Mopping up Mess from SPAC Mania: After Imploding, Shift Technologies (-92%) and CarLotz (-95%) Merge into One Zombie to Burn Remaining Cash Together

Charts of stocks like these – hundreds of them now – are an indictment of the mania in 2020 & 2021. We’ll be shaking our heads for years.

By Wolf Richter for WOLF STREET.

The SPAC Implosion Saga just keeps on giving – this one in the used-car space. San Francisco-based Shift Technologies, a SPAC creature that sells used cars online on its AI-powered platform or whatever, and that lost oodles of money, has entered into a definitive agreement to acquire an even more imploded SPAC creature, CarLotz, an online used-car consignment platform powered by AI or whatever that has lost oodles of money.

In the second quarter through June 30, Shift lost $52.2 million, on $223 million in revenues, selling used cars, which really takes some talent.

Sales rose by 44%, but the cost of sales jumped by 53%. So gross profit plunged, despite the increase in sales. Operating expenses jumped. And the net loss jumped by 65%. Way to go.

It ended the quarter with $88 million in cash and cash equivalent, down by nearly $100 million from six month earlier. So maybe at this rate, two or three quarters left.

In its quarterly filing with the SEC, Shift warned that its “losses and negative cash flows from operations since inception, combined with its current cash and working capital position, raise substantial doubt about the Company’s ability to continue as a going concern.”

Shift shares [SFT] have collapsed by 92% from their high in June 2020 to $1.23. Charts like this – there are now many dozens of them out there from the SPAC and IPO mania – are indictment of the era:

CarLotz, the used-vehicle consignment platform powered by AI or whatever, had a net loss of $34 million in Q2 on $76 million in sales. At the end of June, it had $124 million in cash and marketable securities left to burn.

In May, CEO and chairman Michael Bor was thrown out and replaced by Lev Peker, the former CEO at CarParts.com.

In June, with the new guy in charge, CarLotz announced that it would lay off between 25% and 30% of its workforce and close half of its dealership stores. Another three dealership stores that were scheduled to open will not be opened. All of this to preserve cash and remain in business a while longer.

More layoffs are likely following the “merger of equals” as the company will give up its headquarters in Richmond, VA, and whatever is left over will shack up with Shift in San Francisco. In an employee FAQ, filed with the SEC, the company said:

“I’ll be honest, the most difficult part of a merger is that there will be some duplicative roles that will be reconfigured. And, unfortunately, at this time, I don’t have anything to announce. However, I promise that I will be as transparent as possible and provide updates as soon as I have them.”

And the company pleaded with its employees:

“I know this news may be difficult, but I would ask that we continue to work together to deliver results. We need to continue to operate CarLotz as a stand-alone company until the combination.”

CarLotz shares [LOTZ] have collapsed by 95% from their high and now trade at $0.60. Another chart, like many dozens of others – that serves as an indictment of the SPAC and IPO mania:

CarLotz shareholders will receive “approximately 0.692158 shares” of Shift common stock for each share of CarLotz common stock. At this morning’s price of Shift shares, this would amount to $0.88. The deal is expected to close in Q4, and hopefully, Shift will make it that far.

After the merger, the brand “CarLotz” will disappear and Carlotz will become a wholly owned subsidiary of Shift.

Shift announced in the same breath that its co-founder and CEO George Arison will step down as CEO effective September 1, to be succeeded by the current President of Shift, Jeff Clementz. Arison will remain Chairman of the Board of Directors, the company said.

Shift, CarLotz, and another online used-vehicle dealer whose shares imploded, Vroom, all went public during the SPAC and IPO mania in 2020 and early 2021, which will go down in history as the most fascinating spectacle of hype-and-hoopla finance driven to ridiculous highs, when everything just flew, no matter what, powered by trillions of dollars of central bank liquidity and pure benighted betting on miracles.

At a rational level, it is amazing that startups could even be funded and hyped to retail investors at peak valuations, when by design they lose oodles of money, including in businesses that have been around for over 100 years, such as selling used cars, where dealers have been making oodles money for over 100 years. Some of us will be shaking our heads for years to come.

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  109 comments for “Mopping up Mess from SPAC Mania: After Imploding, Shift Technologies (-92%) and CarLotz (-95%) Merge into One Zombie to Burn Remaining Cash Together

  1. Concerned_guy says:

    Make your bets.

    By when and how low do you think sp500 will go?

    By when and how low will nationally house prices will go?

