As far as the end of 2022 was concerned, there was certainly very little to celebrate apart from the way that it was finally over. We went not perhaps from a bull market this time last year, but not far off, to the most illiquid bear market.
Sudden inflation, rising interest rates and a land war in Europe, all meant that there was at least initially not too much to recommend as far as the small-cap space.
From Bull To Bear
However, what we do know is that it is not necessarily bear markets that cause the most pain, it is the move from bull to bear, as the tide goes out that really hurts. Now at the start of 2023, we have had our calamitous fall. There may be more, but presumably, those who are left to participate are now used to the lay of the land.
Wall Of Worry
At the same time, the biggest rallies for the stock market are known historically to be derived from the climbing of a “wall of worry.” This is a pretty good description of the way that the FTSE 100 has pushed to four-year highs. It has additionally done so despite all the doom and gloom in the financial media, economists looking for recession, and everyone else complaining about the Tory Government, and how Brexit has been a disaster. Indeed, it never ceases to amaze me how financial commentators, whether journalists or “experts” tend to get it all so wrong. Luckily, they do serve a purpose in terms of being a counter-indicator. Presumably, when the likes of the Financial Times start getting bullish, it will be time to go short of the stock market.
Online Share Tipping
In fact, the comment of the week in the financial press was arguably not to do with the direction of stocks – they are normally counter-indicators, it was to do with the apparent need to regulate or presumably ban, online share tipping. I am of course presuming that the article was not merely sour grapes, as the best of Twitterati are much more informed than much of what you read in the papers regarding the stock market. It is very much the case that in recent years people look to online sources on small caps, as since the internet arrived coverage of small caps in the financial press has effectively died. Part of the reason people look online for share tips is that there are hardly any in the papers anymore. Indeed, #ARB on Twitter for instance, is a rather better place to start if you want to know what the lay of the land on a stock is, even that Googling News.
There are also a few more aspects to mull over here from the article in Times describing online share tipping as the Wild West. The first is caveat emptor, a concept which as you can tell by the Latin origins of the phrase existed well before the FCA or the SEC. If you read something online or anywhere else, you should be grown up enough to decide on its merits. If you are not grown up, you should not be in the markets.
The second point is that of free speech. If there was a ban on online share tipping, then would this not be an infringement of free speech? True, this ship has already sailed given the arrival of political correctness / woke, but it would be a blow in this respect.
The third point is another Latin phrase,” quis custodiet ipsos custodes.” And actually, this is perhaps the key one given that we are in a Nanny State and Soviet style free speech regime. The problem with having a guardian like the FCA, or “sheriff” as Mr O’Connell describes is that they tend to become judge and jury. True, they may catch the odd wrong’un, but driven by performance targets, their own prejudices, and the need to make money, they merely become judge and jury. The resulting climate of fear, means the creation of a big, bad wolf rather than a sheriff: where absolute power corrupts absolutely. Indeed, there is a fine line between sheriff and mafioso. In such situations, it is not so much tipping, but tip offs that rule the day, where people who have a grudge “sneak” in order to try and cause the downfall of others. This would take us to the area of the vigilante, not the sheriff.
Argo Blockchain / Mode Global
On a rather lighter note, there was something of a trickle down to the small cap area from the rise of the FTSE 100. In fact, the trickle down was to a rather surprising area, that of a couple of the main cryptocurrency plays, who did not exactly shine in 2022. Even more gratifying was the way that the rebound in both Argo Blockchain (ARB) and Mode (MODE) was big enough to be a pie in the face for bears of both stocks and cryptos in generally. Indeed, the rebound reminds us of a rule in the financial markets, that very often it is the stocks in a particular area that are the leading indicator of recovery. It will be interesting to see whether the start of 2023 witnesses a bounce for digital assets? If it is, the arrival of crypto and fiat banking platform Tap Global, after the RTO with Quetzal this week could be timely.
Hvivo / Hemogenyx
Also on a brighter note this week, a couple of my stocks to watch for 2023 were in focus. It was enjoyable that Hvivo (HVO) finally responded in a decent way to the latest in a long line of chunky 7 figure contract wins. Hemogenyx (HEMO) shares finally seemed ready for a breakout through 2p as the biotechnology company completed its second process qualification run of the end-to-end process for the manufacture of HEMO-CAR-T cells. This is the runway to the company getting IND new drug application as to FDA requirements.
A favourite type of company announcement is when it has to deny it knows of any reason for a share price rise, and then the stock price goes up even more. This wonderful scenario panned out for GreenX (GRX) when faced with an ASX price query. Given that regulators seem to hate it when share prices rise sharply (sour grapes perhaps), this is exactly the kind of reaction non-regulators like to see.
For Sound Energy (SOU), it has been a good start to 2023, helped along perhaps by comments given by CEO Graham Lyon, that Morocco is set to become an energy exporter. In December the company said it making good progress targeting near-field opportunities within the TAGI play in Eastern Morocco assets of Grand Tendrara and Anoual and also progressing its seismic campaign in Essaouira Basin covered by Sidi Moktar.
Perhaps ironically, it was surprising that Nanoco (NANO) was only up 30% on the week, after offering up a settlement with Samsung. Indeed, we were reminded by this that there is nothing that really brings out the sellers than a genuinely transformational piece of good news. Hopefully, once they are all out the stock can really get going.
Finally, it maybe worth mentioning the move for Hydrogen Utopia (HUI) to the main market of the LSE, having started its life this time last year at 7.5p on Aquis. Now at 16p and with a market cap of over £60m, the company has managed to get over the (ridiculously high) £30m minimum required to get onto the standard list. Even more unfair than the £30m rule has been the way that since it came in so many “shells” have got onto the standard list, grandfathered in from before the rule came in.
And as a valedictory point to answer the “Wild West” article in The Times above, there has been no mainstream media coverage of HUI getting onto the LSE, even though from the perspective of anyone who knows the markets this is a newsworthy story. The combination of it being one of the rare successful IPOs of 2022, and it is a potential cure to the waste plastic crisis / a renewable energy play, is not good enough to prevent it from being “shadow banned.”
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