Crescent Park & Recreation – Something Like a Pheno-“MEME”-non

Dear Partners and Friends,

We hope everyone is easing into summer and out of lock-downs. I recently traveled to Palo Alto to visit the rest of the Crescent Park team in person. I was refreshed by my ability to come and go relatively freely. Apparently I am not the only one wanting to travel as my flights were full in both directions.

As initiated last month, I wanted to take the opportunity to reach out with some short updates on topics of interest in the industry.

Something Like a Pheno-“MEME”non. Whether it is Wendy’s, Geo, or GameStop, the meme stock phenomenon continues unabated as we enter the summer months. The SEC Chair, Gary Gensler, has directed his agency to examine a range of potential trading issues associated with retail investing. It remains to be seen what actions, if any, will be taken and whether the new retail bulls can be stopped from their stampede.

As a result of the continued retail trading frenzy, the markets remain a fraught environment for short sellers. According to Wells Fargo’s Chris Harvey, many hedge funds “have taken their ball and gone home or elsewhere”. The number of companies with bearish bets equating to at least 30% of their shares has declined meaningfully during 2021. Even some in the research analyst community are refusing to hang on, including Bank of America’s Curtis Nagle.

Inflation? Is that you?

Our friends and relatives are not the only things we haven’t seen in a while. On June 10, it was announced that headline consumer prices rose 5% year over year in May, the fastest pace since August 2008 and higher than Wall Street expectations. The 3.8% rise in the core inflation rate, which excludes food and energy prices, was the sharpest increase in that rate in nearly three decades. Surging used car prices helped drive the inflation gains. Hints of rate increases starting in 2022 spooked markets slightly at the end of the trading week of June 14.

Mood and Judgement.

According to a recent WSJ essay by Daniel Kahneman, Olivier Sibony and Cass Sunstein, psychological research shows that judgment is surprisingly dependent on mood. It turns out that always being in a sour mood isn’t necessarily a bad thing (although it won’t make you very nice to be around). The essay was adapted from a new book written by the authors called Noise: A Flaw in Human Judgment which was published in mid-May.

Key take-way

The research findings within the book suggest that the variability of mood greatly affects the quality of our judgments. This variability or “noise” should give pause to anyone who thinks we can make purely objective judgments. For example, in some studies people were found to be more receptive than others to “BS”. They were impressed by “seemingly impressive assertions that are presented as true and meaningful but are actually vacuous.” The research demonstrated gullibility was not merely a function of permanent, unchanging dispositions. Inducing good moods made people more receptive to BS and more gullible in general.

Interesting fact.

Since all of us are using Zoom frequently these days, I thought I would share the following news from Bloomberg. Apparently your voice is one of your biggest challenges in virtual meetings. New research into video conferencing platforms reveals that services like Zoom and Teams don’t transmit all sounds equally well. Voices are compressed and not all frequencies survive the process intact. That apparently tends to impact women more than men.

All the best,
Pete

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