Bubbly. Not a bubble.

RYAN   By Guest Blogger Ryan Lewenza
.

What is happening in these markets?!

I think some people have lost their minds and are throwing caution to the wind. If some people are not careful, someone could get hurt. I’m of course talking about GameStop and AMC Entertainment, which have exploded in value due to Robinhood-horny trading junkies who are joining forces on web chatrooms, essentially pumping and dumping struggling companies to boost their stock prices and profits and cause much pain to the hedge fund companies that are short these very securities. Basically there is a Wall Street ‘David and Goliath’ story currently unfolding on Wall Street and beyond, with billions at stake. Let me explain.

For a number of years there has been a trend of ‘democratization’ of financial services, which basically means making banking and investing easier through the use of technology. This includes things like online banking, lower and more transparent fees, ETFs, roboadvisors, a greater use of technology and specifically apps and chatrooms. Robinhood was the latest iteration of this long-term trend.

Robinhood is a financial technology (fintech) company that combines commission free online trading with an investing app where investors communicate with one another. In these chatrooms, and others like Reddit, they pitch ideas and try to get everyone on board and move stock prices. Well, they’ve been quite successful lately since these renegade day traders have pushed a few struggling US companies from rags to riches in just days, shocking even this well-seasoned investor.

The company getting the most press is GameStop, which, as can be seen below, has skyrocketed from $20 a few weeks ago to $350 on January 27th. How can a struggling company rise 16 times in just a week or two?

First, these Reddit investors look for beaten down companies with large short positions. A short position is simply selling the stock first, then hoping it goes down and buying it back at a lower price. There are a number of big hedge funds that are short these struggling companies with the belief they will fall further and they aim to profit from this.

Second, once they have their short targets they start talking it up in their chatrooms, trying to induce others to start buying shares in the company and getting it moving higher. As this happens it starts to feed on itself as more and more investors rush to buy the stock and bid it up. Then the hedge funds, who are short the stock, get ‘squeezed’ where they have to put in more money as their position drops in value. It becomes a kind of negative feedback loop where more and more investors pile, pushing up prices higher and higher until it inevitably pops.

Some view this as the small retail investor getting back at the big bad hedge funds, who have no qualms over shorting stocks and trying to force companies into oblivion. Essentially, they are getting some of their own medicine.

My problem with all this is: 1) the potential impact to the broader markets and financial stability; and 2) it’s based 100% on pure speculation and market manipulation rather than based on any fundamental research or real economic value. GameStop’s market cap went from US$1 billion at the start of the year to $25 billion in a few weeks! If that’s not rampant speculation and froth then I don’t know what is!

GameStop Rallied from $20 to over $350 in Just Two Weeks

Source: Stockcharts.com

But it’s not just GameStop and AMC where I’m seeing some ‘bubbly’ conditions. Turning to the next market darling – Tesla. Yes I get it, it’s an amazing company on the cusp of a new revolution, but it’s still just a car company, who soon will have much more competition (GM just announced that it will stop selling gas powered cars by 2035). Consider this.

Tesla’s market cap has increased from US$80 billion a year ago to US$850 billion today, just shy of a trillion dollars. If we sum up General Motors and Ford Motor Co, their combined market cap sits at just US$125 billion today. So Tesla is nearly 6 times bigger than both companies combined!

And what do you get for this?

Last year Ford and GM’s revenues were a combined US$240 billion versus Tesla at US$30 billion. On total car sales, Ford and GM sold a combined 7.5 million cars to Tesla’s 500,000 cars last year.

I get that Tesla’s growth prospects are much higher, it’s the extreme valuations I have a problem with.

Tesla is Worth More than GM and Ford Combined

Source: Bloomberg, Turner Investments

I would be remiss if I didn’t bring up Bitcoin. It’s price has surged from US$7,000 a year ago to US$32,000 today or an increase of 3.5 times. I fully admit that I’m stumped about Bitcoin and where it’s heading since I believe it’s based on little actual monetary value. But at the same time, there is a lot demand for a relatively finite currency. If more money is flowing into an asset with limited supply then it could easily go higher in the short-term. But I remain steadfast in my belief that bitcoin is in a bubble and one day could pop.

Is Bitcoin in a Bubble?

Source: Bloomberg, Turner Investments

Lastly, this article (https://ca.yahoo.com/news/robinhood-traders-covid-stocks-142924970.html) gave me a good chuckle recently. It profiles this young couple on how they are making all this money from trading on Robinhood and apparently its super easy. From the article I liked this quote the most, “I see a stock going up, and I buy it. And I just watch it until it stops going up, and then I sell it. And I do that over and over, and it pays for our whole lifestyle.” So that’s what I’ve been doing wrong all these years! I have seen this mania before and it generally doesn’t end well. These traders are confusing luck for skill!

So I am seeing some areas of ‘bubbly’ conditions, but to be clear, I don’t believe this translates into an overall market bubble like that seen in 2000. As I outlined in our outlook report I see the potential for a big economic recovery this year, higher corporate earnings, and very supportive central banks. Give this we’re still bullish on the equity markets for this year, but these ‘bubbly’ conditions could lead to some short-term volatility so be prepared and as always, stick with the balanced and diversified portfolio.

Ryan Lewenza, CFA, CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Vice President, Private Client Group, of Raymond James Ltd.

 

165 comments ↓

#1 crowdedelevatorfartz on 01.30.21 at 9:29 am

Another great article Ryan.

I noticed the stock “traders” that got burned have now taken their wrath out on Robinhood.

https://futurism.com/the-byte/google-deletes-negative-robinhood-reviews

Will the children never learn….

The Golden Rule

Who ever has the gold …..rules.

