The large amount of liquidity in the current market has led to some unusual stories – stories that too well illustrate why the financial world easily loses touch with reality. The story of Hometown International, Inc. is told with humor and insight in a recent short article in The New Yorker. The article details how a small deli in New Jersey chose to go public including refusing to state that they were a shell company since after all they were an operating business. A deli with average sales of about $80 per day. The New Yorker goes on to test the deli’s pastrami sandwich to see if there was a “special sauce” that made it worth $2 billion at one point but later returned to a less stratospheric level of $100 million.
More information on the financial activities was available from an article in the Financial Times. This article noted that included in the investors of Hometown International, Inc. were the endowment funds of two major US universities, Duke and Vanderbilt. These investments appear to be made by an Asian asset manager on behalf of the universities. It would also appear that the ultimate goal is to use the entity to be a cheaper version of a SPAC (special purpose acquisition corporation).
Many bankers claim that all this innovation is good for the overall economy but is that so or merely a chance for bankers to make fees that can be used to pay their bonuses? And is it responsible for university endowment funds to support this type of speculative activity?
