What a $12,500 cocktail and a $78b EBay bid say about our red-hot markets

The Australian and US economies are both red-hot, but our respective sharemarkets have diverged sharply.

If anyone needed a reminder why the local sharemarket has been down almost every session for a stretch that began well before Anzac Day, the Reserve Bank’s interest rate hike on Tuesday should have been a sharp reminder.

But this dour mood is not shared in the US, where AI euphoria has continued to drive shares to fresh highs.

Some of this exuberance is understandable. Global tech giants like Google, Microsoft and Amazon are driving an extraordinary lift in capital investment to more than $1 trillion this year to build more data centres.

This high-octane environment has also minted unthinkable fortunes for a colourful range of characters, including an Aussie/Kiwi who allegedly bought the world’s most expensive cocktail at Crown’s Melbourne casino in 2013 – right before he was banned for reasons that remain in dispute.

James Manning is one of the founders of Aussie AI startup Sharon AI, which started just two years ago but is already listed on the Nasdaq with a billion-dollar valuation. The firm is expected to launch a dual listing on the ASX as early as next month.

So it was not a great time for professional short seller Bleecker Street Research to drop a report this week alleging Sharon heavily relied on “phantom contracts” with a shadowy Indian intermediary, as well as questionable related party transactions and financing.

The report also shed light on Manning’s acrimonious exit from the bitcoin miner, Mawson Infrastructure Group, which ended its legal battle with him in 2023 with a $2 million payout.

Manning declined to comment on allegations in the report, but is scheduled to spruik his ASX listing at the Macquarie Australia Conference this week.

The report didn’t even mention the most interesting story from Manning’s past, a possible role in an alleged high roller scam at Crown casino in February 2013.

Manning was a VIP customer when he embarked on an extraordinary winning streak on the card tables netting him $32 million.

But Crown executives became suspicious of his astounding luck responsible for some of his winning bets and questioned whether Manning may have received help – possibly from a Crown insider.

Manning has reportedly denied any wrongdoing, but was later banned from the casino. This raised a problem, though. Crown had already publicised that Manning would pay a world record $12,500 for “The Winston” – a cocktail made with 1858-vintage Croizet Cuvee Leonie cognac.

Despite reports from this publication that the subsequent “sale” of the cocktail was faked, with another Crown customer stepping in, it officially remains a Guinness World Record.

But in an AI world, it doesn’t seem to matter. The short report was an abject failure, with Sharon AI’s shares rising strongly in US trading following its release.

The impact on a potential ASX-listing remains to be seen, but the fact that Manning, and three other Sharon AI executives, have iron-clad control of the company with 75 per cent of voting stock would normally give investors pause for thought under these circumstances.

AI has not been the only thing keeping the US market in a euphoric mood this week.

The $US12 billion gaming group GameStop has announced a bid for the vastly larger e-commerce veteran EBay.

For those with short memories, GameStop gained notoriety as a meme stock in 2021, soaring over 1,500 per cent in a week thanks to a social media frenzy against so-called big corporate short sellers.

GameStop is offering $US56 billion ($78 billion) in cash and its shares for eBay. And both groups have good reason to consider the desperate deal. GameStop has been closing its physical stores as its gamer customers move their purchases online. EBay has been trying to adapt to changing consumer preferences and fresh online competition.

But the biggest winner from any deal would be GameStop boss Ryan Cohen, who would receive more than 170 million share options if he lifts the group’s market valuation above $US100 billion.

It all shows that, if there is a limit to the US sharemarket’s decoupling from global realities, we haven’t found it yet.

It’s all a long way from the reality of the ASX200.

Our central bank has now erased all of last year’s rate cuts, and more rises are expected to help douse a red-hot, energy-induced inflation spike.

That cost spike is already working its way through the supply chains of Australia’s largest companies – and hitting customer demand – which shows the impact of the war in the Middle East is only just starting to hit their bottom lines. The ASX200’s decline reflects the fact that even giddy local investors are being forced to face this reality.

Westpac joined the other big banks on Tuesday in raising bad debt provisions in expectation that a faltering economy will be too much for some borrowers.

Even tollroad operator Transurban is feeling the heat as higher petrol prices slowed traffic growth last month.

Pubs and pokies group Endeavour reported that its reliance on these vices have not protected it from a recent sales slowdown as customers sober up and save money. On top of that, rising costs of transporting its goods weigh down profits.

An update from CEO Jayne Hrdlicka this week signalled that the company will increase its booze stock by $400 million compared to last year to protect against supply chain “constraints” induced by the Middle East conflict.

When a pubs and pokies operator starts feeling this much heat, you know there’s trouble ahead.

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