These Stocks Prove Inflation Has Come to Wall Street
Andy Snyder|June 30, 2021
Every good investor wants to know… what will this bout of inflation look like?
The simple sheep out in our pasture can help us tell the tale.
We made the big call last week. The sheep are headed to slaughter.
The market is hot. The lambs are prime. And, after a year of insanity, the butcher has a first-class slot for us.
One of the most popular ways to sell animals straight from the farm is similar to what Wall Street does with stocks… Just split them into shares and sell each share to eager customers.
Most often, as you’ve surely heard, animals are sold in halves or quarters.
But prices are up… and demand is through the roof.
Inflation is taking hold.
What if, instead of selling four quarters of our prized lamb, we divided the animal into six pieces… or maybe eight?
We could do it. Buyers are lining up. They’d be happy to pay the same price and get a bit less meat. They’re just happy to get a call.
That, friend, is what inflation looks like these days.
Get less… pay more.
And it’s not just at the hardware store, the grocery store and the butcher shop. It’s on Wall Street too.
That’s where it’s perhaps the most acute these days…
“Sharing” the Wealth
The fine folks at Bloomberg just released a telling report. It shows the real – and painful – impact all the free money is having on the stock market.
Many investors are paying more and getting less… far less.
The report shows that just since the end of March, nearly 100 unprofitable companies have sold more of their shares on the open market. Every share sold raises funds for the company… and makes each remaining share worth that much less.
In all, some 750 unprofitable firms have sold shares over the past 12 months. They’re diluting their stocks while valuations are high, investors are flush with cash and speculation is explosive.
They’re selling off shares just so they can stay in business.
GameStop (GME), of course, is one of them. AMC Entertainment (AMC) is another.
Again, what’s happening is the very definition of inflation.
Investors are getting less and paying more.
In a normal environment, this sort of dilutive action is harmful to share prices. But with so much free money out there and so much pressure on prices, companies are getting away with it like they seldom have before.
Shares of AMC, after all, are now trading north of $50 each. They started the year at just $2.
GameStop started at $17. It’s now above $200.
Are investors getting more for their money?
We don’t see it.
We see a telltale sign of Wall Street inflation.
One of our favorite sites for gauging share dilution like this is MacroTrends.com. Type in the ticker you’re interested in and the site will instantly show you whether you’re getting more or less for your money.
Inflation takes many forms.
This is one of the most sinister.
Own companies that are buying back their own shares… not selling more of them.
Andy Snyder is an American author, investor and serial entrepreneur. He cut his teeth at an esteemed financial firm with nearly $100 billion in assets under management. Andy and his ideas have been featured on Fox News, on countless radio stations, and in numerous print and online outlets. He’s been a keynote speaker and panelist at events all over the world, from four-star ballrooms to Capitol hearing rooms.