Who Drove up Gamestop (GME)?

It has been a wild ride for Game Stop (EB Games in Canada) over the past couple weeks. This is a company with 5509 retail stores and like many retail stores has seen a huge hit in lost revenues to the tune of over a billion dollars during the 2020 Covid pandemic as people cannot shop at stores and digital gaming continues to cut its grass. Although game lovers still love to pick up a physical copy from time to time many gamers have long thrown shade on the company suggesting it may end up going the way of Blockbuster. The stock price of GME has fallen from a high of nearly $55.00 in 2015 to $4.00 by June 2020. Like many stocks, in July of 2020 GME began to see some uptick to a somewhat respectable high of almost $20.00 per share by January 12, 2021 (Chart 1).

Chart 1 – GME stock price prior to run up

The declining stock price in the last 5 years should come as no surprise. Revenues of GME have dropped over $3 billion per year since late 2014 to January 3, 2021, just before the pandemic closures began to occur.

Data From: Simply Wall Street

There are many other reasons why this company ended up priced where it was by the end of 2020. On the one hand, it had a fair amount of cash on hand and video games are popular. This was what originally led the Reddit #WallStreetBets poster Desmund Delaney to suggest that GME should be put on the radar last year and ultimately take credit for the run up that just occurred. Even he admits that he was laughed at then and for good reason. The company’s debt level had become enormous and their Debt to Equity Ratio had risen 128% over the past 5 years. Cash is barely enough to cover payables, the company is currently not profitable and nobody really knows what effect Covid will have on its long term future.

A couple of weeks back, I started to notice that many of the investing boards I follow began talking about GME, AMC, BB, NOK and a number of other fairly lackluster and boring companies. I have held both BB and NOK in the past and sold my shares after years of flatlining or declining stock prices and boredom.

At first, the responses by other investors to those hyping GME were the same as Delaney received last year. Then the amount of chatter increased significantly and before long you could sense that there was some serious hype going on. The words “troll”, “bot” and “pump and dump” were heavily used on all the boards I participate in. The strategy initiated by WallStreetBets to convince retail investors to band together seemed to be working. By January 21 the stock price had run up to $61 USD. Premarket trading on Monday the 25^th saw the stock gap up to over $80 and it bounced around and spiked again to eventually close on the 26^th at just over $200 USD. This was quite a feat for a band of retail investors to drive up the price of GME. The short sellers were already screaming about their billion dollar losses but remained defiant and holding.

And then enter Elon Musk.

Adjusting for time zone differentials it seems as though Musk waited until the end of the trading day to tweet this. Musk has been blamed, criticized, praised for influencing the stock market a number of times and no matter which way you come at this claim, it has serious impact for all involved.

GME Stock Price Driven Up by Short Squeeze & Retail Investor Trading – After Market Tuesday January 26, 2021

Chart 2 – Pre Tweet (well close enough to the tweet)

GME Pre Market Stock Price – Thursday Morning January 28, 2021

Chart 3 – Post Tweet period, $456.50 USD by 06:00

It is no secret that Musk is also a hater of short sellers. Whether you agree with this 400 year old practice or not would make fodder for great debate but just so we can be clear on where Musk stands we can find evidence in some previous tweets.

Most people who understand a little about the stock market know that the simplest goal is to buy low in hopes that they go up in price. This is speculating that the stock price will improve. In the past, this really depended a lot on how good those who ran the company were at doing their jobs and how they fared against their competition. Short selling is the opposite. People took a look at the company and thought that the people working at the company were actually bad at their job and/or their competition was going to outperform them. They speculated that the company will decline and with it, the stock price. Both parties are speculating and neither really knows which way things will go.

Why does Musk hate short sellers so much? Who knows really but if were to speculate, it may be because he owns what Forbes called back in July of 2020, the most hated and short sold stock.

Many analysts also say it is a hugely over valued stock and “value” is what Musk says short sellers destroy more than anything. What is value? Huge topic but here it seems to mean more than technical analysis, more than money but potential.

One Analysis of Tesla’s Value – Simply Wall Street

In Musk’s defense, whatever you think has been driving Tesla’s stock price to Mars recently has really stuck it to the “haters” and short sellers have lost billions on betting against the unprofitable electric car company this year alone. What drives Musk? Is it ideology or is it money or ego? Many believe it is ideology and that retail investors have propelled Tesla to become over valued and Musk to be the richest human to have ever lived on our planet. Musk has long said he does not care about the money and it is all about getting people to Mars.