    • drowningfish says:

      i thought the sp500 would be at 3500 by now, but its over 4200 lol.

      beginning to think the bottom is in, even if fed hikes 75bps, it really won’t spook the market anymore as the fed has already hiked 75bps twice.

      • Einhal says:

        Nah. The market is where it is because it’s convinced that the Fed is going to pivot. If it doesn’t, and starts aggressively running off its balance sheet, the market will plummet.

        Current prices aren’t justifiable under anything other than ZIRP.

        • drowningfish says:

          well i get that but it’s kind of hard to convince the market when they are just willingly blind. my guess is when the fed raises in september, they will say that it will be the last 75bps hike and continue to FOMO. that’s what they did with the 9.1 CPI print.

        • Moosy says:

          The market is as much as where the Fed is going as where the weather is going to be.

          The sp500 these days has little to do with reality but a lot with speculation based on gullible retail investor manipulation.

          If you like to gamble, go for it. Just don’t fool yourself that it is not gambling.

          I have been investing only in value stock with PE’s and forward PE’s below 3, with order books filled to the max for the next few years and recently saw my stocks hammered 10% on the day they announced monster quarterly profits equal to 20% of the stock price —because they missed the estimate of 22%. And the next day, Amazon comes around with profits of something like 0.5% and miss of the estimate of 1% and Amazon goes up 10%.

          The one noticable difference was in the free-financial reporting (marketwatch, yahoo, zacks) that reported on the coal miners that they had a huge miss but did not mention that they estimates where just ridiculous high, the companies had become debt free or anything else positive. For Amazon, it was just raving reviews.

          Don’t know if it was all unintentional but it really smells like manipulation of gullible people that believe anything, something we know is a problem with anything political news but appears to be the same with financial news and advise. Remember the overload of advise to invest in crypto, as we now are finding out all paid for by those that wanted to offload their fake coins amd whatever it is called.

        • Apple says:

          Gold meanwhile, is up 0% the past 12 months.

        • JeffD says:

          If the Fed were smart (which we know they aren’t), the would raise a quarter point next week to keep things from getting out of hand.

        • Einhal says:

          Apple, it’s well known gold is manipulated. It’s a hedge, not an investment.

        • VintageVNvet says:

          this for drown fish, et alia:
          ”If you like to gamble, go for it. Just don’t fool yourself that it is not gambling.”
          IMHO, this is SO TRUE!!!
          Unlike other folks on here,,, I have been OUT of the SM and commodities mkts for a long time because I finally figured out my huge gains in stocks AND commodities were due, quite simply, to what is now called, “Insider Trading”…
          In the 1950s and until at least 3 decades later, Insider Trading, though possibly NOT ”LEGAL” was OK for any of the ”bosses” AKA oligarchy, with whom I was at least somewhat ”connected.”
          NOW,,, INsider Trading is only allowed/legal for our folks elected to Federal offices as part of their pay off to vote FOR,,, or AGAINST anything that will harm the corporatists who have paid them…
          ”GAMBLING” is kinda/sorta a polite way of saying ”BRIBERY” in todays’ world approaching quickly the DOUBLESPEAK, etc., of the book, ”1984.”
          Really amazing how some authors have been able and willing to describe very clearly ”WHAT is coming.”

        • Itsbrokeagain says:

          @moosey I realized playing earnings calls in the market was yielding the same returns. I was told by experienced people that if a stock beats it’s earnings, it’ll sell off. If it missed it, it’ll go up. So I had one put out for the first stock, and a call for the second one. Both did exactly the opposite and both calls went to 0. So then I tried to straddle an earnings play, one call and one put…figured one has to bite right?

          Wrong. The earnings was short, but then the stock just traded sideways. Since the report was after closing bell, I couldn’t unload it and by the following morning that spread was worth 0.

          Needless to say that was the last time I bet on earnings.

      • cd says:

        I doubt if its above .50 in Sept.
        fed will stay a political thru October…

        • Archie Roach says:

          It’s not rocket science. Low interest rates by fed for over a decade caused massive malinvestment that is unraveling now. Hopefully we learn from our mistakes and finally see Keynesian economics is flawed. Then we can let markets rather than fed chairmen and socialist governmental polices dictate prices and rates.

          Inflation is painful but a great teacher.

      • I am hopelessly naive’, but I don’t see how the market correction can occur with the recently passed $700,000,000,000 “Inflation Reduction Act.”
        Someone please inform me where all this money goes?

