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I N T E L L I G E N C E
THE PENN WEALTH REPORT
VOLUME 9/Issue 03 22 Aug 2021 $5.99
The Show Must Go On Meme Stocks Financial Engineering
NFTs
“This will not end well”
SPACs
Convoluted Derivatives
Dogecoin
IN THIS ISSUE Tulip Mania: The West’s First True Financial Bubble
ON PAGE 08 ON PAGE 10 ON PAGE 14 Archegos: Fallout Feeding Frenzy: New United Embraces the from a Rogue Trader Investment Vehicles Future of Air Travel Copyright 2021. All Rights Reserved. Penn Wealth Publishing.
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Volume 9 Issue 03
Cover: Vintage circus act against backdrop of old European city. Photo licensed by Penn Wealth
Investment
Strategic Vision
Front Matter
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Tulip Mania: the West’s First Financial Bubble Four hundred years ago a tulip trading frenzy gripped Holland; since that event, one aspect remains unchanged: human nature
04
United
Now that t
Tactical Awareness
08
From the Editor Discerning highly-orchestrated theater from real opportunity is becoming quite the challenge
Archegos: A Case Study in Risk Management How a family office group was able to build massively-leveraged and concentrated positions undetected by investors and regulators alike
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10
The Story in Charts A look at some of the charts which have shaped the past few weeks
Feeding Frenzy From cryptos to NFTs to SPACs, FOMO has spurred a new wave of investment into vehicles which few fully understand
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Copyright 2021. All Rights Reserved.
Materia
It doesn’t al in materials always prov
WTealth he Penn . SW uccess ealth. report Happiness.
Executive Summaries for Decisive Leaders
The Penn Wealth Report
t Intelligence
Weekly Business Report 20
Roblox is not just another gaming stock, but should you invest? The new administration took a tough stance with China in first official meeting; now, let’s look for continuity Will GoPuff be the poster child for the coming post-pandemic market reality check?
Embraces the Future of Air Travel
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the hapless Oscar Munoz is gone, United can finally move forward
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Under the Radar
Could an internecine battle in Germany help bring about a major regime change? A good sign for the US economy: Americans are quitting their jobs in record numbers
22
Outcome of Peruvian national election highlights the country risk associated with precious metals and mining stocks Amazon poised to make its second-largest acquisition ever: a storied movie studio
als Select SPDR
lways make sense to take a stand s, but when it does, this fund has ven to be effective
23
Bright Ideas Being Ignored
Top quotes of the week... Pope on Humility
Two Aerospace & Defense companies, a health services provider, and a steelmaker: Four ideas that are being missed—or ignored—by investors and the press
Dryden on Temptation Walpole on Focus
The Trading Desk
18 Upgrades, Downgrades, & Trades Actions we have taken at the Penn Trading Desk, plus a look at what other Wall Street Analysts have to say, along with accompanying charts
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22 Aug 2021
The Penn Strategies 24
Strategic Income Portfolio
26
Dynamic Growth Strategy
28
Global Leaders Club
30
Intrepid Trading Platform
32
New Frontier Fund
34
Most-Shorted Stocks List
Penn Wealth Report
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strategic
vision Western Civilization
Tulip Mania: Arguably the West’s First True Financial Bubble Four hundred years ago a tulip trading frenzy gripped Holland; since that event, one aspect remains unchanged: human nature. In the late 16th and early 17th centuries, the Dutch Republic—of which Holland was a part—dominated world trade, boasting the largest fleet of merchant vessels in existence. These merchantmen brought new and exotic products from far-off regions back home to the wealthy members of the Dutch upper class; formerly unheard of items such as potatoes, peppers, and tomatoes. In addition to these future staples of the European dinner table, the Sultan of Turkey delivered a quite unique item to the citizens of Vienna in 1554: the first tulip bulbs and seeds had hit European shores.
Trade flourished within the Dutch Republic in the 1500s; image licensed
When tulips made their way to Holland in 1593, these notoriously finicky plants were placed under the care and supervision of a group of professional cultivators. Due to their rarity and beauty, they quickly became an obligatory mainstay in the gardens of the region’s rich and famous—a status symbol of the elite. Human nature being what it has always been, the masses of the middle class, primarily merchants, became obsessed with owning tulip bulbs, both for their own egos and as a profit center. These plants were so unique, and their varieties so diverse, that members of every class of Dutch society wanted in on the action. 6 Penn Wealth Report
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Tulip mania grips—and then torches—a society By 1634, tulip mania was sweeping through the region. Bulbs of the more rare varieties of the plant were suddenly selling for as much as six times the average citizen’s salary. In one case, a thriving brewery was traded for one bulb of the Tulipe Brasserie variety. Those without the guilders to pay outright for bulbs began to barter their homes for a piece of the action; others were allowed to buy using an early form of the margin loan—with the principal and interest to be paid back using the profit from the subsequent sale of the bulbs. When the speculation became so fevered that ordinary citizens could not afford even the most common of bulbs, the nightmarish hangover began. By early 1637, prices began to dive and owners were forced to sell their prized possessions to pay off their debts. While there are wild stories of some tulip bulbs reaching 10,000 guilders in price, it is reasonably certain that bulbs selling for around 200 guilders in late 1636 were suddenly being liquidated for something more like ten guilders—a 95% drop in value. For those who bet the farm—often quite literally— on the rich promises that came with trading tulip bulbs, their financial futures were in shambles. While the nation’s economy remained relatively unscathed, the lives of those in an extensive number of individual families were deeply affected. Many spent the rest of their lives trying to pay off the debt they incurred from the foray. There are so many timeless lessons to be gleaned from the bubble that was tulip mania. Financial engineering has come a long way over the past four hundred years, devising all types of new schemes, but human nature hasn’t changed a bit; and that is an explosive mix. The same cause and effect, the same greed and fear, that existed in 17th century Holland surges through today’s markets. When people hear about others hitting it big in this scheme or that, it is natural for them to want a piece of the action. While it is now easier than ever for ordinary citizens to take part in complex trades once limited to the elite, it is critical to live by the creed “caveat emptor,” let the buyer beware. Copyright 2021. All Rights Reserved.
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Jan Brueghel the Elder’s portrait of tulips and other flowers in vase, circa 1600-1625 Photo in the Public Domain