Stories and the Trump Bump

Because of Trump, “the market is going straight up with nothing to stop it,” explicated one very excited attendee at a local investing group that I attended during the third Thursday of December 2016.

Barely able to contain himself, this lad gave the following “story” regarding Dryships (DRYS):

Trump is going to put a “huge”, G_d I hate it when the illiterate use that word, tariff on Chinese steel. Investors, that word is second from the top of my most despised words in the English language and only barely above the use of the word “scientists”, in the United States are renting large warehouses to store steel that they intend to import from China into the United States in advance of the inauguration of “The Donald”. Once “The Donald” has become president and the tariffs imposed the price of steel in the United States would skyrocket and these “investors” would make a fortune by selling the steel, which they had imported from China whilst cheap, into an expensive U.S. steel market. Thus, Dry Ships will be rolling in money because the “investors” need dry ships to transport the cheap steel from China into the United States.

Whilst nearly hyperventilating with excitement, this lad exclaimed that DRYS stock price had risen over 2000% within a few days: he called it “the opportunity of a lifetime. Then he petitioned the members of the group to announce any similar opportunities of which they might be aware. In a very calm voice, I stated the general position of the group, as I had been attending the group and knew the investment strategies of most of its members, as follows:

I use the following rule to reach a decision regarding into what I will invest my money: have a strategy that works; and stick with it no matter what happens in the world.

Within a few days of the pronouncement of our hyperventilating lad, DRYS crashed from about 100 per share to barely above 1.87. What our lad seemed to have missed is the following: that DRYS had a 52-week high of 278.40 and a 10-year high of 3000.00 per share. The Ticker Symbol closed on 12th January 2017 at 1.84. Even without the glut of ocean shipping capacity and the bankruptcy of Hanjin, I would have never purchased shares in a company such as DRYS: its gross profit for the year ended December 2015 was less than half of its gross profit for each of fiscal year 2013 and 2014; its net income applicable to common shares was deep in red territory for 2013, 2014, 2015, and through third quarter of 2016. No one, except shorts, in their right mind would ever consider purchasing so much as one share of a company showing a market capitalization of 68.00MM that had a fiscal year 2015 net income in the red by more than 2.8B.

My call for the rise from a few dollars to over 100 dollars per share following the election of “The Donald”: this was a classic short squeeze. No one in their right mind would ever come within a country mile of such a Ticker Symbol.

The moral of this story: run, as fast as possible, from any one with a “story” about a “good” Ticker Symbol.

I hope that this helps.

Nathan A. Busch

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