Democracy renewed
A new beginning or old wine in a new bottle?
When history throws a curve at civilization in the form of a maverick head of state who sought to bring down the very institution that gave him legitimacy, citizens who voted for change tend to be euphoric when that very change arrives. The nightmare is over and there is a new dawn and we can all breathe easier albeit through our masks. It is a long-sought transition, yes, but let us stand firm on the ground recognizing that the challenges that brought us down several rungs of the ladder over the past four years are by no means over. Of Course, we expect to no longer be in free fall but the climb back to normalcy is not easy.
"Congratulations to my friend, President @JoeBiden! This is your time," Obama wrote online.
It seems so long ago now, but let us remember that President Obama, in his first 2 years tried to push through many changes that Democrats have been longing for. Medicare for all proved to be so controversial that even the goodness of the economic bailouts was summarily dismissed as Wall Street bailouts. It should be remembered that many who voted for Obama believed he could bring in true bipartisanship. The country was quite polarized then as now and the wave that swept Obama to presidency imposed an undue burden on the new president to deliver change at a speed that the American system of government is incapable of. And President Biden had a front-row seat to see and learn from all of this. Our hope, while hope is not a strategy, is that an experienced, septuagenarian politician will navigate the rough waters which have sharks in shades of red and blue, while vanquishing visible and invisible enemies.
Good luck President Biden.
Intouchables
Netflix is on a tear. I started watching Lupin and Omar Sy was a revelation. And then came Intouchables. This is a french movie from 2011 that recently showed up on my Netflix recommended movies. And what a treat it was. Those accustomed to Bollywood emotional dramas or disability-based movies like Me Before You can relate to it but while the story itself is not particularly new, the execution, the range of emotions from Omar and Francois, the background score, and the tight narrative makes it a must-watch.
In real life as in the reel, chance compresses our true life into moments of choice which carry disproportionate significance. The randomness of those moments, that in fact may be divinely deliberate, are the forks we take fulfilling our destinies. A quadriplegic takes a chance on a small-time criminal ignoring a sea of standard caretakers. The criminal takes a chance on the caretaker job, driven by the lottery to live in a palace of pleasure. The transformation in each of the characters is inevitable I guess as the two grow in their ways discovering something about each other. We only know the consequences of our choices when we look back at those moments of our decisions when our story has already been written with the letters of our daily life. But before the indelible ink of our existence on this earth is set on the heavenly paper, we have a choice to make something out of it and possibly rewrite or atleast append it with renewed purpose.
GameStop
Robert Kennedy popularized the phrase ‘May you live in interesting times”. There is no lack of day to day drama as we begin our second decade in the twenty-first century. A 20th-century company called Gamestop though is at the center of attention. The company which began as an educational software retailer with the interesting name Babbage Inc renamed itself Gamestop at the beginning of this century.
While the mainstream media was quick to characterize the business as outmoded, the company reported holiday sales for 9 weeks ending Jan 2 2021 as $1.7billion of which 34% was eCommerce sales spurred by the launch of new gaming consoles. This was by no means a dead company albeit a dangerously declining one with a possibility of resurgence. On Jan 11 2021 it announced the appointment of three new directors aligning with Ryan Cohen of RC ventures( who has been accumulating shares for a while). The stock traded around $19 at that time. By Jan 13th the stock had moved to $31 and $325 as I write this!
Gamestop has a TTM( trailing twelve months) revenue of $7.3 billion with a market cap of $22 billion which does not sound absurd when compared to SNOW or ZOOM. But that revenue is going the wrong way and the company is trying to get back on its feet.
Against this backdrop, short-sellers, who bet against a company by selling the stock of a company by borrowing shares they don’t own, hoping to buy it back when the company’s share collapses thereby making a profit, held a disproportionate short position on the stock. While short sellers play an important role in bringing liquidity to the market, it is not clear if they provide value in all cases. The supposed bet is that Gamestop is a brick and mortar business selling used games and will go down the road to bankruptcy much like Blockbuster. In Gamestop's case, more than 100% of the shares outstanding have been shorted.
Reddit and specifically the forum r/WallStreetBets has some savvy individual investors who discuss value and fundamentals and try to find companies that have been targeted by shorts but have potential. But as with any online forum, many probably are in it to be part of the crowd ready to follow a lead. Ever since the pandemic shutdowns, time combined with the stimulus was enough stimuli to send bored humans hunting for adventure. With apps like Robinhood, anyone can trade stocks and options at zero commissions. And they did.
It was common, even before the Gamestop saga for people on these forums to post their big wins and losses. One, who had a quarter-million-dollar loss was labeled a GOAT.
Gamestop was a $4 stock with lots of promise. Roaring Kitty an individual stock trader, dabbling from his basement in Boston, also known a Deep f….Value on the r/WallStreetBets forum is now a legend. He had started talking about Gamestop as a strong value play long back in his YouTube videos. While many sane and smart investors populate online forums, a meme stock like GME catches the attention of a crowd, and with enough motivation, sometimes with a moral cause of sticking it to the hedge funds, the action can explode.
While this mania may not last, there is a case to be made for Gamestop 2.0, a reimagined retailer or even an eventual publisher of games in a hundred+ billion-dollar video game market. GME has over 60 million loyalty accounts by some estimates.
But the mania is by no means confined to the crowd of so-called naive investors on Reddit. SNOW ( Snowflake ) has a market cap of close to $75 billion depending on the day of the week. The TAM( Total Addressable Market) for the entire Data Analytics on the cloud is expected to be $80 Billion! It is twice more expensive than Zoom which itself is in a valuation bubble category. It has a TTM of < 500 million with a market cap of $77 billion. It is a darling of Wall Street because it is growing triple digits but will it ever grow into its valuation with some insane competition in the space? May be, but these kind of bets are two sides of the same coin, with naive and savvy investors just placing a bet without any regard for fundamentals.
As someone who has played a small part in the video gaming market over the years, I am rooting for GME to succeed. If wall street expects companies like SNOW and ZOOM to grow into their valuations why not GME with its new investors and management?
After all, Netflix used to sell DVDs.