This is one of the cases when the theory of financial market efficiency is not quite true. After a momentary breakout at the beginning of the year, the shares of the vehicle rental company - Hertz, are falling at an alarming rate. A normal investor would expect that such an entity does not have a bright future ahead, especially when Hertz has declared bankruptcy and has billions of debts to pay, which means that little will remain in the bankruptcy estate for shareholders. However, this does not stop thousands of investors buying like crazy shares of Hertz.
Such data provides us with the Robin Hood platform, which is one of the most popular places to buy "shares" in the US for individual investors. While the valuation of Hertz shares fell to very low levels, the number of shareholders increased by 50%, reaching 60,000!
New Monetary Theory
This behavior could be theoretically explained in two ways. First of all, we have been dealing with central banks for several weeks, which in one voice have stated that they will print as much money as needed and nothing to worry about. This was valuable information for investors who know that central banks will always save financial markets from a deeper collapse.
Secondly, investors have well remembered the famous saying 'buy when blood is shed'. And although in this case the blood has really spilled so much, it does not mean that we have any inflow of its fresher version. Below is the valuation of the Hertz stock.
Just three months ago, USD 21 was paid for one Hertz share. Today it is just 0.9 USD. We are dealing with a decrease of 95% in 3 months!
Although it's worth bearing in mind that the US Fed is already the proud owner of Hertz's multi-billion dollar bonds. So officially we are dealing with the situation when the central bank rescues private enterprises, and all this is paid by taxpayers.
!! - !! - !!
Does this sound fantastic? It is a pity that for the management of the company and not all citizens.