        The problem, as I see it, is that there are more dollars than there are even remotely efficient uses for them. Isn’t that why we have inflation? Won’t the added $700B just make it worse?
        Please don’t think that I am in possession of very many of these dollars. They don’t seem to be uniformly distributed either.

        In regards to the specific topic of this article, it would appear that having a couple of slick sales people is a lot cheaper than having sophisticated “AI or whatever.” Or perhaps there is some slight misdirection of funds. How else could a couple of used car sales companies go bust during rampant used car price escalation?

        That being said, the U.S. Government (not the FED this time) is pouring tons of money into someone’s purse. It has to go somewhere. TINA???

        • Moosy says:

          Once you accept that everything is just corrupt everything that happens is easy to understand.

          I am not saying this as something to be or get angry about. Corruption has been with us since beginning of time and it is what it is, and that we live in a country without corruption is a nice fairy tale you can tell a 5 year old before bedtime.

          So this $700B is just another installment that will enrich those in power, ahum, ahum, cough, cough, madam speaker of the house and all other going to DC poor and returning rich. It will be paid for by the consequence of printing that much more money and making you more miserable when you get audited and are found guilty until you proof with spending lot of time that you are innocent.

          Money makes the world go around and power corrupt. That simple. Don’t waste time on getting angry of upset. Instead use this knowledge to your advantage to navigate your life.

        • Wolf Richter says:

          That $700 billion is spread over how many years?

        • JeffD says:

          Don’t worry. They will make sure to frontload the most inflationary parts, like the heat pump, water heater, appliance, insulation rebates which pay 100% of costs if you are poor enough, up to $14K. Anyone who doesn’t think that will increase the cost of home goods and services is on meth.

        • Johnny5 says:

          Roy,

          The government is going to be “pouring that money into someone’s purse”, but it’s also going to be taking it from somebody else’s purse – either through taxes or issuance of debt. And so long as the Fed doesn’t monetize that debt – which it won’t while it’s running QT – it shouldn’t be broadly inflationary for the stock market. In fact, it could be deflationary for the stock market if the funding of that spending draws money/liquidity from the market.

        • Flea says:

          Jeff d all of these products are made in foreign countries ,why do we continue to accommodate the rest of world. Labor shortage my ass, 50% welfare state make them work . Solves so many societal problems

        • Goodlooking says:

          In 2005 a US $5,000.00 tax credit was announced for the purchase of a hybrid car. I was working next to a Toyota dealer ship on the eve of the announcement and walked over to the dealer and checked the sticker price of the Prius-it was $25,000.00. After some math I figured the realized cost would be around $20,000.00 and thought that would be a good deal. On the return to work early the next morning, before the dealership opened, I rechecked the sticker price of the Prius-it was now $30,000.00! So that announced tax credit was just ALL producer surplus and absolutely no consumer surplus.

      • Lorenzo says:

        Things don’t start to break until 9 months into a rate hike. And this binge has already been over stimulated and over hyped. Expect maximum pain globally until something breaks. It’s debatable if they will even be able to put humpty dumpy back together again :(

      • economicminor says:

        It is still all about liquidity. There is still a lot of liquidity sloshing around out there. The fed has only just started by stopping inflows. Once the fed starts to aggressively unwind, it will dry up liquidity fast. Watch the MBSs and the mortgage rates as that is where the real damage will occur first I think.

        • sunny129 says:

          economicminor

          “Once the fed starts to aggressively unwind, it will dry up liquidity fast”

          Don’t forget, they still over night REPO (almost 2 Trillion) to provide the immediate liquidity ‘any where’ in the world ($ swaps)
          Rate hike is going ‘relatively’ on baby steps. They might even pause in October? QT is on snail pace.
          This is the reason mkt is calling Mr. Powell, a bluff (fluff?)

          Finally, Congress will allow Fed to ‘do whatever’ needed in the name financial stability! Remember ‘special purpose’ funds in 2020?

        • Wolf Richter says:

          sunny129,

          “… to provide the immediate liquidity ‘any where’ in the world”

          Unlike QE and QT, Reverse Repos are demand based (similar to reserves). If Money Market funds have too much cash, and if the Fed continues to pay interest on Reverse Repos, there will be takers. As QT continues, liquidity vanishes from the system, and RRPs will decline and eventually go to zero.

