaboration software – and it said the rate at which users of its free versions converted to paid versions was cooling. It said that it would slow down its own headcount growth going forward, and it gave a disappointing outlook.
Shares kathoomphed 29% on Friday to $124.01 and are down 74% from peak mania in October last year. This chart looks awfully close to Carvana’s chart did back in April when it had plunged to $100. Each implosion had a different start date, and each plunge brought out the dip buyers that then got their fingers sliced off, and it will happen again because there are still dip buyers out there with some fingers left on their hands that they want to get sliced off (data via YCharts):

Cloudflare, a cybersecurity company, reported earnings late Thursday – yup, another huge loss. While revenues jumped 47%, the operating loss jumped 73%. The more they sell, the more they lose – following the Silicon Valley growth model during the free-money-virus era. Guidance was also light.
But the free-money-virus is fading, and brains are recovering from it, and on Friday its shares kathoomphed 18.4%, to $41.09, down 81% from the peak in November last year.
The stock is roughly eight months behind the first batch of heroes in my pantheon of Imploded Stocks that started to come unglued in February 2021 (data via YCharts):

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In biology, a die-off can be an elegant, beautiful and regenerating part of nature, as long as I’m not the one doing it!
Good early call on Carvana. It bought a car dealership property near me, and was going to erect one of its silly car vending machines, wrecking my view. Luckily I don’t have to stare at its deteriorated wreckage, as they didn’t get that far. Who would buy a car many yards above the ground, immune from inspection? It is as silly as buying a house based only on an algorithm, or gold under the ground based on shaky “samples.”
My dumping comparable stocks in later ’21 coincided with my regularly reading this blog.
I say, go to the damn vending machine and select each car one by one. Test drive and bring it back. I am sorely tempted to do that here in Phoenix metro where they have one of those monstrosities setup.
Wonder what are the challenges for both companies, buyers and owners for online sales of Electric cars like Tesla and Rivian.
It doesn’t work that way… you can’t “test drive multiple vehicles” at Carvana. You buy one. Get a token. It shows up.
This whole debacle of geeks thinking the automobile industry is easy is hilarious. I recall – way back in 1979 – calling on a dealer in Wood River, IL. I was perusing his financial statement and noticed that he was losing money on every car he sold. His response? I make it up on volume. Neophyte car rep: So… if you lose $1 per car and you sell 100 don’t you lose $100? When does that “volume thing” kick in? His response…. “You don’t understand the business.”
He went broke.
I am all for cash burning unicorns to be replaced by productive businesses.
However thanks to broad financialization and outsourcing of productive work, mos productive businesses in US are barely profitable.
The proven path to profitability are:
1. Create a niche, then increase barriers to entry for competition through patents, rules, processes etc. E.g. Pharma, Aircraft manufacturing, nuclear power.
2. Establish a monopoly through mergers and acquisitions or form cartel with top corporations to retain pricing power through questionable means. E.g. Technology, Airlines.
3. Create something useless or find something obsolete and then promote it as an investment to run a giant ponzi scheme. E.g. Cryptos, NFTs, unicorn stocks, spacs
4. Deal in government contracts.
You forgot: Set up a minority and/or woman owned business, get a contract from the government, buy crap on Amazon, mark it up 100% and ship it to them.
If you think it’s not true, I’ll give you the address of a woman who does it 24/7. Doesn’t even unpack the boxes. Changes the shipping label and out it goes.
They live in a $2M house in SoCal, kids went to UCLA (scholarship, of course – and not academic nor sports), and spend most of their time printing labels or sitting by their pool.
Agreeing with both cb and El katz
One more:
4. Make something by spending $1 in China. Spend $20 to advertise it as the best product in the world and then sell it at $50 to the truly American consumer, who just has to buy it, and then pay for it with borrowed money (credit cards).
You’ve just described some of the most consistently long term profitable business models. Consumer products such as a bag of chips, Air Pods, a jar of mosturising cream, or a pair of $200 sunglasses.
Thought the same as you, phleep, and was thoroughly annoyed when so many of the used cars I was considering were their listings on Cars dot com and Autotrader, etc. But upon closer inspection, Carvana is actually awesome for buyers. You have a couple days to drive the car up to 300 miles (I think) and can return for any reason for full refund. This was perfect for me, because I wasn’t sure whether the car I wanted would be fun with an auto trans, so I could test it out. I ended up NOT doing that, though, because their listings radically shrunk to nearly nothing a couple months later. And I also now have no faith in their ability refund money.
Thanks, Gattopardo.
I want to buy a car that works well, Day One. I am willing to pay for not having my new purchase start coughing out on a road somewhere, and jerking around with a return, and starting over. But I realize some folks are more resourceful that way.
WOW and I say they are still overvalued.
It is simething else. They drop 70-80% and still trade at 10 times sales.
