Sundial’s trade volume is at 630MM shares 30 minutes into the trading day. Apparently the Robinhood platform had removed them from trading, perhaps sparking somebody’s (or some swarm’s) ire.
This thing’s gone radioactive. Note the Level 2 bid/ask:
Yeesh. Perhaps this is good if you’re underwater on $SNDL and want an exit. If you can find an exit, even better.
This type of ‘investor’ activity is going to be around for awhile, as (in my opinion) there is a strong undercurrent of feeling disempowerment in Western society, and ‘sticking it to the man’. Altering what’s been the ‘normal’ course of equity trading is the cudgel of choice.
I price assets, and I trade around those assets based on that price. I eschew volatility, unless that’s specifically what I want.
This new fad –
if that’s what it is – is going to impact the market by increasing volatility in equity forwards and futures, and prices will rise. That means an inflationary impact, helped along as M1 gets stoked via COVID stimulus programs.
It’s great if you have a low performing mutt that gets hit by a lightning bolt (and can exit). My view is that mis-priced assets is not a sustainable condition, and that at some point, they’ll return to the value the majority of the market decides.
This fad is disruptive. And nice to see in a ‘David versus Goliath’ kind of way. But markets are – at their core – intended to be orderly. The ‘Wall Street Bet’ of assets and pricing is going to catch some serious attention from the big money, the politicos, and those who have a lot of the marbles in the game.
Watch out for some hard and fast moves from regulators as they try and put this fad in a box. Their reactions so far have been crude and absolute (banning purchases, limiting participants), but there will be a phlanx of commissions and inquiries and ‘Blue Ribbon’ panels convened to squash the unpredictability. Money (and business) hates uncertainty. That’s mid-term.
Hard and heavy decisions will come fast. There’s a thousand targets out there for the WSB crowd to hit. Decisions will be made – not to protect an individual stock – but the entire herd. Its’ uncharted waters. Like most fads, I expect this thing will fizzle as folks eventually get eaten by their own YOLO. And right now, there’s every big brain on WallStreet figuring out ways to make money off of this. That’s what they do.
Short term, I’m concerned. about inflation and short-term lending rates. They have the potential to bust returns on your portfolio – and after a decade of low-negative basis on rates – much capital deployed right now is dependent on cheap cash. I expect it’s about to get more expensive. I expect a flight to quality (blue chip), and speculative assets to get discounted harder. An alternate view is that this fad is compartmentalized, and it’ll blow over. I don’t think it’ll be ‘gone’ soon in any respect, although it might structurally manifest on a smaller scale.
Here’s the bid/ask on $SNDL an hour later:
Try and transact anything useful on that. Eventually, the kids will run out of money as liquidity is removed (and kept relatively low by design). And this thing will ultimately go the way of leg-warmers. Until then, it’s going to be bumpy. The reactions from the exchanges will be uncertain, but ultimate. Of all the trade offs, they’ll prioritize ‘market stability’.
The preceding is the opinion of the author, and is in no way intended to be a recommendation to buy or sell any security or derivative.