        • cb says:

          @ Wolf –

          Repo’s and Reverse Repo’s are just FED?Bankster scams to support corrupt finance.

    • Lauren says:

      No one really knows. Here in Durham NC, if you look at Zillow, you do see housing inventory coming out of the woodwork like Wolf says. My guess is lower. We are also the headquarters of Avaya lol. Should I be worried?

  2. Mad Puppy says:

    Maybe they should get some used car salesman ( if you can find an honest one) to run the show!

  3. Mike says:

    Lol, “burn remaining cash together”. I guess it’s better than doing it alone.

  4. BuySome says:

    Someone’s gotta say it….Man, that’s a whole lotta Carlotz full of Shi(f)t!

    • TimTN says:

      I completely read the company name as shi(t) technologies. :-). Someone in marketing surely advised them to come up with a better name.

    • BobC says:

      Holy Shi(f)t these companies are in trouble!!

  5. Ted T. says:

    “I know this news may be difficult, but I would ask that we continue to work together to deliver results. We need to continue to operate CarLotz as a stand-alone company until the combination.”

    I’ll be honest boss, as long as you make payroll, I’ll show up!

  6. JeffD says:

    I’m surprised they chose to keep the name “Shift”, given that manual tranmissions (sadly) will disappear within ten years. Train wreck all around.

  7. Augustus Frost says:

    The mania isn’t limited to just SPAV and “disruptor” “tech” companies. It’s the whole US stock market and most major asset classes.

  8. Ben says:

    My daughter told me one of her financial blog she reads mentions that for a rental to make an acceptable ROR (not including leverage and capital appreciation) and I don’t know details but needs to be able to rent out monthly at 1 percent of purchase price including upgrades.
    So for a 1.5 mm median home in SF that would amount to 15000/month!
    The SPAC and a Tech IPO same or worse than dot.com this one was internet linked as well.
    How did the retail investor get buffaloed again?

    • Augustus Frost says:

      “The SPAC and a Tech IPO same or worse than dot.com this one was internet linked as well.
      How did the retail investor get buffaloed again?”

      This is worse than the dot.com bubble. Many or most just don’t want to believe it because of the implications it has on their finances and the economy.

      How did it happen?

      Manic psychology as always, a herd of lemmings running mindlessly over the cliff.

      What’s happening here is also the same psychology driving crypto.

      • Marissa says:

        It will only be as bad as the guys with the fiat currency printer allow, which is a political decision. Ultimately, we have allowed politcians, which the least trusted people, to control our money. It’s hard to not call this a con(fidence) game, aka fraud and theft.

      • sunny129 says:

        The power of Perception (hopium+) will reign until Fed takes ‘firm’ stand against inflation, in action NOT just in rhetoric words. We all know that Mr. Powell doesn’t want to ‘shock’ the market!

    • VintageVNvet says:

      For many decades of our involvement in the RE mkts in several places from OR to FL,,,,
      1% per month,,, or 10% per year WAS the standard by which we measured IF a potential rental property purchase was worth the investment.
      Without that as a minimum, NO purchase…
      One exception, to live in temporarily, was ultimately the ”exception that proves the rule.”

  9. Cytotoxic says:

    Do merged wrecks like this have a chance at creating something viable?

  10. Jason Harnum says:

    “ powered by AI or whatever..”. Classic Wolf!

    • Publius says:

      Oh, it’s AI, but like human intelligence there is a range of artificial intelligences, and these companies picked a pair of underachievers. GIGO is still relevant.

    • SomethingStinks says:

      The whatever is like the monkey powered plane from Madagascar 2. Double monkey overtime.

  11. COWG says:

    “ to Burn Remaining Cash Together”

    Sitting around the ole cashfire , holding hands and singing “Kumbaya”…

    Start looking for another job, folks…

    When the CEO say “we”, he means “ you”….

  12. Stanley F Brossart says:

    It was the best of times when Trump and the Fed were giving out millions and more millions in QE while driving interest rate to zero. So now we wonder why inflation rages. If the game is lost, then we’re all the same
    No one left to place or take the blame. The radical, he rant and rage
    Singing someone got to turn the page
    And the rich man in his summer home
    Singing just leave well enough alone
    But his pants are down, his cover’s blown
    And the politicians throwing stones
    So the kids, they dance, they shake their bones
    ‘Cause it’s all too clear we’re on our own

    • Volvo P-1800 says:

      “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair.”