Next on the block will be Snowflake, AirBnB, and Tesla. Followed by Eli Lilly few months later.
“How can a company that has been publicly traded for seven years, and has been around for 14 years, and had $3.5 billion in revenues over the past 12 months still generate a $482 million loss on $983 million in revenues?”
A related question, rhetorical of course:
“How can a government spend Trillions on Inflation Reduction and still have raging inflation?”
The rhetorical answer is:
Both massively fund their insider’s life styles along with their friends and families using “OPM”.
Just observing the passing parade from the sidewalk.
The government trillions hasn’t been spent yet. It will be spent over a number of years.
Precisely…and the fact that there is almost no effort in DC to pause/reverse that spending (despite horrible inflation) tells everyone everything they ever need to know about DC’s prioritization of *itself* and the use of the entire nation’s wealth to increase/exercise its own control.
That’s too bad because a government running a deficit is by definition a stimulus action putting more water into the price bathtub while Powell is trying to close the valve a bit.
I was listening to MSNBS (my sister’s in the ER) and some jamoke from NJ running for congress was talking about “repurposing” $1T from the Covid bonanza to Medicare. I thought…. so, that’s just a gigantic slush fund for the criminals in DC?
Inflation is far from over, folks. With those brain dead boogerheads “representing” us…. we’re doomed.
Atlassian and Cloudfare still have plenty of room to run. Thank you for the heads-up and giving me time to get on the elevator. Gartman and Cramer would be all over these. First step is to figure out what they really do. 🥳💸🤡🤣🥳
I’m pretty familiar with Atlassian from 35+ years in the tech industry. It started with a free bug-tracking application called Jira, which was (marginally) better than the popular open-source equivalent Bugzilla (I managed systems of both; Jira was a bit of a hairball). Atlassian extended into software project tracking and management, esp. in the faddish ‘Agile’ development domain, with several add-on modules. Like with a lot of collaboration software, basic usage was free, but they started to charge for the add-on goodies. The initial versions were on-premise, but a few years ago they jumped on the ‘cloud’ bandwagon (which is getting slammed as well).
As for Cloudflare, I have no clue; but it must be special because it has ‘cloud’ in its name.
Cloudflare looks to me like a WAF (web application firewall). The valuations of all these IT SaaS companies need to be revisited. As do the prices of their products. I have seen insane quotes for 1 year or 3 year contracts, much like the “packages” cable companies had in the past. Everybody in IT and their grandmother wants to be a billionaire.
Thus is correct they are a SaaS based WAF and content caching infrastructure play.
The software team at my company uses Jira. And yes, ‘Agile’ if one of the top software development buzz words. I have seen the name ‘Atlassian’ all over the place.
As a fellow tech geek that use’s Atlassian – I don’t see a long life ahead. Agile has been around for 30+ years. It’s a methodology that is, at best, misunderstood. Our org tries to use Jira and confluence as the holy grail of PM/ agile solutions. It really is bulky and painful – made for bug tracking and software development. Confluence is the add in for knowledge. Most ITSM, like SNOW, does a better job. Seriously, the only thing jira does is manage a work breakdown structure. I can’t wait for it to go bye-bye. PM is more useful.
Cloudflare secures nearly the entire internet. They block ddos attacks for effectively free in many cases. Any website making $$ gives them at least $10/month. Websites with volume at least $250
It’s starting to get bad, folks. Cloudflare runs the largest chunk of internet caching services, also DOS protection. Atlassian make competent collaboration tools for engineers. These are real products, not cat pictures like the face book or tweetie. Both enterprise market. They were supposed to make money, not show ads.
This site uses Cloudflare to protect against DDOS (distributed denial of service) attacks.
So “cloud blockchain” is still a winner?
By the way Wolf, your imploded stocks articles bring a sense of hope that there are still some investors out there looking to fund profit making ventures.
Hope springs eternal.
Thanks!!
Carvana is absolutely insane. It is proof that there is no smart money and dumb money, there is only dumb and dumber. Used cars are notoriously more profitable to sell than new cars, but they obviously aren’t profitable enough to manage the overhead of a company like Carvana that has to also deliver the vehicles on their own trucks and has to offer a 7-day guarantee (and pick up the cars again if there is a problem) to get people to buy their cars sight unseen. And they have to compete in a market that has a ton of players between dealerships, private sales, used car lots, Carmax (who actually has a good business model). Just bonkers. Hopefully when they get kathoomphed to $0 their stupid eyesore “vending machines” also get torn down. (not likely, we are good at building things but not good at maintaining or gracefully deconstructing)
P.S. the braindead passive investor websites are still talking about how great passive indexing is and “stay the course.” These people never change their investing strategy based on macroeconomic trends because, despite nominally acknowledging that past results don’t predict future returns, they rely on success of passive investing over the QE era to predict infinite future growth in their index funds. These people are still to this day saying time in the market is the most important, if you have cash on hand you are timing the market and should have already put it in your index funds, yada-yada.
