By Ross Silver
Chief Entertainment Officer, Sylva International
Unfortunately no Greg this month, just me. Greg will be back next month, he is moving into his new office as this is being published. When Greg returns next month, be sure to have your dictionaries ready for his vocabularic battery. So what’s up with this title you may be asking, “Where’d Who Go”? Well the answer to the question is investors. In the stock market, more ownership seems to be concentrated in fewer hands. That’s been a worry for at least a century, since Louis Brandeis wrote his book “Other People’s Money.” Once upon a time, investors used to receive stock certificates which they likely kept in a safe or in a safe-deposit box at the bank as proof that they owned a certain number of shares in specific companies. This is no longer the case, as everything is electronic and to receive a physical certificate these days is expensive and a mega pain to deposit when you want to sell it. So the modern day shareholder is an electronic shareholder and with that many shareholder rights are forfeited which we will not get into but just look at the concentration of ownership in any Dow 30 company and you will see why your 100 shares of say WalMart (ticker: WMT) mean nothing given Vanguard owns 100M+ shares. For fun, one of you reading this should call the head of IR at one of these Dow 30 companies and demand to speak with the CEO as you have concerns regarding the company’s operations. You have about as much of a chance to speak with the CEO as I do climbing Mt. Everest in flip flops and a Capri Sun. On top of that, the brokerage houses are lending out retail shareholders stock, likely without them having the slightest clue. For those of you who have brokerage accounts, call your brokerage firm and ask them if the shares of a company you own are available for someone else to borrow, the answer is likely yes. Pretty shocking right?
So the concentration of investors and also the concentration of money aka ETF’s is something we all should be worried about as this will ultimately lead to a wicked and nasty downturn when it comes. Why? Let’s start with who counts as a shareholder and the disappearance of investors. Under Securities and Exchange Commission rules that conform to a 1934 federal law, companies don’t have to count every Joe and Jane Investor as a shareholder. Instead, they need only list the institutions that represent Joe and Jane — such investing behemoths as BlackRock, Charles Schwab, Fidelity Investments, Morgan Stanley or Vanguard Group. Often, Depository Trust & Clearing Corp., an industry-owned organization that handles trades for brokers and asset managers, stands in for many big firms as shareholder of record.
Per an article by Jason Zweig of the Intelligent investor, “Computer-graphics giant Nvidia Corp. has 534 million shares outstanding and a stock-market value of more than $25 billion. The company’s official shareholder count is 342 shareholders, but Nvidia estimates it has at least 200,000 shareholders in total, says spokesman Ken Brown. The trend is accelerating. Twenty years ago, according to S&P Dow Jones Indices, the typical company among the largest 1,500 stocks had 3,342 shareholders of record. By the end of 2010, that was down to 2,689. At Dec. 31, 2015, the median number of official shareholders had shrunk to 1,969. Among all stocks tracked by S&P Dow Jones Indices, shareholders of record have shrunk to a median of 352 today from 1,626 two decades ago.” This is alarming, it seems the power of any publicly traded company seems to befalling into fewer and fewer hands.
As for ETF’s, oh boy. ETF’s are becoming the stock market equivalent of WMD’s and I am certain that one day, some fund that holds an ETF or ETF’s gets a mega redemption notice and as such triggers a massive sell off of the ETF or ETF’s as all these ETF’s seem to be algo managed (algo=algorithm). That day will come and when it does it will be ugly and for those of you blindly throwing money at ETF’s that have outperformed active managers, watch out. Those of you wondering what a mega redemption is, an example would be Sylva Intl deciding it doesn’t want to hold $4B (I wish we had that much money) worth of ticker: DIA (a popular DJIA tracking ETF) and deciding to sell that day. That would trigger a massive drop in the DJIA and the companies included in the Dow 30 would be down a few percentage points just from Sylva’s sale alone. Since these trading algo’s are so singular in their response to a sale like that, it would auto trigger multi-billions in sales of the Dow 30 companies and as such a collapse would begin. Lets just hope some billionaire doesn’t get jumpy and decide to go from equities to the “safety” of cash or gold one day because if that happens, carnage ensues.
As a funny aside, a friend of mine who teaches 8th grade asked her class of approximately 40 students what they wanted to be when they grew up. For those wondering what knucklehead Ross Silver wanted to be in 8th grade, the answer was President of the United States. My friend told me, not one of her students wanted to be President and over half her students marked unsure. Every generation knocks the other for being softer than their own but holy uncertainty Bat Man. Over half the class has no professional aspiration? Parents, get off your “smart” devices and teach your kids a craft. An 8th grader should at least have some idea of what they want to be. One kid who responded said she wants to be Kim Kardashian, yep, welcome to 2017!
Our “Sylva Standouts” are included in the hyperlinks below. Remember to read our disclaimers and disclosures as it relates to investing in anything we write about. Good luck with your investments. Have a wonderful month and we will report back in August. If you need more Sylva in your life, who doesn’t :), check out our daily ramblings on Twitter at https://twitter.com/SylvaCap?lang=en.
Resources (mining): https://sylvacap.com/resources-stocks
July Stock of the Month is Verastem, Inc. (Nasdaq: VSTM): https://sylvacap.com/verastem-home-page/
Disclaimers & Disclosures: For a full list of disclaimers and disclosures, please visit: