The rising price of stocks, an art that uses the so-called non-fungible token technology and bitcoin have led some market watchers to warn that investors are becoming irrationally exuberant, increasing the risk of an accident.
Exemplar A, according to a prominent investor: a sandwich shop in New Jersey, with a single store, insignificant sales and a market value of just over $ 100 million. Hedge fund manager David Einhorn, who called the famous Lehman Brothers before the 2008 crash, wrote in a quarterly letter to customers this week that the market value of the sandwich shop, Your Hometown Deli, is the latest sign that investors receive unbalanced.
“From a traditional perspective, the market is fractured and is probably in a process of complete rupture,” Einhorn wrote.
He added: “Small investors who are attracted to these situations are likely to be hurt in the end, yet regulators – who should protect investors – seem neither present nor curious.”
Hometown International, which, despite its name, owns a single restaurant in Paulsboro, New Jersey, had sales of $ 14,000 last year. That was a drop from nearly $ 22,000 last year. Despite its modest business, deli shares, publicly traded since 2019, have increased by almost 300% in the last year to almost 14 USD. It recently gave the company a market value – derived from the addition of the price of all its shares – of almost 120 million dollars.
Kindness to Google Earth
The company does not have full-time employees. The CEO of his hometown, Paul Morina, is also the company’s financial director and treasurer. Separately, he is also the full-time principal of Paulsboro High School, as well as the school’s wrestling coach.
A call to the number listed in a financial record in his hometown was not returned. A message left at Paulsboro High School for Morina has not been returned.
Shares in his hometown fell 3 percent to $ 13 on Friday as Einhorn’s letter was circulated – still well above the delicacy operator’s share price of about $ 4 a year ago.
“Strange things”
In his letter, in which Einhorn also predicts rising inflation and warns of rising national debt, the hedge fund manager said the hometown is just one example of what he sees as a growing disconnect between stock prices and financial reality.
“Strange things happen with all kinds of stocks,” Einhorn said. “Last year, on a June day, the stocks of about a dozen bankrupt companies doubled to about a huge volume.”
Market skeptics see other signs of a possible bubble. One of the most noticed came earlier this year, when GameStop video game chain shares have risen more than 2,000% in less than a month. That gave the troubled retailer, which had not made a profit for years, a $ 30 billion market cap. A number of other stocks in combat, such as the AMC movie chain with pandemic scars and software maker Blackberry, have also been pushed up, probably by members of a Reddit message group in what became known as the name of the rally “meme stock”.
In another indication that some Wall Street analysts say it could show foam on the market, investors in the last year have bought offers from “special purpose purchasing companies” or SPACs. Corporate structures are often referred to as “blank-check” companies because they sell shares to investors before the company actually owns a business, with the promise that corporate managers will use the money from the sale of shares to make purchases. This type of investment, once seen as risky, was suddenly embraced by investors.
More recently, commentators have pointed to price increases at digital illustration sold as bitcoin-like NFTs as the last sign of a potential balloon. Earlier this year, a relatively unknown digital artist, Beeple, sold an NFT for $ 69 million, surpassing the price of famous artists such as Picasso and Andy Warhol.
Bitcoin itself has also risen, recently topping $ 60,000 for the first time. Digital currency traded just over $ 6,000 on bitcoin a year ago.