All that to say, the darling of these people “Vanguard Total Stock Market Index Fund” holds 2,947,724 shares of Carvana as of the end of Q2 2022. That’s a lot of passive investor cash incinerated.
I’m mostly indexed to the S&P500 and High Dividend indices, which is basically buy-and-hold for large cap, and don’t worry about it. These two indices avoid these imploded stocks and start ups, but are overweighted APL and a few others. But I have a ten year horizon, and these indices are calls on the general US economy, been buying them the max every two weeks through 401K through this down-market, no doubt in my mind they’ll be up in a decade when I can get to that retirement money.
I learned the hard way to avoid bond indices – I hold ladders of direct treasuries to maturity on the income side of the asset list.
whatever,
As Wolf has covered, there are countries where the stock markets never regained lost ground 10, 20, 30 years after the peak. You are confident that your 401k will be up in a decade, but I would hope you hedge your bets.
I have a 401k and it does include broad US indices but I do not assume 8% CAGR on US equities like many do. With short-term CD’s available at 4.5%, equities are becoming less attractive by the day.
“I’m mostly indexed to the S&P500….These two indices avoid these imploded stocks”…
Uh, no. TSLA and the stupidly named stock formerly known as Facebook are in there. So are plenty of others, and plenty more that dropped out as they puked over time. I keep waiting for the Only Great Stocks Index Fund that avoids the losers!
Fixed ops pays for the dealership lights, power, salaries etc, sales is just a side hustle..
I’m surprised with Wolf so close to this sector he was not shorting at $300
I’m waiting for the days when I could call a buddy at Western Financial Savings, Long Beach, Westlake etc and go look at new repo on their lot…
Fixed ops only pays the freight because the manufacturer allows it – due to dealer lobbying. For the uninitiated, the term “fixed ops” is service, parts, and (if applicable) body shop.
What do you think pulls the freight for the manufacturer? Do you remember the meme’s about how much you’d spend building a car out of the parts list? My significant other got clipped in an intersection. Cost to replace a bumper cover, lamps, radar sensors, wiring harnesses, grille, etc….. $8,500. Sheet metal damage? $500 of that amount. No structural damage. The headlight was nearly a grand… for a headlight.
Look carefully at your repair bills…. all the costs of a dealership doing business are foisted off on you. Shop supplies. Environmental. Yada yada yada. Just like the BS charges when you purchase (“documentation fees”). While I never played in retail, I challenged the “doc fees” by asking them if they can legally sell a car, per state licensing requirements, without providing documents (title, bill of sale, etc.). I’d gladly go to the DMV to save $1,000. Response? Crickets.
What you’re referring to is “service absorption”…. in other words, if service absorption is 100%, the rest of the revenue generated by other departments is pure profit (aka variable operations).
Careful with repops. Cars that they often sell are “as is as shown”. I’ve seen where the airbags were jumpered and the seatbelt retractors had a resistor put into the circuit to confuse the idiot lights. The bad news is that you have no recourse. If you don’t find it, and you’re in an accident, you die. So does your spouse and kids and, since it’s without expressed or implied warranty, you’re on your own.
Adulting is fun.
Just to share a fun tidbit. The “doc fees” you mention came into being when I was in the business (1985-1995). They were part of what we called ADP (additional dealer profit). Dealers at their 20-group meetings taught each other how to implement this and get F&I to sell it when challenged (something like, “they helped cover the costs of handling the documents at the dealership”). Tags, title, and license fees were all separate items.
When I purchased a new car in 2006 (import brand), the dealer had a massive doc fee (they were still working off a foursquare, which was hilarious to me, like time warp). The doc fee was one of the things I was able to negotiate away, along with getting a big discount off MSRP (they probably had a massive stairstep program from the manufacturer, and it was toward the end of the month).
In 2020, we bought a used hybrid (domestic brand, made in Mexico) from Enterprise, and they didn’t negotiate on anything, not the trade, not the doc fees, not anything — but the price was right. I just looked at the paperwork….
They charged two doc fees, and note the disclosure:
— $85 “Document Processing Fee (not a government fee)”
— $30 “Electronic Vehicle Registration or Transfer charge (not a government fee)”
But they let me pay with a credit card where I got 2% cash-back, so that was several hundred bucks in cash-back.
they are purposely braindead, that’s the point. as Buffet says, it’s a bet on America
they might sense for a time, at the right time
You are 50% on to something – I do think *blind* use of indexation has led to pathologies.
But indexing does provide for 1) very low cost, 2) simple, 3) diversification.
And all three are a big deal. And there are plenty of smarter indexes.
But blind/ignorant indexing allows the easily corrupted IPO process to become the sole gatekeeper for *bad*/*dangerous* indexes…the equivalent of Gen 1.0 driverless vehicles.