      ― Charles Dickens, A Tale of Two Cities

      • HowNow says:

        Tell Dickens, “come on, make up your mind.”

        • VintageVNvet says:

          TOO late HN:
          Dickens never did ”make up his mind” ever AFAIK,,, Why he would ever do such as that while getting paid by the word, as least with the first presentations in the popular press???
          Maybe a bit later, when his writing became ”books” he would solidify a bit,,, but only a bit…
          Somewhat similar to some writers/authors these days, eh?

      • SomethingStinks says:

        Meaningless observations supplemented with a generous dose of exaggeration, kinda like Jerry Seinfeld. One word to fix all this; accountability. Anyone getting paid to do a job needs to be held accountable if things go wrong, and the punishment should be proportional to the damage. Start at the top of the government and corporations and work your way down.

        • curiouscat says:

          Nice thought. But I always wondered what that word means… “accountable”. If what ways should we make them accountable. Take them out back and shoot them? Is anything less likely to be effective? Who decides if the punishment is proportional to the damage? Fire the CEO and hand him $30 million on the way out the door. This doesn’t seem to have worked very well in it’s current limited use.

  13. cd says:

    these auto platforms have come and gone many times, people that bought into these spacs or CVNA should have known. Or at least took profit…

    meanwhile great stocks that pay huge rewards are just getting started to multi year highs and yield a plenty

    sector rotation is a cycle, try to stay out of the spin cycle…..

    • Einhal says:

      You realize that all “great stocks” that pay “huge rewards” are all priced for perfection, don’t you?

      • Augustus Frost says:

        He doesn’t think or even know this is a mania, even though it’s the biggest (by a moonshot) in human history.

  14. Aaron says:

    Meanwhile in another article we see San Francisco is still one of the most expensive cities in the world. Of course they decided to relocate Carlotz to SF instead of keeping it in Richmond, they can burn far more money in SF! If this was still the era where you HAD TO locate in silicon valley to get quality programmers then I might understand. But considering that the majority of programmers have said that they WANT to work from home, and you could thus hire from anywhere in the country that has an internet connection, just why oh why wouldn’t these companies locate their their new combined headquarters in the cheaper city?!

    • Augustus Frost says:

      The C-Suite doesn’t want to live in Richmond, that’s why. They will get paid whether the company goes broke or not.

      I once worked for a major financial services company which had a subsidiary based in Minneapolis. The CEO of this division lived in NYC where corporate HQ is located, even as the rest of the staff did not.

      Wells Fargo is actually Norwest Bank which was also based in Minneapolis. Yes, SF is more of a financial center than Minneapolis but most of the staff don’t interact with customers anyway.

  15. Anthony says:

    It won’t be the only ones to fall. I look at the world recession which has started and I see Apple gets huge amounts of turnover from the rest of the world(and profit) Who is going to buy an Apple when they can’t heat their homes.

  16. ru82 says:

    IMHO. When the fed took the 1 bps off the table that was a pivot. Maybe a Short term pivot but the market has been on fire since that day and in hindsight that was the catalyst.

    Lots of headwinds in front of us though.

    I want to think we retest the lows of june but need to see revenue and earnings reduced which is really not happening yet. Maybe next quarter. Party on Garth.

    • Wolf Richter says:

      Everything is a pivot for people who dream about pivots.

      • unamused says:

        Never underestimate the human capacity for wishful thinking, self-deceit, and unshakeable belief in things which cannot be true.

        • sunny129 says:

          Those beliefs are ‘supported’ with 13 yrs of multiple QEs, twist, stimuli and prolonged ZRP more than it’s need.

          They have been ‘pavloved’ repeatedly by Fed’s put, until now. The pivot Mr. Powell made in late 2018 (+ almost 5 trillions shower in March of 2020) is still on their mind

        • Wolf Richter says:

          sunny129,

          “Those beliefs are ‘supported’ with 13 yrs of multiple QEs,…”

          What people refuse to get is that inflation was at or BELOW the Fed’s target during most of those 13 years. Now inflation is 3x the Fed’s target. This is an entirely different ballgame. That’s why all this pivot stuff and the comparisons to 2018 or whatever, are just silly. You need to look at the 1970s and early 1980s for inspiration. That was the last time we had inflation like this.

        • Anthony A. says:

          U mean there is no Santa Claus? Or the Easter Bunny?

