Where to Put Your Money During a Banking Crisis; Hindenburg Research report on Square; Behind Adani Deals, an 'Elusive' Elder Brother; This Uranium Miner is Radioactive; Debate on Sigma Lithium; Fatal avalanche on Colchuck Peak

1) I don't think depositors need to worry, but there's some good advice in this Wall Street Journal article about where to earn decent returns on your cash: Where to Put Your Money During a Banking Crisis. Excerpt:

This year's market turmoil has sent nervous investors rushing to cash. But protecting your money isn't as simple as parking it in a mattress.

Despite recent strains in the banking sector, a bank account remains the simplest place to store cash. Balances up to $250,000 are protected by the Federal Deposit Insurance Corp., or FDIC, at any U.S. bank.

But checking accounts still offer almost no return on that money, and there are higher paying alternatives. Those include high-yield savings accounts, money-market funds, certificates of deposit, and short-term Treasurys. All of those are boasting interest rates around 3% to 5%.

Financial advisers note that holding cash means missing out on any gains, along with the losses, and caution against market-timing.

2) Activist short sellers have been busy the past couple of weeks...

They're always worth listening to, even if you ultimately conclude that their bear case isn't persuasive. And, overall, they're a healthy part of our markets, so it's almost always wrong to demonize them, as my colleague Herb Greenberg noted last Thursday in an Empire Financial Daily essay: Don't Blame the Short Sellers for the Fall of SVB.

The most interesting short report to me was Hindenburg Research's missive on Block (SQ) because it's authored by one of the best-known activist short sellers whom I respect a great deal, and because the stock is an open recommendation in Empire Stock Investor.

You can read the report here: Block: How Inflated User Metrics and "Frictionless" Fraud Facilitation Enabled Insiders to Cash Out Over $1 Billion. Excerpt:

• Block Inc., formerly known as Square Inc., is a $44 billion market cap company that claims to have developed a "frictionless" and "magical" financial technology with a mission to empower the "unbanked" and the "underbanked."
• Our 2-year investigation has concluded that Block has systematically taken advantage of the demographics it claims to be helping. The "magic" behind Block's business has not been disruptive innovation, but rather the company's willingness to facilitate fraud against consumers and the government, avoid regulation, dress up predatory loans and fees as revolutionary technology, and mislead investors with inflated metrics.
• Our research involved dozens of interviews with former employees, partners, and industry experts, extensive review of regulatory and litigation records, and FOIA and public records requests.
• Most analysts are excited about the post-pandemic surge of Block's Cash App platform, with expectations that its 51 million monthly transacting active users and low customer acquisition costs will drive high margin growth and serve as a future platform to offer new products.
• Our research indicates, however, that Block has wildly overstated its genuine user counts and has understated its customer acquisition costs. Former employees estimated that 40%-75% of accounts they reviewed were fake, involved in fraud, or were additional accounts tied to a single individual.
• Core to the issue is that Block has embraced one traditionally very "underbanked" segment of the population: criminals. The company's "Wild West" approach to compliance made it easy for bad actors to mass-create accounts for identity fraud and other scams, then extract stolen funds quickly.

I think Hindenburg raises some legitimate issues that Block will need to quickly address.

That said, this would have been a much more compelling report when SQ shares were above $250 as recently as 17 months ago.

But yesterday the stock closed at $63.76, which raises the question: Having lost more than 75% of its value and only trading at 2.3 times trailing revenues, isn't most of the bear case already reflected in the stock price?

I'm going to do some more digging, but for now I wouldn't recommend dumping the stock...

3) Speaking of Hindenburg Research, here's a WSJ article following up on its recent report on India's Adani Group: Behind Adani Deals, an 'Elusive' Elder Brother. Excerpt:

Gautam Adani is the public face of Adani Group, the sprawling Indian conglomerate that has been accused by an American short-seller firm of stock manipulation and accounting fraud.

Behind the scenes, another family member has played a pivotal role in the company – and the activities that critics say misled investors: his elder brother, Vinod Adani.

For decades, according to allegations published by Hindenburg Research, the elder Mr. Adani was instrumental in managing overseas shell companies that Hindenburg says Adani Group used to manipulate the stock price of Adani companies, and artificially boost the financial health of its family-run firms in ways that were hidden from investors.

4) My old friend Sahm Adrangi of Kerrisdale Capital published this bearish report on Uranium Energy Corporation (UEC): This Uranium Miner is Radioactive. Excerpt:

We are short shares of Uranium Energy Corporation, a "fast growing" $1.2 billion uranium miner that has indeed exhibited a blistering growth rate since its entry into the uranium business in 2005, but on the wrong metric – shares outstanding, the company's best-selling product, which have grown by an astounding 10x over that time. Revenue from selling mined uranium has been much less consistent, first making an appearance in Fiscal 2012 and last seen in Fiscal 2013.

Over the course of the last two uranium bull markets – in 2006-7 and 2010-11 (the latter abruptly cut short by the Fukushima accident) – UEC completely failed to exploit the run-up in prices, only belatedly mustering a meager half million pounds of mined uranium – unprofitably and inconsistently – between 2012-2013. While we're presently optimistic on uranium prices and believe that they need to rise to meet continued demand growth, we don't expect UEC – or its shareholders – to be any more successful this time around.

5) I also think it's healthy that there's a group of short activists critiquing other short activists' work, as the anonymous folks at Fiat Lux Partners are doing. Here's their initial rebuttal of Grizzly Research's short report on Sigma Lithium (SGML):

And a follow-up:

I don't know this company or stock, so I can't opine on this debate... but I know it's important and we should have more of this.

6) I don't just think about risk in the markets, but also in my personal life – from car safety to riding my bike on crowded Manhattan streets to backcountry skiing, mountaineering, and rock climbing.

My professional climbing guide sent me this accident report from a small avalanche on Colchuck Peak (in the Stuart Range in Washington state) on February 19 that swept four members of a group of six climbers down 1,000 feet, killing three of them.

Here's a photo from the report, showing where it happened:

These climbers didn't have radios for communication among one another, nor avalanche beacons, nor Garmins to call for help (their cell phones didn't work)... and, most amateurish (and fatal) of all, three of the four climbers caught in the avalanche weren't wearing helmets! Guess which one survived?

This is why I always climb with a professional guide (and why, when I traveled in Ukraine for six days earlier this month, I was in an armored vehicle driven by a special forces professional, with four more pros in an escort vehicle).

If you're going into a dangerous area and aren't an expert with lots of local knowledge, HIRE PROFESSIONALS TO GO WITH YOU!

Best regards,

Whitney

P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.