Used cars are not “notoriously more profitable” than new cars. Why? Because no used car is created equal. There is no “used car factory”. Two visibly identical cars can be valued differently for reasons that are undetectable to the neophyte.
New cars have a base value. AKA invoice. The manufacturers participation is the only thing that moves the profit margin. Clueless people believe the “invoice” that the dealer shows them to be the true cost of the vehicle.
It’ ain’t.
As an example: I bought my 2017 technomobile for $29K. The MSRP was $45K plus freight. How? I worked for a manufacturer. The “margin” on the “invoice” at that time was about 8% below MSRP. Do the math.
What was removed from my purchase price was…. holdback, a holdback that had a special name that, if I told you what it was would out me, full tank of fuel, advertising allowance, floorplan assistance, marketing allowance, and lord knows I’ve forgotten several more.
People think they’re experts in the automobile business because they drive one.
Looking at the charts, I’d say both Atlassian and Cloudfare have a lot of downside room to fall before they bottom out.
Oops, sorry Island Teal, I sort of mirrored your observations. But the whole point is as more and more waken from their stupor, the more their true value will be reflected in their pricing. After all, what possibly could attract anyone to these with zero upside potential? OK, maybe there are still greater fools out there with money to burn. Simply astounding.
How about an article on the stocks that are working in a rising interest rate environment?
Thanks.
Theo,
Just about the only big sector that has been working is energy, and that’s not because of rising interest rates, but because of rising oil and gas prices (now some of it has already gone back down).
Slowly rising interest rates can be good for banks, but in this environment, bank stocks too got crushed.
What’s working in this environment: short-term Treasury securities (4.5%+ yield on 6 months and longer), brokered CDs (now 4.5% to 5%), and other “trash” like that. Been saying that for a while.
Shorting has been good too, but is very risky (pure speculation).
Short-term trades, if you’re quick enough to catch a dead-cat bounce and get out in time, have been working for the lucky ones. Unlucky ones get crushed. Luck is not an investment strategy.
This is a shitty investment environment. So you try to find the least shitty options.
Yup. Just bought some least shitty 12mo treasuries at 4.76% last week.
I’m paying extra on my 3.75% car loan. That might change if my savings account starts to yield more.
I’ll be sticking with 3mo treasuries for a while. Nice to finally put savings back to work again.
Lauren:
If the cash pays more (brokered CD’s through Fidelity or whomever), then let the loan roll. Work your money and have it make your payment. Today’s rates for a 30 day brokered CD was 3.30% (only because it pays monthly – interest paid at maturity interest rates are higher). And that’s before last week’s .75% pump registers. Plus they have (at least Fido has) fractional CD’s available below $1K each from certain banks.
Have your money pay your bills. I “borrow” from myself on major purchases and pay myself back – plus interest – for the privilege. That’s how people build net worth. Not by wishing ill will on others (“I hope they lose their @ss on the house they bought!”). Be your own bank. I began living debt free in my 30’s. And, no… I didn’t inherit bupkus, and, no…. I didn’t make zillions. We did what we referred to as “value engineering”.
Yes, I’m a “rentier”. And so is anyone who has a brain.
Sorry. Me and my date, Stella Artois, are having a moment.
You forgot fertilizers, though I have made the easy $$$ there, and FX (long the US$ and short any country especially if it a fuel importer like Japan or Sri Lanka) though that trade is getting riskier! CDs still are $$$ losing investment and when the stock and bond markets turn you will be locked into a $$$ losing trade, especially if you were buying CD’s before the last FFR hike and the most likely scenario is inflation will be allowed to run at a 4 to 6% clip like after WW2! Many semis are cheap here and you can sell calls against them deep or OTM, depending on your bullishness a time frame of up 2 years and have up to 40 to 50% downside protection!
1. “CDs still are $$$ losing investment…
The rate of inflation destroys the purchasing power of your fertilizer stocks at the same rate as it destroys the purchasing power of CDs. If you made money on a short-term trade with fertilizer stocks, great!!! Then go deduct 8% annual rate from that due to loss of purchasing power due to inflation. If your stocks lose 33%, then you have to add to the loss the 8% of inflation, and you’re 40% in the hole. With a 5% CD, you will be 3% in the whole.
NO ONE escapes inflation.
But you can take big risks to try to out-earn inflation. And that’s great. But you can also lose huge amounts, topped off by inflation. Nevertheless, it’s a valid consideration, in my book.
2. “…when the stock and bond markets turn you will be locked into a $$$ losing trade”
Yes, happens with all investments. When you got money tied up and an opportunity arises, well then, your money is tied up. If your portfolio is down 50% and you’re fighting margin calls, and then the market turns, your money is tied up, and there is ZERO you can do to invest, because you have no liquidity. All you can do is hoping to recover part of your losses. So it’s a good idea if you think that you might want to take advantage of opportunities to have some liquidity ready to go. And now you can earn 2.5% on this liquidity in savings accounts.
