The Wrap – But Aren't Stocks Supposed To Go Straight Up? - Herb Greenberg
Herb Greenberg’s latest Red Flag Alerts report cautions that, despite rising stock prices and broadly bullish market sentiment, several large cap companies face meaningful risk from weakening fundamentals, inflated guidance narratives, and unsettling similarities to past market bubbles. The analysis focuses on how headline driven rallies, such as Corning’s 16 percent surge tied to a fiber deal with Meta and Adtalem’s so called “raised guidance,” can obscure fragile business models, legacy debt burdens, and cyclical overvaluation patterns that echo conditions seen during the dot com era.
Ticker Symbols: GLW (Corning), ATGE (Adtalem Global Education)
Position Disclosure: No stock positions stated by author
Report Type: Independent research and market commentary
Core Investment Risks Identified:
- Headline Euphoria vs. Reality: Strong consensus views and positive press releases can conceal weakening fundamentals. Enrollment pressure, elevated debt, and fragile growth narratives leave widely favored stocks exposed to abrupt corrections.
- Corning’s Dangerous Déjà Vu: Corning surged roughly 16 percent on a $6 billion fiber optic deal with Meta. The move recalls late 1990s fiber enthusiasm that pushed Corning toward a $100 billion market cap before capacity gluts and debt contributed to a collapse of nearly 99 percent.
- Adtalem’s Misleading Spin: Adtalem highlighted a “tenth straight quarter” of enrollment growth and raised guidance. Underlying trends point to slowing momentum, and post earnings trading suggested investor doubt beneath optimistic headlines.
- Short Selling Still Relevant: Market veterans such as Jim Chanos and Doug Kass argue that traditional short selling discipline still applies. Avoiding crowded trades while targeting consensus favorites with weakening fundamentals can remain effective even in strong markets.
- SPAC Resurgence as Warning Signal: Renewed speculative SPAC activity and social media driven narratives point to frothy conditions and cyclical excess similar to earlier market bubbles.
- Technical vs. Fundamental Disconnect: While the S&P 500 pushes above 7,000, sharp intraday reversals and FOMO driven momentum reflect enthusiasm not clearly supported by business fundamentals.
- Historical Pattern Recognition: Prior episodes such as Iomega’s 2,000 percent dot com era surge before collapse, alongside Corning’s fiber bubble, illustrate how rallies can unwind quickly when valuations lose fundamental support.
Notable Facts and Market Nuggets:
- Corning’s Bubble History: At its dot com peak, Corning reached nearly $100 billion in market value before collapsing by roughly 99 percent as fiber optic capacity gluts and rising debt overwhelmed the business. Current market value is cited around $88 million, with renewed concerns about leverage resurfacing.
- “Taxi Driver” Moment Alert: Market observers point to FOMO levels associated with peak euphoria phases, where even casual participants chase momentum stocks, a classic contrarian warning signal.
- Solar, Not Fiber, Driving Recent Gains: Corning’s 100 percent plus run over the past six months has been largely driven by its solar exposure rather than core fiber optics, complicating the Meta deal narrative and raising questions about segment durability.
- Adtalem’s Post Earnings Whiplash: Adtalem jumped pre market on “raised guidance” headlines, then reversed sharply after earnings, signaling that informed investors were skeptical of the underlying story.
- Short Selling Book Preview: Mark Roberts’ forthcoming book, Off Wall Street: How to Win at Short Selling by Betting Against the Crowd, argues that while market mechanics evolve, the core discipline of identifying overhyped consensus names remains intact.
- Gold Price Speculation: Market commentator Bob Howard and others debate whether gold could spike sharply, reflecting broader uncertainty and increasingly narrative driven investment behavior.
- Premium Member Perks: Greenberg’s Red Flag Alerts service includes private Zoom briefings, Special Situations coverage, and access to non mainstream themes for subscribers seeking deeper analysis.
- Backdoor Investment Themes: Coverage extends to under the radar opportunities in AI infrastructure and longevity related plays, including companies like Danaher, where non headline catalysts may drive future returns.
FAQs
What is the main thesis of Herb Greenberg’s Red Flag Alerts analysis?
The core argument is that even legitimate, large capitalization stocks with strong consensus support can materially underperform when fundamentals such as enrollment trends, debt levels, or cycle driven valuations fail to justify headline fueled rallies. Bullish momentum alone does not protect stocks from sharp corrections when the business reality weakens.
Why is Corning highlighted as a concern?
Corning is used as a case study in historical repetition. A recent 16 percent surge tied to a $6 billion fiber optic deal with Meta echoes the late 1990s, when fiber enthusiasm pushed Corning close to a $100 billion market value before a collapse of roughly 99 percent driven by capacity gluts and debt. Recent gains have been driven largely by solar exposure rather than fiber, while leverage concerns persist, raising questions about whether optimism is again outrunning fundamentals.
What issues are identified with Adtalem’s earnings announcement?
Adtalem emphasized raised guidance and a tenth straight quarter of enrollment growth, but that framing obscured slowing momentum and broader sector pressures. Post earnings price action, including sharp reversals after early enthusiasm, signaled that informed investors were skeptical of the headline narrative.
Is short selling still viable in today’s market?
Yes. Market veterans such as Jim Chanos, Doug Kass, and Mark Roberts argue that the core discipline of short selling has not changed. The focus is on avoiding crowded trades and instead targeting consensus favorites where enthusiasm masks deteriorating fundamentals, a middle ground that can still offer opportunity even in bull markets.
What role do SPACs play in the analysis?
The resurgence of Special Purpose Acquisition Companies is treated as a warning signal. Renewed SPAC activity, amplified by social media narratives, reflects speculative excess and cyclical overextension similar to patterns seen in past bubbles.
What is meant by “headline driven rallies”?
The term refers to sharp stock moves sparked by press releases, earnings beats, or deal announcements that are not supported by durable business strength. These rallies can hide weakening trends, rising leverage, or unsustainable growth assumptions that eventually reassert themselves through corrections.
Do Herb Greenberg or his organization hold positions in the stocks discussed?
No. The disclosure states that no positions are held in the companies analyzed. The work is presented as independent market commentary based on publicly available information.
What are the key takeaways for investors?
Investors are urged to look past optimistic headlines, recognize recurring bubble patterns, accept that even high quality large cap names can underperform when momentum exceeds fundamentals, question whether index strength reflects durable growth or FOMO driven enthusiasm, and treat recurring warning signs as reasons for caution rather than confirmation.
Where can the full analysis be read?
The complete piece is available at https://www.herbgreenberg.com/p/the-wrap-but-arent-stocks-supposed
Who is Herb Greenberg and what is Red Flag Alerts?
Herb Greenberg is a veteran financial journalist and market skeptic known for forensic analysis of earnings quality, balance sheets, and consensus driven narratives. Red Flag Alerts is his subscription research service focused on identifying warning signs in popular stocks, market cycles, and headline driven stories that may mask underlying risk.
Important Note: This summary is not primary research but a condensed overview of a comprehensive analysis conducted by Herb Greenberg and co-writer Katherine Spurlock. For complete data, methodology, and deeper analytical context, readers should consult the full original report. All findings, opinions, and conclusions presented here are attributed to the original authors.
Original Research Credit: Herb Greenberg, Red Flag Alerts
Source: The Wrap: But Aren't Stocks Supposed to Go Up?
Disclosure: Author reports no stock positions in companies discussed.
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