        • sunny129 says:

          Wolf

          “You need to look at the 1970s and early 1980s for inspiration”

          Yep! I was here during those decades. Didn’t have much to invest. Borrowed 7/8% mortgage interest to build home between Sept ’78 and March ’79. We hired our own sub-contractors beside the main builder. We bought the basic plan for the house on line and my wife modified the architectural design to suit our needs.
          We planned landscapes, around, rented equipment to clear all the pebbles and large rocks, seed the ‘Kentucky Blue’ grass on our own, water and sprayed fertilizers and of course kept mowing myself for 3-4 hrs each time, for the next 2 decades. They wanted 6K for that. we did it under 2K +using our ‘sweat’ equity’!
          We got a ‘whole sale Nursery’ license for $20 bucks/year. Bought all the nursery and dwarf food trees and planted most of them our selves. Inflation was raging at 15% and up. 10y bond yield was 14% and rate got increased almost 20% to reign the inflation

          Yeh, Seen it, been in it and gone through and survived. Glad I am quite ‘deep’ in my retirement. Feel sorry for the next generation including my children and the grand children.

          The big problem is Mr. Powell is NO Mr. Volcker. He cannot match his honesty, integrity and his ability to stand against the politicians A lot of my friends didn’t like him b/c of the recession, brought by his bold policies. B/w Mr. Volcker was NOT afraid to ‘shock’ the mkts unlike ultra dovish, Mr. Powell!

        • TXRancher says:

          Yes the $30T debt accumulated kept inflation at or below the Fed’s target for those years. In the 1970s and 1980s we did not have those debt levels so hard to compare.

      • George says:

        I have pivoted from pivot to no pivot real fast, under the direction of this site and other analysts I follow. I care about reality, not ideology.

        • ru82 says:

          Not even sure how the term pivot came about in Fed speak. Technical trading has pivots.

          The big swings have allowed me to have my best swing trading year ever.

          What is funny is NASDAQ is technically in a bull market now because ii is up over 20% since the bottom in June

      • Harry Houndstooth says:

        Pure wisdom dispensed daily.

    • Einhal says:

      If enough people begin believing a mass delusion, they act as though it’s reality.

      However, the Fed is running the balance sheet down WAY too slowly.

      I think that has more to do with loosening conditions than interest rate hikes. The Fed’s balance sheet is available for everyone to see each week. Even though Wolf has explained many times why the balance sheet goes up and down in the middle of months, it’s still a bad look, in my opinion.

      While the Fed is running QT, they should be adjusting repurchases to ensure that the balance sheet does NOT increase from week to week.

  17. Ben says:

    The Fed I do believe will this time get inflation under control and won’t start QE again unless there is a future unforeseen liquidity crisis. Yes the markets are addicted to ZIRP as the fed funds rate and QE lasted for more than a couple of decades. Crypto has not imploded like the SPAC and unprofitable IPO because Crypto is a digital commodity. I love the comments about the Markets and gambling. A warehouse of cash flows that has the world watching and churning on a 24 hr basis like a casino.

    • The Real Tony says:

      QE and ZIRP policy completely destroyed the entire world. A legacy that dates back to the Greenspan and Bernanke era. Those policies put people out on the street to live. Virtually everyone got poorer and poorer. Why on Earth would they ever want to do that all over again?

      • economicminor says:

        Because they are playing Monopoly and the object of the game is to own all the property (assets) and charge enough rent to run the other players out?

    • butters says:

      GDP growth will require QE. There’s no organic growth….there;s no going back, only QE and fiscal stimulus will raise the gdp enough for the chattering class to proclaim the economy is ‘strong.’

    • SomethingStinks says:

      I am mining a gaseous commodity, using a healthy serving of black beans from last night. I think it will shoot up to 1000x next week. Much better than crypto and its a great store of value. I can sell it to you in a plastic ziploc bag for a reasonable amount. Call 1-800 386-2277, or 1-800-dumbass

  18. billytrip says:

    And the stock market in general, running on AI or whatever, continues to walk randomly.

  19. Old school says:

    The Fed might have messed up much more than they know. There is so much brainpower and computer power trying for short term money riches that the market structure is unlike anything that has come before. Not sure it can be unwound safely if we get a market run going.

    • Einhal says:

      No, I think they do know. What they don’t know is how to unwind it without getting blamed for the fallout.

      You raise an interesting point, though. How much of our collective societal resources and brainpower do we dedicate to financialization? All of the “equity analysts,” “investment managers” and other jobs that all fall under “financial services.”