OMG… The fact that you (Wolf) has to explain that to Gringo is hilarious. Somehow they think that stonks and commodities are exempt from the same pressures as cash instruments.
I don’t play in stuff I don’t understand.
I sit here tonight with a person who took a myriad of risks and, today, our net worth is dang near identical. We both thought each other the fool…. and it turns out I got to sleep and they needed veneers to fix their ground down teeth.
PS: They made a metric crap load more money than I did when they were gainfully employed. The end result isn’t that much different (my cars are actually nicer and the view from my lanai is far more satisfying).
@ Wolf –
what about Yort’s 7 to 10% Mortgage Backed Securities?
Sorry to interrupt.
In the 2000s, I had a pal who was raving about the yield he was making on securities from a mortgage company. Countrywide, if you know the name. Pretty infamous.
Not sure if I got this right from Wolf’s recent article, but looks like market structure is changing in mortgages and mortgage securities? Like gov is backing out some? I’m wary. I’d rather lose a few points to inflation, which can be done at low risk, than risk the whole bundle.
I would respond that boring old companies that make a profit, maybe pay a dividend, but are as far away from anything “disruptive” as possible.
Shorting isn’t pure speculation, you do it based on garbage fundamentals plus technicals to give you timing. I’d rather short a garbage company than go long an index in a bear market.
Iona
For shorting to work, I mean puts and NOT direct shorting of the stocks, TREND and TIMING have to be in your favor. same with inverse ETFs
Recent repeated ‘Front running’ on the whisper of ‘some or any thing’ makes shorting hard.
Recent uptick of Chinese stocks/Etfs on the rumor of relaxed covid restriction is an example. I have buying and selling puts ‘repeatedly’ on FXI since Feb ’22. Over all it is in profit zone. Same with inverse etf-FXP and YANG. I also buy YINN and FXI to cut the whiplash although insignificant compared to puts.
Re timing of shorts…
The SP 500 (significantly more financially solid than the other 4500 rando equities…) started being significantly overvalued in…2015.
So you had to hold on for over 6 years (using frequently flawed shorting tools) and wait for DC to become terrified enough to stop destroying interest rates (their main activity for almost all of the last 20 years).
I think a lot of people recognized the insanity (that is why 90%+ of the nation viscerally loathes DC) but they had poor tools to offset it.
Emigration (monetary or physical) may have been about it.
I had some good paydays this year from VIXY, which does not respond to price changes in a linear way, as puts do. Its reactions to index price changes (it is geared to VIX which is geared to S&P 500) are more fuzzy. Then again, it doesn’t expire, so I can afford to wait a long time until it spikes. It HATED the Fed put. It responds to sharp downturns, but lately, it seems less snappy even on bad stock days. Right now stock indices are falling and VIXY is languishing too. I wonder whether risk managers/speculators have found some other game to play.
Thanks, Wolf.
Selling S&P and NASDAQ-100 futures has worked well
There are about 200-250 Zombie companies in the S&P 500. They all need to implode.
S&P 250, that has a nice ring to it.
Even after a 50% decline of every stock/asset/realestate from here seems low for me.
For a while there, it was more like the S&P 5.
We already listed 1001 companies that plunged by more than 80% from their highs:
https://wolfstreet.com/2022/10/17/the-1001-imploded-stocks-of-2022-down-80-or-more-so-far/
Shades of the entire Vancouver stock exchange when it peaked in I think 1983 until today as its now the Venture exchange. Inflation adjusted everything has lost 90+ percent the last 39 years.
https://www.vancouverpolicemuseum.ca/post/the-vancouver-stock-exchange-a-legacy-of-fraud-and-money-laundering-part-i
wow. From a shorting perspective, not much meat left on the bone.
ru82
20% down in S%P is nothing compared to nearly 60% down during GFC until Fed jumped to the rescue. Things are a lot worse than in 2008.
I expect girding DOWN, with higher of the highs and lower of lows, as happening since Jan ’22. But I am also buying ETFs with div on weakness, as a counter measure.
The problem with that is, when they do, all the money they owe disappears, and begins a chain reaction of debt default.
Debt acts like nitro-methane to the engine of growth, but debt default acts like a handful of sheet metal screws down the carburetor….
Would sure be nice to see some of those “systemically important” banks fall apart and sold at auction after the government takes them over. And also dismantle the banker’s cartel known as the FRB. This country should be run to the benefit of its citizens, not the “too big to fail” banks.
Really? How do you think the pols become millionaires? Because they’re here to serve you?
A certain person running for office in AZ said it succinctly: If you become rich in public office, you’re corrupt.
Have you studied TUP?
