Dogecoin – The hometown hero

Earnings continue to pour in, but that’s boring so let’s turn to some funny stories that could only happen in 2021.

First, dogecoin is now worth more than Ford and Kraft. That’s right. The cryptocurrency that was created as a joke to make fun of cryptocurrencies now has a market cap north of $50 billion. By the time you read this, it could be worth more than Twitter [insert joke here].

Here’s a chart showing that if you had put the three U.S. stimulus checks into Dogecoin around the time they were sent out (green dots), you would have over $300,000 now:

I’m wondering if/when the Feds will step in on this one. Crypto isn’t viewed as a security in the eyes of the SEC, but I have to think that some of these celebs and billionaires pumping this hype will answer for it. If I were in charge of the SEC, and I never will be, I would most likely knock on this door first

That being said, I’m in this awkward position of defending dogecoin. The crypto purists [insert another joke here] view dogecoin as the “above ground pool” of crypto, but why is bitcoin any better?  

Sure, bitcoin is bigger and can be used to buy a Tesla, but dogecoin can buy Dallas Mavericks tickets. Some may argue that both are equally useless, and since the amorphic value of both coins exists solely because people perceive them as having value, bitcoin is merely the tallest midget of the crypto world. 

Others argue the technical details of dogecoin differentiate it, but I’m not buying it. I’d wager the hostility from bitcoiners is due to a combo of these:

  1. It took years for people to take bitcoin seriously, and dogecoin risks delegitimizing bitcoin and all other crypto.
  2. Those that got bitcoin right are just pissed that they didn’t see this coming.
  3. They are starting to realize that bitcoin’s scarcity value is in question now that a joke crypto is taking market share (albeit small relative to bitcoin’s) so easily.

Regarding #3, this has been my second biggest issue with bitcoin from the start (regulatory being the first). Bitcoin is limited to 21 million BUT there’s nothing stopping someone from making a new cryptocurrency. Dogecoin is proof of this. 

Meaning, capping the supply of bitcoin in a world where the supply of crypto is theoretically unlimited still leaves bitcoin open to competition.

Now on to one of the shadiest stories I’ve read in a while…

David Einhorn runs Greenlight Capital, and he is regarded as one of the most successful hedge fund managers on the planet. He’s been known to cause stocks to crater by simply asking probing questions on quarterly conference calls.

His most recent letter to investors was published last week, and in it he highlights a company called Hometown International. Not because his fund built a position in this stock but rather to highlight his belief that regulators are asleep at the wheel. It would be an insult to Mr. Einhorn to try to paraphrase his thoughts, so here’s an excerpt:

“Someone pointed us to Hometown International (HWIN), which owns a single deli in rural New Jersey. The deli had $21,772 in sales in 2019 and only $13,976 in 2020, as it was closed due to COVID from March to September. HWIN reached a market cap of $113 million on February 8. The largest shareholder is also the CEO/CFO/Treasurer and a Director, who also happens to be the wrestling coach of the high school next door to the deli. The pastrami must be amazing. Small investors who get sucked into these situations are likely to be harmed eventually, yet the regulators – who are supposed to be protecting investors – appear to be neither present nor curious.”

This story took off last Friday big time, and Matt Levine pointed out on Tuesday that this deli isn’t worth $113 million but rather $2 billion when accounting for all warrants.

Mr. Einhorn has a point. It’s amazing that stuff like this can happen in 2021. You’d think there would already be a SQL query hard coded somewhere in the SEC network that screens for a combination of these criteria:

  • Pink sheet stock
  • Price-to-sales ratio at 12 standard deviations from the mean
  • Two of the largest shareholders are shell companies based out of Hong Kong and Macao

But who knows? Maybe this is more normal than we realize. Or perhaps since this isn’t a high-profile case involving a hedge fund manager trading on inside information, which does literally zero harm to everyday investors, it’s not a priority.

Whatever it is, I’m stopping right here because Mr. Einhorn is a billionaire with a team of lawyers ready to fight any blowback from criticizing regulators. I don’t have any of that so time to move on. 

Side note: Mr. Einhorn also wrote a stellar book titled Fooling Some of the People All of the Time. Definitely worth reading.

And speaking of hedge fund managers writing letters, some of the most entertaining ridicule comes from this quirky group of absentee parents. Without question, the most scathing come from Dan Loeb at Third Point

His missives are brutal but also incredibly enjoyable to read. Carl Icahn has had a few doozies as well. If you are bored over the weekend, here’s a more extensive list from both.

Lastly, Netflix was in the news this week after it reported numbers that missed expectations. Here’s a cool visual that shows what Netflix has accomplished by showing the rise and fall of Blockbuster: https://twitter.com/JonErlichman/status/1383457845081825285

Enjoy the weekend…