      It can’t last long term, but it’s lasted way longer than I thought.

      • CreditGB says:

        Good point, or at the very least, a damn good question. Of the giant drop in non farm productivity in past 2 years, (a record low since 1950), how much of that is the non productive financial services you referenced? Exactly how is “productivity” measured for these “services”? Magic from behind the curtain?

        • Einhal says:

          Yes. The point of finance is to raise capital for productive businesses. It’s not an end in and of itself.

          It can only last for so long as the world’s manufacturers and oil powers are willing to give us their stuff for our printed dollars.

      • unamused says:

        “How much of our collective societal resources and brainpower do we dedicate to financialization?”

        More than enough to guarantee the parasite will terminate the host.

  20. polistra says:

    Wolf’s last paragraph is important. The opportunity cost of VC is huge. REAL businesses that make a reasonable profit could use more investment to hire more employees for useful work. Instead, all the investment is going into SPACS and NFTs.

  21. Island Teal says:

    ABSCI (ABSI) is a potential candidate for the list. Layoffs we’re announced this week so that resources could be better allocated to the usage of AI for drug and delivery platforms. ABSCI is in the biotechnology space.
    😂💸😂💸💰💰

  22. Isn’t this fun?

    A cute thing I have noticed in the last ten years of watching the markets as a hobby is that in whatever sector, whether pm’s or commodities or the indexes, everything goes up or everything goes down or everything sits on hold. (I am generalizing here so please don’t beat me over exceptions) What this screams is that large volumes of cash move from sector to sector and thereby move the markets little by little until smaller guys pile in and then the toilet flushes as the whales remove their cash and yours.

    Whoops!! How did That happen???

    If you do not have billions in cash you are simply guessing which market the overlords will manipulate next. It’s global monopoly and most of the rest of us keep landing on park place.

    The tables will turn…

  23. CreditGB says:

    This hyped marketing selling stuff all started with Coleco Industries “hype campaign” for its Cabbage Patch dolls in 1983. Parents waited in long lines to dump their cash for one of these ugly little stuffed rags. I know, I was one of them and so was my father in law. Fights over these actually broke out. Arguably the first “FOMO” campaign!

    All those dolls are in attics, basements, or at the dump moldering away now. Useless and valueless except for a couple of basement dwelling ne’er-do-wells who think they have value. That is until the new generations of SPAC investors latch onto these relics and drive their value back up…maybe?

    Move the same “hype marketing” to investing, and you have the very same thing. FOMO on SPACs. Fools and their money are soon parted.

  24. Michael Engel says:

    1) Benoit fractals zones beat the idiotic Brownian motions. There is nothing random in the stock market casino.
    2) SPX might be on the way to dma200 to close May 4/5 open gap.
    3) July 7/8 2021 backbone, the weekly cloud and the weekly ma50 are resistance. SPX might be in a trading range for a while.
    4) SPX might drop below May 31 close @4,132.15 on Sept 30.
    5) For Sat entertainment in the casino only.

  25. CreditGB says:

    Gee, I wonder if the management teams are taking unpaid time to help with cash? Some of those salaries, and benefits are pretty steep!
    Kinda reminds me of my days in business, where a team would buy up a mid sized firm, then borrow against its assets, raise salaries of the top guys, hire in friends, and consultants run by family, then wait for the insolvency to become so obvious that bankruptcy came quickly. Most of them also came up with priority claims in the bankruptcy just to get the final crumbs ahead of the hapless unsecured creditors.

    Few if any ever had their massive increases in personal assets questioned, being careful not to be obvious in the 90 days pre bankruptcy. Several stopped salary in those 90 days so as to present a claim for wages.

    Same thing here. What a joke.

  26. Crush The Peasants! says:

    Liqudity garbage disposal.

  27. Depth Charge says:

    “…an indictment of the mania in 2020 & 202…”

    What the FED did was reckless and disgusting to put it mildly – criminal, really. They created a speculative tsunami with the most grotesque money-printing orgy in the history of mankind. They knew exactly what they were doing.

  28. Depth Charge says:

    I guess “meme stocks” are now making a comeback due to the renewed speculative fervor on Wall St. Can Sh!tCON reach its all time highs again?

  29. unamused says:

    Einhall: “Current prices aren’t justifiable under anything other than ZIRP.”

    I quite agree. And I don’t think it’s just equity valuations. It looks like the US economy has been levitating on cheap debt for years.