Double kick in the teeth and one in the sack! Rising wages which further detracts from American competitiveness, rising interest rates which means for these zombies it’s harder to be refinanced and if they are at much higher interest costs and, of course, the slowing economy means a big drop in revenues and a need for, drumroll, more debt financing!
90% (probably higher) of the folks working in these zombie companies are way over paid and should be netting an income of a gig worker!
Actually, large scale defaults may flush the economy for a lot of rentiers, removing their taxation. Production cost then go lower and competitiveness improves.
Nobody gives a wet one for the zombies that need to “refinance”. They are failed businesses and need to go away. Carvana is not an entity that is mission critical to our future.
Nor is faceplant. Instagram bugged me for days to give them my mobile number to “verify my account”. Nope. Not giving it to them. They relented. Found that interesting to say the least.
> mobile number
This, I’m told, is the Rosetta stone that allows the highest level of comprehensive consumer surveillance.
With the help of (nominal) interest rates quite a bit above zero it is possible to introduce reason to the so called market. It looks lovely and I am tempted to give more weight to my dusty economic knowledge. 😀
CARVANA – A year ago these announcements would have catapulted the share value to the clouds… ” revenues fell, cost of sales jumped, gross profit plunged, selling and administrative expenses soared, interest expense more than tripled, and the net loss exploded to $508 million.” – –so long as they sold more cars.
CVNA advertisement boasts that they figured out in 2021 “how to sell a car touchlessly and completely online” – a BIT late, considering that ..”in the period from 2006 –2008 eBay Motors, the automobile arm of online auctions giant eBay, …an average month, nearly 50,000 vehicles were sold, a sales rate of almost one vehicle every two minutes.” In 2022, CVNA sells about (100,000 units per Quarter) 2/3 of the volume including “wholesaled” vehicles – and eBay was and is profitable selling those units. CVNA, excelled only in hype and consistent record setting losses.
Don’t need to be a rocket surgeon to figure out why fleabay prospered and cardontwanna didn’t. Diversification.
We are still just cutting into the fat as witnessed by the hot labor market and continued massive spending on everything by the consumer. This market was obese with liquidity and still is. Hopefully QT will bring down the body fat to a healthy level.
I’ve used Atlassian software with digital teams at three different companies. It does serve a purpose, but is not revolutionary or impossible to replicate. Successful software can be tremendously profitable, so ongoing losses at this level indicate that they haven’t actually found a new, unserved niche and probably never will.
Their software sucks. They refuse to improve their existing software and focus on experimental projects that never pan out. Atlassian is run by a couple kids.
If your transaction/product level economics are meh (or negative!) you can only justify 25+ PE (let alone a 100+ PE) by perpetually promising the next gen glitter unicorn that will poop diamonds.
Only rainbow diamonds.
With friggin’ lasers on their heads.
Wouldn’t be surprised to see TSLA ($408) show up one of these days on your “imploded stocks” list, as the Company’s “earnings” are mostly due
to government incentives for EV’s.
Think Musk’s leveraged take-over of TWTR will also result in a giant margin call if TSLA closes a week below $200/share.
Correction: Current TSLA price is $208; not $408
They’ll go the same route as Netflix competition will kill them.
Netflix. Makes. Nothing.
It’s bread and circuses at your own expense.
I dumped cable and subscribed to the house porn channel for my wife. It’s useless. Worst $8 a month (commercial free) I’ve ever spent.
At least TSLA actually makes something.
And it’s very profitable. But its stocks is out the wazoo overpriced.
“free-money virus”
Now THAT’S funny. Sad, but funny.
Wolf is trolling a lot of people with his posts, which I love. The best was “FED pivots more hawkish.” It was like salt on the wound of the pivot crowd.
LOL.
At least someone caught it. I’d already given up hope.
Wolf: You have a silver tongue.
The 100 percent rigged and manipulated U.S. stock market can’t rig and manipulate every single stock. It’s good to see some stocks correcting closer to fair market value. Too bad the major stock indexes don’t do the same thing… fall off a cliff closer to fair market value.
P/e are still to high ,lots of air left in this balloon
Still 25% over valued relative to historic norms.
And…that doesn’t take into account,
1) Individual vast, scary overweights (looking at you Apple and others) and
2) The knock-on, second order economic effects of first losing 20% in the mkt, then another 25%.
And a 31 trillion debt.
On the eve of the entitlements nightmare.
The only useful, non destructive service that US political “leadership” of the last 50 years might ultimately serve…is if they function as food in the near future.
> US political “leadership” … if they function as food in the near future.
Completely inedible. Toxic and bloated. Sub-zero value.
better add Lincoln Financial Group
LNC
that boring business should wake up all on what could be coming
SVIB (owns Silicon Valley Bank) is already on it. It’s the 14th largest bank in the US.
thanks
I’m going to buy puts on LAD and AN
finance reserve, warranty and fixed ops is about to meet some serious head winds…or already beginning
Having seen the financials and met the leadership of some companies who received funding from SVB, let’s just say I wouldn’t touch them with a 10 foot pole.
