The Wrap: Credits - Stake Global

The Wrap: Credits

Side hustles with Shopify, the pollution falling from the cloud, and squeezing the life out of short-sellers.

5 stocks reaching 52 week highs

    • General Motors (GM) +16.2% in the last week
    • Abercrombie & Fitch (ANF) +13.2%
    • UBS Group (UBS) +15.8%
    • Idex Corp (IEX) +3.6%
    • MicroStrategy (MSTR) +11.8%

Credits

Labelled as the decade of disruption, the 2010s were all about the side hustle*. Stocks like Uber, Fiverr and Shopify are all products of the new millennium and owe their existence as a public company to the savvy home entrepreneurs using their services.

Meet Kelly Garrett, a crop-and-cattle farmer from Iowa. Since 2014 Kelly has earned almost 300,000 USD through Shopify, but not in the way you might think. Kelly isn’t selling merch or drop shipping phone chargers, Kelly is selling carbon-credits to the e-commerce giant directly.

Naturally, crop farming absorbs CO2 from the atmosphere. Farmers receive credits for doing so once they have offset their own emissions and can sell these credits to carbon emitters through online marketplaces. Shopify is voluntarily setting aside US$5m a year to combat the impacts they are having on the environment. Sure, they’re not Ford or BP but the internet has a bigger impact on the environment than may be apparent.

Emissions from the internet are equal to those of the airline industry; both roughly 3.7% of total global emissions. A study from 2009 estimated that each Australian emits 81kg of CO2 each year through their internet usage and since then our internet usage has increased while our electricity isn’t considerably cleaner.

Where do the emissions come from? Largely the power needed to run data centres. On top of that is the production of our phones, tablets and computers and the derivative emissions from online shopping postage for instance. While these figures aren’t counted as internet emissions they are still related.

*even if stagnant wage growth forced the population into second jobs to keep up with rising the cost of living.

Squeezed Out

The short squeeze; famous for pushing Tesla and scores of other stock rallies into the atmosphere while crushing the P/L of institutions looking to get creative. For some readers, this may be obvious but to the rest, here’s how exactly a short squeeze works.

Here’s the short of it. To short a stock, investors borrow the stock from holders with a predetermined date on which the stock must be returned. They immediately sell the stock and then on the date in the future, must cover their shorts by buying the stock again to return to the original investors. If the stock price has fallen, they buy the same number of shares for a lower price and keep the difference as profit. A rally, on the other hand, can be a one-way ticket to uncapped losses.

A short squeeze occurs when those shorting the stock are forced to buy the stock in order to cover their position. Naturally, this causes the price to rise and triggers a positive feedback loop whereby more and more shorters are forced to cover. By the peak of Tesla’s rally, short-sellers had lost US$21b as the number of shorted shares halved.

Top 5 Gainers

  • Cooper-Standard Holdings (CPS) +87.9%
  • Resideo Technologies (REZI) +62.8%
  • Chefs Warehouse (CHEF) +62.0%
  • CineMark Holdings (CNK) +56.9%
  • Spirit Aerosystems (SPR) +51.8%

Top 5 Fallers

  • Jumia (JMIA) -25.2%
  • Quidel (QDEL) -23.4%
  • 2U (TWOU) -21.3%
  • Stamps.com (STMP) -19.9%
  • Amarin Corp (AMRN) -17.9%

Trade Teaser

First, I threw away the outside and cooked the inside. Then I ate the outside and threw away the inside. What did I eat?

What We’re Following | VCs Congratulating Themselves (@VCBrags)

Let’s take a break from books about trading psychology and podcasts about the US dollar; it’s time for a laugh, a head shake and a cringe.

@VCBrags is pretty self-explanatory. Silicon Valley’s assortment of Brads in Patagonia flexing their list of achievements on the world. There are some shockers on this page and they act as a reminder not to take ourselves too seriously. You will always be grateful for the presence of some sort of social awareness in your system.

If you don’t laugh at this I guarantee the next month of wraps will be FREE!

Best Buy | MSTR

This trader bought into MicroStrategy for their macro strategy. As soon as the firm announced they had added bitcoin to their balance sheet, this trader added $MSTR to his portfolio. A worthwhile trade so far.