This trend of believing Musk is out to save the world seems to go back some time already. It is easy to spiral down a rabbit hole on this one. Maybe Musk is the world’s saviour, maybe he is not.

It appears that retail investors really can make a difference and move the needle on a stock price. The digital era is flipping traditional structures of investing on its head. Many platforms exist where individuals can sit at home during a Pandemic and invest or gamble their money at very low commission fees. Message boards provide immense value to DIY investors but there are also a large number of false leads that are being attributed to “pump and dumpers” dragging people into a stock with FOMO and then leaving them holding the bag.

Elon Musk has the power to move stock prices all by himself. In May 2020, Musk tweeted that he thought Tesla’s stock price was too high. It seemed a little odd but nonetheless the stock price had fallen 12% within 30 minutes of the tweet. Musk’s tweet was above board though because he had cleared this with the SEC and his lawyers back in 2018 after settling with a $20 million fine.

Maybe you do not believe one person can single handedly affect stock prices? Here are some other recent examples of Musk’s tweets driving up stock prices.

It was fairly obvious to many after the first initial run up of GME that Musk’s tweets had a huge impact on further gains of the stock price. Note the position of GME prior to Musk’s tweets (Chart 4).

GME First Sell Off by Run Up Investors

Chart 4 – Stock Price drops to $265.75 USD by 17:30 Thursday January 28, 2021

Again, accounting for time zone changes, in comes Elon Musk.

GME Pre Market is Wild again Friday January 29, 2021

Chart 5 – Stock price hits a high of $430.00 USD by 04:30

The volatility Friday morning would be enough to give any DIY investor a heart attack unless they have nerves of steel but short sellers on Wall Street woke up crying Uncle. Was Musk involved before 3:08 pm on January 26? It is difficult to know but from that point forward, his tweets did a fine job in helping him exact revenge on those he hates thanks to an opportunity some investors found in a boring, shorted company called Gamestop.

Was this a triumph for the little guy? A just fall from grace of the greedy Wall Street investors? Maybe it was both and maybe it was the world’s richest man taking it out on an age-old investing strategy that continues to threaten and offend the value Musk sees in Tesla? One thing is for sure that this event had an ironic twist. What was said to be a war against Wall Street actually managed to propel one of Wall Street’s darlings, Ryan Cohen who coincidentally became a board chair on January 11 and had purchased $9 million in shares last September, into the Billionaires club.

Maybe it was all just dumb luck and timing but as I write this, GME is down $103.46 USD / 31% again to $225.00. At its 52 week heigh of $483.00 USD, Bloomberg noted that Gamestop was more valuable than 90% of the US companies listed on the Russell 3000 index.

Rick Shone

Written Monday February 1, 2021

This is just a fun piece of observation of last week’s GME craze and in no way supports any conspiracy theory or any side of the debate. It is just an observation of the facts and timeline as I see sitting from the sidelines watching people laugh and cry.

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Ignore the Beggar

Six years ago, I was walking across the border between Belize and Nicaragua with a 3 and 5 year old in tow. As rain started to come down in torrents, I shelled out some coins to hire a rickshaw driver to shuttle my family and backpacks the rest of the way while I ran beside them.

Halfway across the border zone, we were detoured to an Ebola testing station where we each had to have our temperatures taken. I paced nervously as my son had a thermometer put against his forehead when I clearly knew that he was sick with fever. In a moment of quick eye contact, the official looked at me knowingly and quickly decided to just move us along.

With stamps in our passport we were shuffled out into a bustling parking lot and bombarded by taxi drivers. Trying to keep track of my kids and belongings while listening to fares being shouted out me, a man tugged on my shirt. I ignored him. He was dressed in rags, bloody and bandaged. He kept tugging. I ignored him. I brought my kids in closer and directed them into the nearest car, a dilapidated grey sedan. The loud street noise dulled as we sat in the car and the man stood tapping on the glass. As we drove away my daughter asked me the question that I never forgot.

In her world, there was only one thing that mattered and that was the bloodied man asking for money. Experience, time and age has a way of dulling our senses. It can make us numb to the pain and hurting that we see around us. At times, we might even be tempted to blame others for their misfortune and feel anger towards those who inconvenience us with requests of money. It is easy to become indifferent and put up barriers. These barriers are like emotional shields so we do not have to admit how easily our places might be exchanged if we just grew up in the wrong family, lived in the wrong area, made the wrong choices, fell to addictions or had less social support.