Cathie Woodshed approves.
I hear she’s trying to unload some kind of slivers of privatized twitter, to retail investors. There are some cultists still out there, to line up for that kool-aid. Goes well with my shiny new NFTs!
I’m guess that these imploded stocks were all IBD darlings in days of yore.
“They were designed to burn investor cash. And investors no longer want their cash to be burned. And so that existential crisis is now.”
This doesn’t sound like a business model so much as a hustle.
Are people putting money into these money-burners not so much ‘investors’ as ‘speculators?’ Sounds like gambling.
Looking for a bigger sucker, but they find they are last in line, bag in hand. There was very cynical trading in things like altcoins and penny stocks, alongside these. Lambo when?
Cloudflare and Atlassian are both vital tools for every large corporation I’ve worked for (big chunk of the F500, including a few of the upper decile of that).
There aren’t many 1 to 1 competitors for their products that can operate at enterprise scale, and I suspect they can raise their pricing a fair bit without losing paying customers.
That *doesn’t* mean that their shares are a good investment, just that those two companies aren’t at significant risk of dying in a downturn.
The other two are probably shark food though.
There are always best investment alternatives. There is always a best expected deal at the moment, given a time horizon. There will most likely be good opportunities coming.
I tried to interest Wolf in an investment board a couple of years or more back. He declined. Too bad for us; He would be Great. I thought about trying to create one, but then I woke up. I don’t have the skills.
I have invested. Mostly real estate related. Very little in public markets.
I just went through a 300 page offering memorandum with supporting documents on a private placement offering. The teaser was a 7% not guaranteed but “preferred return.” Well, the preferred return was after a whole lot of fees and expenses. My hours spent could save others that time. (I hate it when a company is brought up and not identified, but this was a confidential share.)
There are a lot of very smart and very insightful people and investors on this board. Wisdom Seeker, top drawer among them (sorry for any past slights).
If one of you knows of or decides to create a best investment ideas site, not commercial but member supported, please let me know. Where solid notes and thoughts are shared, shoving the hustlers and charlatans aside.
Wolf, you’re still top choice.
Falling stock prices is only half of the equation, the other half is when these failing companies cannot repay their bonds….. that has much more serious implications, and will cause this whole thing to shift into a higher gear….
The ‘healing’ has barely started (see Fed balance sheet). I strongly oppose the idea that current leadership will have the guts to allow a full unwind of the excesses of the past couple of decades. We have barely scratched the surface.
I don’t think it’s fair to compare Atlassian to the other companies. It was definitely massively overvalued at its peak, but Atlassian actually generates meaningful cash from operations and basically breaks even on operating income despite massive stock-based compensation from previous RSUs vesting during their stock peak and turning into a net income expense.
In addition, Atlassian actually has a proven business model with a large customer install base. Enterprise software moves slow and it would take years for customers to detangle themselves from their products.
Unlike the other companies, Atlassian isn’t a zombie. If you generate free cash flow, you’re a viable firm. Carvana and Twilio are a joke, Cloudflare can basically cover the cost of running their business (although they have difficult-to-reduce costs given their infrastructure based business).
No plunge protection team yet. But a limit down move is inevitable.
This article is Peak Wolf. (I guess the old advice to Write What You Know still applies.)
On Friday, Larry Summers, who has been dead on predicting this inflationary surge, said increased interest rates may not be slowing inflation as much as expected, and that the Fed Funds rate may have to be raised to over 6%. A 6+% interest rate will put some serious stress on the economy, the financial system, long duration debt securities, and the stock market.
Imagine the interest payment on the current national debt of 31 Trillions with annual deficit of 1 Trillion more,in the coming years!?
Nearly 2 trillions in interest payment! Wow!
Some thing will break definitely before that. Coming inflation # on Nov 10 (for October) will be interesting.
“Imagine” is exactly what the DC worthies should have done *before* they expended every single one of those *trillions*.
But it was much more in their personal interest to attack/belittle/ignore/suppress anyone and everyone who opposed their multi-decade madness.
But they were our betters intellectually and spiritually. Their flying monkeys of the MSM insisted so.
I’m getting the feeling that he is right, and I’m getting the feeling that some people at Fed are thinking so too. This inflation is just a huge mess now.
1) Carvana and Twilio imploded by assassin’s creed. Eight billion people will starve, only the rich will survive.
2) WTIC is still below 2008 high.
3) Soybean Oil peaked in Oct 1974 during the 70’s inflation. In Mar 2008 Soybean oil breached the previous high, plunging for 12 years til Apr 2020. It was rising vertically til Apr 2022 high like NDX creating global panic.
