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Apple and Amazon disappoint Wall Street. Cleveland-Cliffs shorts return

Written By | Oct 29, 2021
Apple and Amazon, Cleveland-Cliffs shorts

Inflation catches up with everyone on Wall Street. Cartoon by Branco. Reproduced with permission and by arrangement with Legal Insurrection. (See link below)

WASHINGTON – As we enter into the final hour of trading on the final day of the trading week, stocks remain confused to end a week of continuing confusion. Oil and gas stocks remain under pressure, even as oil ticked up a bit Friday afternoon. Tech took a hit as well, as Apple and Amazon reported disappointing earnings, largely due to supply chain issues (Apple) and rising fuel and shipping costs (Amazon). Meanwhile, one of our favorite stocks is under attack again as those Cleveland-Cliffs shorts return.

Apple and Amazon encounter problems largely due to Bidenomics. Which they likely supported…

A great many businesses share this latter problem as Bidenflation continues to push fuel costs skyward even as his unconstitutional vaccine “mandates” drives workers who refuse the vax out of the workforce, along with law enforcement officials and healthcare workers. Whose government is this, anyway? Apple and Amazon tend to ignore this problem, even though both companies’ undying support for left-wing anti-capitalists could emerge as the cause of their businesses’ downfall.

Biden Press Secretary Jen Psaki’s advice to US citizens? But less stuff now and for Christmas. Take that, Amazon! And less device sales for Apple, at least near-term. But how, Jen, will that slow inflation when it’s not working-class and middle-class consumers who cause the nation’s current economic problems? Maybe she’ll circle back to that one later. Maybe Apple and Amazon (both NASDAQ: AAPL and AMZN) will reconsider who they will support in Election 2024. Na-a-a-ah…

Like Apple and Amazon shares, Wall Street and Mr Market stay confused

At any rate, Wall Street and Mr Market remain as confused as they can possibly be to end this confusing week. As we write this column, circa 3 p.m. ET, the Dow occasionally peeks up a bit from flatline, while the broader-based S&P 500 and the tech-heavy NASDAQ hover just below it.

The latter has recovered from the earlier hit, however, that Apple and Amazon dealt this market average at Friday morning’s opening bell. Investors apparently understand that both companies’ current issues may likely prove transitory.

Cleveland-Cliffs shorts return. Again. Even after record earnings

In other sectors, namely Materials, our more or less current favorite stock, Cleveland-Cliffs (NYSE: CLF), which recently reported spectacular earnings, giving a lift to its shares, remains under pressure. For the second day in a row, the predictable Cleveland-Cliffs shorts have returned. With stunning, irrational regularity, Cleveland-Cliffs sellers and die-hard short-sellers continue to pound these profitable shares back from their recent gains. They’re always out there lurking. Like Jason. Or Michael Myers.

If the shorts drive these shares low enough, again, we may increase our position. The short position in these shares continues to hover around 10-11% as it has for at least two or three years. This remains true even though Cliffs is no longer the same company they shorted vigorously many years ago, when this former coal and iron ore mining company got clobbered close to bankruptcy for overspending on international coal assets. Right at the time when fossil fuel loving Barack Obama declared he’d put coal miners out of business. Which proved one of few promises he actually delivered on, which is plain to see.

Cleveland-Cliffs gradually offloaded the coal mines and refocused on iron ore. Once the company’s new management had worked its way out of horrendous indebtedness, it carefully and methodically embarked on fundamentally changing its business model, acquiring two small steel manufacturers and building a new, state-of-the-art iron ore hot briquetting facility in Toledo, Ohio. And just last week Cliffs acquired one of America’s largest scrap steel recycling companies.

Let no good business decisions go unpunished

Cleveland-Cliffs is now a vertically integrated steel manufacturer. In the process, it became one of the nation’s lowest cost steel manufacturers as well. That’s largely due to its emphasis on cheaper and more environmentally friendly electric arc furnace mills. But analysts continue failing to notice. That allows those pesky Cleveland-Cliffs shorts to continue their nefarious deeds. And this, in turn, holds this deserving company and its shareholders back from a justifiably higher stock price.

But investors in CLF shares are gradually realizing stronger and stronger gains in the stock. This remains true even if each gain is followed, automatically, by heavy selling. When investors finally wake up and discover that Cliffs has ceased to be a purely Materials-oriented company and has now become a full-fledged Industrial sector stock, we might finally enjoy the Mother of All Short Squeezes. Until then, it’s little baby steps up in these shares. We’ll wait.

But if you find this story appealing, do your own due diligence. We talk about our investments and divestments here, but we don’t recommend anything. Unlike our friends in Washington, we avoid even the appearance of impropriety.

Have a good weekend.

Headline image link: Cartoon by Branco. Thanks and a link to the source, Legal Insurrection.

Terry Ponick

Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Senior Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17