I found it striking that this memory was the first thing staring me down during a quick morning scroll through Facebook. This is Black Friday. It is the day where so many people go crazy over retail deals and buy frivolous things they do not need. It is the day our retail business, Wilderness Supply, chooses to be closed in the face of retail pressure, to volunteer our time at the Main Street Project, a local shelter that provides food and beds to those who have none.

This memory came on a morning when I was on my way to pick up $1,000 worth of food we had just bought to deliver to the shelter. As I read my daughter’s words, tears welled up in my eyes and I realized that this little girl had taught me so much in that one moment. Over the years, we have done many things to lend a hand to those less fortunate. It did not start with those words on a warm November day in Nicaragua but what I realized is that we should not help only when convenient, or when we need a little ego boost to feel like a good person but we need to help because it is necessary. There are so many who need a hand and many of us are so fortunate to have had the right things in place to put us where we are. This little girl reminded me to treat people with dignity.

I am indeed proud of our team for closing our stores in protest of Black Friday and unnecessary consumerism but more importantly I am just glad we could be a small part in supporting our community and the amazing staff at the Main Street Project who care so deeply about every human who comes through their door.

Nicaragua with Kids

Crazy is a word I often hear. Head shakes are pretty common. A few tsk, tsk’s under the breath…I smile. I like this kind of thing. If I get this reaction, then I know it’s gonna be a good idea!

Turns out the idea really wasn’t that crazy. Pretty tame actually. Nicaragua turned out to be a beautiful tropical country with warm weather, cool breezes, scenic volcanoes and smiling friendly people. Exactly what I pictured it to be. Now traveling with a 3 and a 5 year old…now that was a little bit crazy at times. But that’s to be expected too. We made the decision to go a couple weeks before we left. Typical. We packed the night before we got on the plane and didn’t sleep a wink. Typical too. Flew 20 hrs with a quick snooze in New Orleans only to land in Liberia, Costa Rica with no bags. Being seasoned travelers we thought to split up our clothing between the 2 travel packs we brought so that in case one went missing we’d still have something to wear – but made a rookie mistake and forgot to pack anything in our carry on in our haste! Oh well, when you are traveling you learn to be flexible. Thank goodness I saw a sign for the only hotel in the area while the plane was landing. I’m sure the Hilton didn’t mind us swimming in their pool in our underwear.

Next morning, with found luggage, we took a cab to the Nicaraguan border. Our Spanish is terrible. A lot of hand waving and gestures ensued to help us figure out what to do. Pay this, fill out this form, get a stamp here, then go outside in the pouring rain and walk across the no man’s land to Nicaragua. Well the walking wasn’t happening. I paid the man. Mom and kids were smiling in the pedicab with the bags, zipping down the road with me running behind. Next stop – ebola check point. Nope, nobody has ebola thankfully so we continue on. A couple of touts had latched on to us at this point. The kids were doing awesome trudging through the dirt and puddles dodging between the semis but I figured I would let these two guys help out nonetheless. They did prove useful in carrying our bags, helping us navigate the Nicaraguan side of the border and plus, they knew “a taxi guy”. I still couldn’t help notice my wife silently mocking me as if to say “haha sucker, you’re gonna have to pay them!”

We met our taxi driver as people crowded around us. I’m negotiating price with him for the next 2 hr trip, our touts are asking me for money, we’re trying to get the kids in the car and a man dressed in rags with bandages falling off his arms keeps tapping me on the shoulder. I ignore him. There’s so much going on right now. He just keeps tapping me. Everyone gets in the car and finally we are on our way. Sweet little 3 yr old Sofia pipes up from the back seat. “Daddy, didn’t you see that man? That man with the bandages? He wanted to talk to you.”

Oh my. In the most innocent of ways, my little girl chastised me for being so aloof. She didn’t see a dirty, ratty, disheveled bandaged man. She just saw a man. Rattled and maybe a bit flustered after the whirlwind of the border, I leaned to the driver, just a young kid, to change the subject and ask his name and said, “Te amo”. Great! Now even my 5 yr old had ammo as he would ask many times throughout the trip “Daddy, do you remember the time when you told the taxi driver you loved him?”

Traveling with kids is so fun. You will have so many moments where you are the proudest parent ever. These little people, navigating through exciting new cultures, languages and places are just taking it all in. We travel with so little, they learn that we don’t need a lot to be happy. The children break the ice every where we go. When we travel solo, nobody seems to want to talk with us and now we can’t even walk down the street. Sam’s red hair and Sofia’s curls and bubbly “hola” are great attractions to everyone we meet.