4) Ukraine’s Wheat sent it to Mar 2008 level.
5) This is only stage one. The sticky inflation might send commodities higher.
There are ver few out there addressing the tricky issue paying interest on the National debt of 31 Trillions, when the rate increases beyond 4.5% or 5%, will be beyond 1.2 Trillion.
If I understand correctly most of the treasuries bought by Fed are of short maturity. Wolf could comment on this issue.
Is Fed trapped? A global liquidity crisis and $ shortage are. worsening
A pause is NOT out of the question in January/February.
1. The Fed isn’t trapped.
2. As long as yields are still as low as they are — 4 percentage points below inflation — it means that there is a HUGE demand for Treasuries. Yields should be much higher. But they aren’t. This means that the government has zero difficulties in borrowing the money to pay for its deficit, which includes the interest expense.
3. I don’t like the deficit, and I’m worried about a lot of the spending measures, and I’m worried about our tax policies, and I believe the government should cut out any and all support for real estate and Corporate America, but I’m not worried about the interest expense.
4. And if interest expense becomes a problem, then it might finally force Congress to take this deficit seriously – and they could start with cutting out any and all support for real estate and Corporate America — and that would be a good thing.
Wolf:
I applaud your patience in addressing the gooberment national debt interest issue yet again.
I’d likely not be as restrained.
Every 5Y-7Y between 170- 250 SPX co are being replaced.
It’s hard to imagine people were crazy enough to own stocks like this. Lots of dreamers lost money on the way down. Plus, lots of people probably lost money shorting them on the way up.
In my book, it’s best to just stay away from ridiculous speculation like this. The price is not tied to anything rational and can stay irrational for years.
These woke tech companies are getting what they deserve. Unlike the tech wreck of 2000, however, the question is whether the Fed will bail them out because they are so powerful and too big too fail. This was not the case in 2000.
So Amazon recently changed it’s streaming service and Prime Members now have access to 10 million songs… I’m not a music person but I used it roughly 2 hours a day to listen to the exact same few artists over and over while going on morning runs.
What they don’t mention is that you now have to listen on shuffle mode, can only skip a few songs, and then they change artists to whatever their algorithm tells it to.
I also read this website for a while now and realize this is a fairly naked attempt to try and boost profits by getting peeps like me to upgrade to the paying plan. I’ve read their disastrous results and crashing prices here and know that’s exactly what this is.
I very much doubt they’ll be on an imploded stock list anytime soon but here’s what I do know- I don’t buy enough from them to justify paying 130 a year for Prime especially when they decide to turn their music service into IHeart Radio and am considering dumping it entirely when it’s time to renew. I already deleted the music app on day 2. Who knows, maybe they will one day if enough people get tired of this crap.
It’s not about money all the time, sometimes it’s just about the principal of the matter like Big Worm said.
The only thing that makes Prime worth it is the free shipping (which I realize is baked into the pricing). I don’t use their music. I occasionally use the video offerings. If you buy as much crap online as I do, the “free” shipping is a huge benefit. I’m at my sister’s house in FL and sent some stuff here. We also tried to ship something small to me… and the cost (USPS) was nearly $60 for a box of next-to-nothing. So, the Prime fees are nominal in comparison to shipping “stuff” on your own. (The $60 was for some warmer t-shirts and a set of keys – weight sub 20 pounds) The key upcharge was because of the lithium batteries in the remote (she shipped the key and I bought new batteries here).
Don’t be penny smart and pound foolish. Where else can you get a gallon of liquid shipped for the same price that you could buy it at Lowes? The gas to go to Lowe’s ain’t free.
Carvana, meet Graigslist… .
A year or two ago many people were still saying “this time is different, these companies have REAL business models”. Who’s left holding the bag now?
Your analysis is accurate but merciless. You seem unable to leave even a crumb of hope that these, poor, companies should rise in value toward their former glory.
You, sir, are a man who seems comfortable with the truth, as you see it. I admire that, not that I agree completely with the entirety of your article.
Searching the article I realized that there wasn’t anything that I disagreed with.
But we all know that the path of history is carpeted with the flower petals of hubris. Which the companies featured in your article seem to confirm.
I take that as sarcasm….. please use the /s in the future.
Thank you.
Me and Stella. Signing off.
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Raging inflation knocked out the “Fed put,” and banks are no longer on the hook for mortgages; taxpayers and investors are.

Looking at the supply-and-demand imbalances and structural changes in the labor market, and what it means for employers.

We also keep an eye on Primary Credit and look at the Fed’s deal with the Swiss National Bank.

But in Q4, inflation will shoot to 11%, the BOE said. Media reported it as a “dovish” monster rate hike. Whatever.

“What I’m trying to do is make sure our message is clear: we think we have a ways to go,” Powell said. “Rates have to go higher and stay higher for longer.”

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