I'm calling another top on 10 stocks in my Short Squeeze Bubble Basket; 'Please Help,' Beg Those Who Lost $2 Million to Fake Elon Musks; I bonds: The Safe, High-Return Trade Hiding in Plain Sight; The Scoop on Traveling to Europe This Summer

By Whitney Tilson

Wednesday, June 2, 2021
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1) I never would have believed it, but the recklessness of a segment of retail investors appears to have no bounds in this market...

After falling by more than 50%, the 25 stocks in the "Short Squeeze Bubble Basket" that I identified in my January 27 e-mail have rallied and are now "only" down 28% on average (versus a 12% gain for the S&P 500 Index).

This type of short-term rally is to be expected, and for stocks like these, this is an opportunity to add to a short or put position because it's clearly a dead-cat bounce.

Thus, I'm officially calling another short-term top – but since I don't have time to re-do my work on all 25 stocks, this time I'm only going to name the 10 most obvious turds in the basket:

Company

6/1 Price

GameStop (GME)

$249.02

AMC Entertainment (AMC)

$32.04

BlackBerry (BB)

$11.56

Bed Bath & Beyond (BBBY)

$27.26

Koss (KOSS)

$24.15

Nikola (NKLA)

$15.44

Workhorse (WKHS)

$9.63

Nano-X Imaging (NNOX)

$26.71

GSX Techedu (GOTU)

$18.08

Plug Power (PLUG)

$30.89

Mark my words: these stocks will fall 25% within a month (probably much sooner), 50% within three months, and 75% within a year. I will be tracking them and will report back to you periodically.

2) I feel badly for these folks, but it sure is a good example of my No. 1 Immutable Law of the Universe: "If you are a dumbass, there will be consequences!" (which was the theme of my commencement address at my alma mater, Eaglebrook School, in June 2016 – transcript here and video here): 'Please Help,' Beg Those Who Lost $2 Million to Fake Elon Musks. Excerpt:

Dozens of consumers who were scammed by Elon Musk impersonators taking advantage of the recent cryptocurrency mania are begging the Federal Trade Commission for help getting their money back.

Since October 2020, consumers have reported losing more than $80 million to crypto-investment scams, according to the federal agency. Many of the schemes promised that a celebrity associated with cryptocurrency would multiply and return any coins the consumer sent to their digital wallet. The losses to Elon Musk impersonators alone have exceeded $2 million. Such ruses had already been going on for years when Musk, the chief executive officer of Tesla (TSLA) and SpaceX, hosted NBC's Saturday Night Live earlier this month – raising interest in crypto and making it even easier for crooks to find people to dupe.

Public records obtained from the FTC illustrate the litany of complaints, with names and addresses removed to protect consumer privacy. "I was sucked into a fake Elon Musk bitcoin scam," says one complaint. "I got scammed by these guys," reads another. Other tales of woe include:

• "Fake tweet looking like Elon Musk. Said, in celebration of lunch today, send 1 bitcoin, get ten back. So I sent one valued at $53,500. I have photos of everything."

• "Posed as a special crypto airdrop by Elon Musk. Promised to double invested currency if a threshold amount of bitcoin, ethereum, or DOGE was sent. Sent 5,000 DOGE before realizing it was a scam."

• "I foolishly thought there was a promotional giveaway being conducted by Saturday Night Live to support Elon Musk's debut to host the show. I went to SNLMUSK.com and sent 30,000 dogecoins that was supposed to be multiplied by 10 and returned. Please help. The transfer was sent to the following address... "

• "This was a Twitter scam with someone pretending to be Elon Musk. Used same icon and had the blue, circle checkmark verification."

3) I enjoyed this in-depth look by Nobel Prize-winning economist Paul Krugman at the role of the U.S. dollar as the pillar of the world monetary order. Excerpt:

Cryptocurrency was supposed to replace government-issued fiat currency in our daily lives. It hasn't. But one thing I'm still hearing from the faithful is that bitcoin, or ethereum, or maybe some crypto asset introduced by the Chinese, will soon replace the dollar as the global currency of choice.

That's also very unlikely to happen, since it's very hard for a currency to function as global money unless it functions as ordinary money first. But still, it's definitely conceivable that one of these days something will displace the dollar from its current dominance. I used to think the euro might be a contender, although Europe's troubles now make that seem like a distant prospect. Still, nothing monetary is forever.

But does it matter? My old teacher Charles Kindleberger used to say that anyone who spends too much time thinking about international money goes a little mad. What he meant, I think, was that something like the dollar's dominance sounds as if it must be very important – a pillar of America's power in the world. So it's very hard for people – especially people who aren't specialists in the field – to wrap their minds around the reality that it's a fairly trivial issue.

First things first: Dollar dominance is real. These days America accounts for less than a quarter of world GDP at market prices; less than that if you adjust for national differences in the cost of living. Yet U.S. dollars dominate currency trading...

This willingness of foreigners to hold American cash means, in effect, that the world has lent the U.S. a substantial amount of money – maybe on the order of $1 trillion – at zero interest. That's not a big deal when interest rates are as low as they are now, but in the past it has been worth more – maybe as much as one quarter percent of GDP.

America does, then, get some advantage from the special role of the dollar. But it's hardly a major pillar of U.S. power. And being the world's primary supplier of assets used in illegal activity isn't exactly a role filled with glory.

So is it possible that the dollar will eventually lose its dominance? Yes. Will it matter? Not so you'd notice.

4) Here's Jason Zweig in the Wall Street Journal with an exceptional U.S. government security that every investor should be aware of: The Safe, High-Return Trade Hiding in Plain Sight. I'm going to buy the $10,000 maximum for myself and everyone in my family! Excerpt:

Here's how you can make more than 170X, raising your return 177-fold in a single trade. Move your cash from a bank account, where it's probably earning about 0.02%, into an inflation-protected U.S. savings bond, which will yield 3.54% annualized. Unlike daredevil stock or crypto trading, buying an "I bond" is almost risk-free and delivers significant tax advantages.

Economists say there's no such thing as a free lunch, but I bonds offer a guarantee from the U.S. government that you can recover your original capital plus any increases in the official cost of living along the way. The only catch is that this isn't an all-you-can-eat buffet: The maximum purchase is $10,000 per year per account holder (unless you elect to take your tax refund in the form of an I bond)...

Ironically, the less you earn and have to invest, the more powerful a tool I bonds are. Sorry, Mr. Bezos.

In today's yield-parched world, money-market funds are paying 0.02%, bank savings accounts 0.13%, a three-month Treasury bill 0.15% and even a 30-year Treasury bond only 2.25%. The income on I bonds is so juicy, it's barely below that of leading high-yield or "junk" bond funds, which are much riskier.

If you've never heard any of this before, don't feel bad. Zvi Bodie, a consultant on retirement issues who formerly taught finance at Boston University, says he regularly speaks to groups of financial advisers. When he asks how many are familiar with I bonds, "less than half the hands go up" in the audience.

"I bonds are the best-kept secret in America," says Mr. Bodie. With a total of just $46.4 billion outstanding, they amount to less than 0.17% of all U.S. debt held by the public, according to the Treasury Department.

That's partly because financial advisers have no incentive to sell I bonds, which don't pay commissions or charge expenses and are available exclusively from the U.S. government (see TreasuryDirect.gov).

5) Some good tips here: The Scoop on Traveling to Europe This Summer. Excerpt:

The question I get asked these days perhaps more than any other is whether Americans will be able to visit Europe this summer.

The answer is now clear: Yes.

It won't be quite as simple as visiting Europe pre-pandemic. For most countries you'll need to either bring proof of vaccination or a recent negative test. But for those of us with big plans that were waylaid over the past year, it's a small price to pay in order to travel overseas again...

Already in May, three European Union countries are currently accepting American visitors – Croatia, Greece, and Italy.

My wife and I just booked a trip to Greece, Spain, and France in early October – and I'm hoping to catch a day or two of Wimbledon next month as well!

Best regards,

Whitney

Whitney Tilson
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About Whitney Tilson

Prior to creating Empire Financial Research, Whitney Tilson founded and ran Kase Capital Management, which managed three value-oriented hedge funds and two mutual funds. Starting out of his bedroom with only $1 million, Tilson grew assets under management to more than $200 million.

Tilson graduated magna cum laude from Harvard College with a bachelor's degree in government in 1989. After college, he helped Wendy Kopp launch Teach for America and then spent two years as a consultant at the Boston Consulting Group. He earned his MBA from Harvard Business School in 1994, where he graduated in the top 5% of his class and was named a Baker Scholar.

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