Traveling with kids can also be so trying. Even the patience of Job could be tested. New food, new beds, over tired, car sickness, whiny, fighting, travel bugs – oh there are a ton of things you could go crazy over. But in reality, that’s why we are here in Nicaragua with our kids in the first place. To teach them that these are things they are just going to have to deal with. We played on the beaches of Marsella, Ometepe and Pochomil. We rented a beautiful house in Grenada, hiked through the jungle and peered into volcanoes. But we learned real lessons. Our children saw beggars and homeless people sleeping on our doorstep. They saw kids playing in putrid, filthy, stagnant water because their parents thought it was okay. They saw a very different way of life unfolding around them and they asked questions that I believe will only help them to become more worldly and accepting of all people. I hope the simplicity of what we travel with and seeing those less fortunate than us will teach my kids that what they have is a blessing and not an entitlement.

Top 10 Red Flags to Prevent Online Credit Fraud for Retailers

Shut Down the Scammers – Top 10 Red Flags

It takes a brazen person to walk into your place of business and steal something off the shelf or give you a credit card for payment that is not theirs. The online space is different. It’s impersonal, faceless with many dark corners to lurk and hide in. Retailers need to take many precautions to prevent themselves from being a victim of online fraud.  It is a headache you just don’t need to deal with!

The first thing to consider is who you will partner with as your secure credit card processor. Be sure to use a reputable company that has advanced fraud tools like the ones offered by PsiGate. These companies will do the legwork upfront to screen the purchase and throw up some red flags if something appears wrong or does not match their parameters. Credit card numbers will also remain confidential so you do not have to worry about the security of those numbers in your files.

Don’t fully automate your online system. A human element to processing orders can help you identify ones that should be considered “red flags” as many fraudulent orders can still get through the screens put up by your credit card processor. At the very least, your system should be designed to spot these and flag them for human review before they are processed.

Top 10 Red Flags for Fraudulent Online Credit Card Purchases:

1. Customers who ask to ship to a unit, suite or box number. Often the bill to address will be different than the ship to address. A simple search for this address on google maps can often tell you if this address is a legitimate business, apartment/condo or if it is just a storage unit. Never ship to a storage unit unless you know the individual.
2. Customers who try to order through email vs. regular online processor. Never take credit cards through email.
3. High ticket items like electronics (or in our case also knives and camping gear) that are in large quantities.
4. Orders shipped to the United States or other international destinations represent over 90% of our flagged orders.
5. Phone numbers that do not work. If you have any concern at all, dial the phone number attached to the order to see if you get a real person or not. Nine times out of ten the phone number does not work or it does not belong to the individual listed on the order. Sometimes it does and this is the point they will thank you for verifying the purchase first before charging their credit card.
6. The same customer orders the same product again in large quantities. We got burned on an order like this once as all seemed legit and even got a live person when calling the phone number
7. Odd combination of products on your order. From our experience, there is a normal pattern to the types of orders placed and stays within a limited number of categories. This is not always true if you have a great website that is easy to browse but something to consider especially if you notice any of the other red flags present.
8. There are multiple orders in the system from one customer, all declined except one – using multiple cards. They are going through a list of numbers trying to find one that works.
9. The email address is generic (random and/or with no actual name) from a service like Gmail, Hotmail or Yahoo.
10. The IP result (location where the purchase is being made) does not match the geographical location of the billing or shipping address used. It is entirely possible this could be a valid order as people travel a lot and still shop but is important to consider.

If one or more of these red flags show up in an order we will always review it further before processing the order. If you have any doubt at all, you have that “gut” feeling and you just can’t feel confident about the validity of the purchase – it might be worth just discarding the order.

I would not necessarily advise this but we do respond to all discarded orders with a simple generic message that says something along the lines of “We do not have the inventory to fill this order at this time” or “this order cannot be shipped to this address”, etc. We will never include any personal names or addresses in this email as we are never are entirely sure where it is going. If it was a valid order in the first place, we would likely get a response to this email.

Since writing this, Moneris has just put out a e-booklet on how to prevent fraud in your store which is worth a read – Moneris Fraud Prevention

Planning a Trip – My Top 10 Things to Do

I spend a lot of time dreaming about where to go next. It’s 20 years of traveling for me now – I’ve finally put my top 10 things to remember to do before I leave on paper…maybe now I’ll stop making some of these mistakes.

