Like a taste of déjà-vu… Just like GameStop before it, the AMC file has caused a lot of ink to flow, but it is above all symptomatic of a market which has completely lost its head.
Today we are looking at an institution – one more – which has been zombified by the authorities: the Stock Exchange.
The Stock Exchange is supposed to allow investors to trade shares of companies that earn profits, increase wealth, and produce goods and services.
No one ever knows what a given stock is worth. The market therefore “discovers” the price… minute by minute.
This price may be based on a single, most recent trade, but it fixes the current value of all similar shares outstanding. It evolves as new information emerges.
In the United States, prices are quoted in dollars … and the Federal Reserve has been tampering with the value of the dollar for many years. During the 12 months that began in March 2020, she has inflated the mass of dollars (the Fed’s balance sheet) by 78% – most of which went to asset markets.
Much of the stimulus checks have gone to the markets as well. In a Deutsche Bank poll, for example, at least half of those polled said they intended to put some of their aid in stocks.
This naturally leads to price inflation on the stock markets… which naturally leads investors to think that their stocks are worth more … which leads to a situation that is anything but natural …
… As investors as well as Mr. the Market himself begin to behave a little weird… reacting to rising prices instead of actually finding out what individual stocks are worth.
A sector in agony
We didn’t really enjoy writing the lines above. This is the classic description of a bubble. It’s boring.
But bubbles are like wars – when normal, civilized life is suspended.
Today, the rational market has turned into a completely insane war of the worlds, with fake money… fake interest rates… and fake prices… all guided by a delirious crowd of moron generals occupying the Fed.
In recent days, it was AMC Entertainment’s (AMC) turn to lose control. His price doubled overnight. What happened ?
AMC is a dying business… in a decrepit industry.
It owns a chain of cinemas. Even before the Covid-19 panic, it was in decline. For many years, the company has borrowed money to buy other theaters.
There is plenty to ask questions.
Making water troughs for horses at the start of the 20th century was also a challenge; new automobiles did not stop to quench their thirst. Gaining market share was not necessarily the best way to solve the problem.
In 2021, buying more empty theaters may not be such a good strategy either. It’s not rooms that AMC lacks, it’s clients.
Large home cinema screens are cheaper than ever before. The range of things that can be viewed from home has also grown considerably.
The average AMC multiplex offers eight to 12 films. On Netflix, Amazon & al., There are thousands of them. Also, cinemas no longer get the best movies first.
Watching a movie at home is also much cheaper. AMC charges approximately $ 10 per ticket. At home, we pay $ 2.99… and the whole family can watch.
Not to mention that, for the price of an evening at the movies, you can buy your own popcorn machine.
This is bad news for AMC, of course. This movie probably won’t have a Hollywood ending.
Yet thanks to the Fed stock market, bubbly and zombified, AMC leads the box office.
The business is losing money; ticket sales in the sector have been declining for almost 20 years. AMC also has over $ 12 billion in debt that it – apparently – cannot repay.
Yet… the action has skyrocketed.
By what mystery?
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