Indeed, we are living in strange times! Highly unusual! From political realm to investments world! Much coveted crown of the wealthiest person in the world or hot air balloon is transferred over from Elon Musk, Tesla (TSLA) CEO to Larry Ellison, Oracle (ORCL) Founder and CEO – all in just a day after we published the last post – yesterday.
In there, we hypothesized that Musk will drop significantly from his top ranking by loosing bulk of his wealth, however, for now, he has lost his ranking by another hot air or recently minted ‘meme’ stockholder. It is essentially a race to the bottom that U.S. investors are making. No doubt there is a day and night of a difference between the two companies’ solidity and sustainability in terms of the revenue as well as a profits. Yet, it is one of those examples that defies the gravity, the universal law of physics in this world ever since it originated.
Now, they are both likely to loose a lot of wealth and their ranking due to much bloated hot air balloon. Ellison had catapulted to second position after Musk prior to 40% move in a stock yesterday in response to decent earnings report, though, more importantly another ‘pie-in-the-sky’ revenue forecasts for the cloud infrastructure given all these enthusiasm and day-dreaming by big tech companies and their founders.
Remember 2021? When there was a mad-rush to hire the tech talent and the big-techs went crazy. They hired like crazy only to fire them like crazy in 2022 just as when we reached the inflection point in the interest rates from zero in a dream land to rising back up again to the ground reality. The most horrible piece there is that they even rescinded the offers to the new college graduates. There is no more shameful act than that by all big tech CEO’s as they all were complicit in such a heinous crime – of crushing dreams of those young folks after misleading them to a brighter future.
To sum it up once again, hire like crazy with unrealistic salary raises for poaching them from their competition, fire them like crazy and do not honor the promises to new college graduates who dreamed for a better life and career right out the gate with so many aspirations only to get disappointed due to such stupid and dumb decisions by these cruel and clueless big tech CEO’s and give them a bitter experience just as they start out their professional lives.
Similar kind of madness is now occurring for hiring AI talent by offering the compensation packages in tune of hundreds of millions, yes, you read that right, it is in 100s of millions, not thousands, which clearly is not going to crush anyone’s dreams since it is a business transaction between the two business lunatics, not between two ordinary individuals.
Back to Oracle…it is a highly leveraged company and has bought back approximately 20% of all of its outstanding shares during last 6 years causing so much additional debt (literally doubling from $52 billion to over $100 billion) to the company to support or even pump up the stock price – a bad move, a very bad move for a company with such great, solid revenue and profitability. Ellison is digging the hole for himself alongside Musk to race to the bottom of the wealthy list, unfortunately.
Smart and shrewd companies and their founders tend to sell shares when the companies are riding high and make their position and wealth even more robust while the wrong-headed company leaders sell debt (bonds) instead of shares (equity) for the company and take on even more debt on themselves. Exact opposite of a sound financial planning! Often it makes us wonder, was it their genius or sheer luck that brought them there?
Last genius move from a business perspective and unfortunately, quite the opposite from the societal implications perspective due to extreme right-wing ideology, Musk sold close to $40 billion of shares in Tesla to buy Twitter (now X – only a crazy dude like him can butcher such a good name and come up with a not-so-significant name or rather confusing way for a wide-spread use) and invest in his other ventures. Now, he is happy riding a hot air balloon! Let us see how far he can ride! Then again, who can forget his ill-fated DOGE efforts preceded by $300 million now defunct investment in another lunatic man?
The same business cycle is repeating again in the name of AI and cloud with unrealistic expectations associated with them in spite of their real potential – over invest, pump up the stock prices then eventually deflate the balloon and jeopardize the countless lives of ordinary folks including new graduates. These are the kind of business leaders we have these days.
To make the event even more interesting of Oracle shooting up by 40%, another steady-ship Synopsis (SNPS), a chip design software company, went down by 35% from close to $100 billion market cap, another one of those mega moves in such a large company – a new phenomenon we described briefly in yesterday’s post. All these events are precisely what makes us very, very nervous and we are afraid that the ‘day of reckoning’ is not that far that the entire market is now at risk, not just a few companies, and it may get punished pretty badly once something hits to all these jittery investors.
There have been countless examples of such large moves in very large companies – up or down during the course of last 12 to 18 months that it is mind-boggling, precisely defining a character of today’s market, most recent of which we saw just yesterday for the large or mega-cap stocks, i.e. in Oracle and Synopsis. Not to mention, the noise-level whopping moves two days ago such as 1,700% upward move, yes up 17 times, not double or triple), in QMMM, a Hong Kong based company trading in U.S. catapulting from $122 million market cap to $12 billion cap only to fall 50% the very next day! Does this really sound like a well-reasoned investor behavior or rather an unhinged gambler behavior? It is an alternate universe for sure with different level and kinds of inhabitants!
The ‘tail risk’ as coined by Naseem Taleb has been steadily shooting up since last year and now skyrocketed to a level of point of no return this year. Time to hunker down, buddy! I am really concerned what will happen to the market now whenever that Armageddon hits! Probability of a major market crash is now not a far-fetched possibility any longer, unfortunately, when the market has been effectively hijacked by the gamblers from true investors! Wishing you all the best!!
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