1. Documents: Make sure all the paperwork you need is in order like visas, passports, flights, etc.  I always leave a digital copy of my passport, itinerary, and other important documentation with an emergency contact at home so they can email it to me if I get myself in a bind. Make sure you understand the visa requirements for the country you are going to. You don’t want to be calling the immigration hall home.
2. Itinerary: Don’t create a rigid itinerary. If you are only going for a couple weeks the tendency is to want to cover as much ground as possible so you can take in all the sites. I get that – you might only go there once – but I’ve found my trips much more enjoyable when I content myself with covering only a small area and spending longer periods of time in each spot. Talk to other travelers and locals about where their favourite spots are. Be spontaneous, go where the wind blows – you are out of your daily routine and your grind is back at home, enjoy it and embrace it!
3. Book the First Night: The last thing I want to do when I land after a long flight is start looking for a place to spend the night. I always book my hotel or guesthouse for the first night of my trip ahead of time, especially if I am arriving after dark. I’m tired from a long flight and my senses are being bombarded from my new surroundings – just get me out of the airport and let me drop my bag as quick as I can.
4. Research: Learn a few things about the culture, history and geography before you go. This won’t make you an expert but it will definitely give you a little background and totally psych you up to get on that plane. Look at pictures and dream of things you hope to experience. Waiting for your departure day to arrive is the hardest part!
5. Money: Try to have a little local currency on hand as airport exchange will usually hose you. If not, carry some US dollars (or possibly Euro) because most people will take that in a pinch. I never carry more than a couple hundred dollars on me when I leave. Just don’t forget your debit card and make sure it has a 4 digit pin. Don’t forget to contact your credit card company to let them know of your travel plans.
6. Packing: Seriously, do you really need to bring that? I once met a girl who had her entire backpack stolen and left her only with her small day pack. She wouldn’t stop raving about how happy she was.  Pack light – you’re still on earth so I’m sure you can find what you need in the markets or shops. Oh, and a little tip because our airlines are always oh so efficient – if you’re traveling with a partner consider packing half of your clothes in each others bags for the flight. When your bag is missing upon arrival and they can’t find it for half your trip, you’ll be glad you took my advice!
7. Safety: Don’t believe everything you read online. Especially the negative. Some places have a bad reputation but are gems – others are really just that bad and you shouldn’t go there now. Know the difference and don’t miss out on a beautiful country and amazing people because everyone tells you that you are crazy for wanting to go there.
8. Insurance: Don’t skimp on the travel insurance. Really. Buy the travel insurance and make sure it doesn’t exclude any crazy things you want to do on your trip.
9. Health: Check out the list of recommended and/or required immunizations for travel to certain countries. Travel should change you and leave lasting memories –but that should be in a good way and not because you didn’t take the appropriate precautions to protect your health.
10. Electronics: Be crazy – consider not bringing any! Okay…having considered that, let’s be real. You likely will so make sure that you bring all adapters (and if you are packing light you shouldn’t need a converter), chargers and batteries that you need and can’t get on your trip. If you are going to use your phone then make sure you look up travel plans or what it would take to convert your phone to a local phone.

The world is a big place, the world’s a small place. Be your own explorer.

Chichicastenango, Guatemala

Our Skin is Dark

Morning time comes early around our house. My little boy Sammy loves to climb up the stairs and crawl into bed with me for morning time snuggles. This morning wasn’t one of those mornings where he would fall back to sleep. He lay on his back and put his hand in the air, turning it from side to side. I put my hand up and did the same not really knowing why I was copying him.

That’s when Sam said, “Daddy, our skin is dark…just like Ethan’s”. I knew Ethan is one of Sam’s best buds at day care but I didn’t quite know what to say at first. After a moment, we lay there in the morning darkness and we talked about how skin can be different colour just like how Sam’s eyes are green and mine are blue.

In the black room, our skin was indeed dark. But in the light, Sam’s skin is anything but dark. A red head with green eyes and fair coloured skin.

At three years and seven months, I had never heard Sam mention anything like this before. I know now that he recognizes the difference in skin colour, but to him, it’s just colour. Him and Ethan are best buds and that’s all there is to it.

I found myself thinking that this isn’t just the innocence of kids that I was experiencing. This is really the way things are, the way things are meant to be. My child lives in his own world where racism does not exist. It’s a world without prejudice to culture or religion. One where we see people for who they really are and not just for what they look like.

Sam teaches me to see the world through the eyes of a child. To see the world as it should be. One that I knew before I grew up.