    The Fed dropped interest rates after the dot-com bust and all that got you was the GFC. So they dropped rates to zero and beyond and that got you asset inflation and then raging CPI inflation. Instead of growth in the real economy you got bubbles.

    Business Insider reported that “The US’ national debt is rising 36% faster than the economy”. In 2019 Powell testified to the same effect. That was during the good times and it gets worse when you include business debt and household debt. If GDP accounted for debt, like a proper balance sheet or cash flow statement, which it doesn’t, the real economy would be shrinking, not growing.

    Stock buybacks are hot these days: it’s their way of telling you that actual business investment is a money-losing proposition.

    Some projections say civilization will implode in fifteen or twenty years, but maybe they’re being generous.

  30. Michael Engel says:

    1) When natgas producers sold it, wall street traded land leases. They didn’t care about natgas.
    2) land value exploded when drilling shifted from vertical to horizontal. That excited investors. The trend was up. To cont, they drill holes in the ground without completion to trap investors.
    3) In China RE developers, financed in tranches, built millions of sq meters.
    4) When commodities slumped and the dollar dropped, RE STARTS went vertical up in 2009 until Apr 2011 and tank til Oct 2011. After a lower high, starts dropped til mid 2015. In 2015 China opened it’s doors to foreign
    foreign investors. Liquidity gave impetus to new starts and a stock market bubble.
    5) In mid 2015 the spread between starts and completions was the smallest since 2009.
    6) It peaked in late 2020/early 2021 : 140 millions sq meter starts/ only 40 millions sq meters completions.
    7) In May 2022 SSEC slumped because of home owners protests and mortgages strikes.
    8) In May Walmart and Dollar General plunged, because investors fear
    that China’s banking problems are spreading.

    • sunny129 says:

      ME

      ‘investors fear that China’s banking problems are spreading”

      Chairman Xi is supposed to appointed for the third time in October. Can he afford to let this chaos continue, until then? unlikely.

      • phleep says:

        > Can he afford to let this chaos continue, until then?

        Never underestimate the extend-and-pretend shell game, and rule by decree. Not that this would help Walmart and Dollar general.

  31. dang says:

    I had an epiphany of sorts today that the game is global. The US is not an island unto itself. The European Union encompasses, if my memory serves me right, 460 million consumers vs the 360 million in the US diaspora. Bare with me here, I’m approaching the point.

    The Fed can’t move independently. It must coordinate with the currency authorities across the globe.

    The Spac implosion is, perhaps, a talisman of the next iteration of the stock bubble implosion.

    Meanwhile, the stock market indices are approaching the 200 day moving average at a 50% Fibonacci level.

    Personally, I’m not inclined too buy shares that I could have bought 20% cheaper, a month ago.

    • dang says:

      The European Union, in my view, is an improbable consortium from the git go. It has wealthy countries and more organic countries, all constrained by the same currency, the euro.

      In my mind, I try too imagine what would happen in Mexico if they adopted the dollar instead of the Mexican peso. They would be at a disadvantage, economically.

      In addition, England, formerly a dominant world power, and an anchor store of the euro financial basis, has separated from the EU.

      Mario Draghi declared negative interest rates at the ECB, the European Central Bank. A bare naked attempt to devalue the euro against the dollar and keep the EU busy supplying America with consumer goods, cheaper.

      They sure as hell aren’t trying to sell to the Chinese who prefer to do it themselves.

  32. sunny says:

    Wolf I enjoy your indepth articles and the important comments from your esteemed readers.
    But in this article I disagree with you. The future is through car buying via ecommerce platforms. Therefore SFT and carlotz are wery wellplaced in this trend. True they lose money , but I think they will soon be acquired by a big market player.

    • Wolf Richter says:

      Nonsense. There are used car dealers that know how to sell cars online and MAKE MONEY doing it, including CarMax, Enterprise, and many others. These startup people are idiots in terms of used vehicles. They have no idea how to sell used cars. They have no idea what it takes to do the title work. They’re only good at creating hype and extracting a bunch of money from investors that they then burned. And they will go to heck.

  33. Xaver says:

    I remember when IPOs of unprofitable companies were prohibited by law in Germany in order to protect small investors. That was fine.

    That has changed completely of course. Today our goverment is spending money to find out how to make it easier to bring companies to the market. This includes SPACS.

    It’s a total waste of capital. We need some real capitalists.

  34. Phil Gambino says:

    Shift will be trading over $30 a share by 2025

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