:)

#2 Adele on 01.30.21 at 9:36 am

Ryan, I like how you use the term “commission free” trading for Robinhood’s business model. Lazier people shorten it to “free” trading. Robinhood gets paid in the form of rebates from market makers. So, are Robinhood customers paying slightly more for the shares that they buy compared to someone who had a trade for the same number of shares at the same time but routed through an exchange? Are the Goliath market makers making a killing from all Davids by front running the trades?

#3 KNOW IT ALL on 01.30.21 at 9:38 am

Have CASH readily available !

2021 is the year of opportunity for “ALL”.

#4 LewenzaCountry aka Prince Polo on 01.30.21 at 9:39 am

Alas, I’m one of those “loser” Millennials not in GME – doing a 60/40 instead. My road-map to investing:
-20s: time to make dumb investing mistakes (not to be confused with smart investing mistakes)
-30s: time to sober up and start doing boring index investing
-40s: add fuel to your pile
-50s: contemplate early retirement

Congrats to the few lucky ones who do the 50s thing in their 20s.

#5 Karlhungus on 01.30.21 at 9:39 am

Ryan, 2 questions

1)Do you ever consider CAPE? Its looking pretty high these days for the S&P 500.

2)Technically, how do these hedge funds who shorted GME lose money? Is it because the interest they are charged for “borrowing” the stocks goes up relative to the stock price? Or is it based on a certain date that they have to buy the stock ?

#6 A Dollar is a Dollar is a Dollar on 01.30.21 at 9:57 am

What is coming down the road from the federal government will be a two-fold earthquake for the stock market status quo.

First, a smaller tremor, Chrystia will target the super wealthy and beneficial treatment of stocks vs regular earnings. Starting next month.

But people will still suffer. It won’t be enough, especially with the after-effects of Covid-19.

So expect a big shift in Liberal policies or an NDP government in power within a couple years or so.

All dollars will be taxed equally. Finally. There will be no other choice.

Otherwise, we will be trapped, with most children just falling off the Great Gatsby Curve. In the midst of an environmental calamity lasting for decades.

https://www.brookings.edu/blog/social-mobility-memos/2015/05/19/the-great-utility-of-the-great-gatsby-curve/

https://obamawhitehouse.archives.gov/blog/2013/06/11/what-great-gatsby-curve

All dollars are equal. None should be treated as better than others.

Why is such clear, simple common sense so hard to grasp? Why do the economic elites constantly try to obfuscate and distract us from this reality?

#7 truefacts on 01.30.21 at 10:03 am

Ryan,

Stodgy blue chip example – Colgate.
Earnings growth – 5% over the next few years.
P/E around 25
Yield about 2%.

Bond investors buy it for yield. What happens if rates rise a couple percent?

Quick questions…

Do you think the price is FROTHY?
Don’t markets seem expensive overall (esp. US)?

Thanks for your insights.

#8 crowdedelevatorfartz on 01.30.21 at 10:04 am

@#6 A dollar taxed to a penny.

” Why do the economic elites constantly try to obfuscate and distract us from this reality?”

++++

Because they can and it makes them richer?

#9 Sara on 01.30.21 at 10:05 am

#181 Boomers, Just Go Away and Die on 01.29.21 at 10:35 pm
Boomers, you are useless parasites.

Exit, stage right.

=====================

Not quite a boomer myself, but close enough. Did your boomer parents or grand-parents beat you when you were a child? What other groups of people do you hate? Women? Asians? Homosexuals? You have big issues if you want people to die just because they fit a certain demographic. Time to seek help and try to get over your anger issues.

#10 truefacts on 01.30.21 at 10:07 am

Ryan, one more question – then I’ll stop (promise).

“…hedge funds, who have no qualms over shorting stocks and trying to force companies into oblivion”

I don’t see how shorting a stock would affect a company directly unless they are trying to raise money a stock issuance. If we had trillions and shorted Berkshire Hathaway and it traded down to a penny, I don’t see how that would affect the long-term business???

Am I missing something?

#11 crowdedelevatorfartz on 01.30.21 at 10:11 am

I expect Tesla to receive its fiscal enema sometime in the not too distant future.
A small car company worth more than all the other car companies combined?
Ludacris.

GameStop.
What an ironic name for the musical chair ride that ensued.
First in and first out made money.
All the other suckers got played.
Rampant speculation by the easily led.
Nothing moral or good.
No lessons taught or learned.
Just greed.

Speaking of greed.
Im off to work to make some honest cheese.
ta ta.

#12 Tarot card on 01.30.21 at 10:17 am

Thanks for the blog Garth
Thanks for the weekend analysis.
Yahoo finance is the same, a few penny stocks I follow have what we call pumpers. Watched this penny stock move on a misquoted article(intentional?) on government funding well the stock exploded 55 million shares in one day. And for a speculative mining exploration that previous had two news releases in two years. Pumpers claiming they bought a million shares and it’s going to the moon.
The pumpers Saying the government put millions into a mining exploration company that they have insider knowledge. Really? What planet are you from?

When myself and others quoted that the article was for another company the pumpers called us cons, liars and bad people and continued to pump the stock. It got into a fist fight of words. people don’t want to read. How can you quote the article provide links and yet people call me a liar?

All because this little town in Ontario has a component for batteries.
Have a great weekend.

#13 A Dollar is a Dollar is a Dollar on 01.30.21 at 10:22 am

https://www.theatlantic.com/business/archive/2013/06/the-great-gatsby-curve-why-its-so-hard-for-the-poor-to-get-ahead/276943/

“High-income kids who don’t graduate from college are 2.5 times more likely to end up rich than low-income kids who do”

“Now, it’s no secret that the rich are different from you and me—they have more money to leave to their kids—or that they have a special jobs program called “working for dad”. Miles Corak, a professor of economics at the University of Ottawa, found that almost 70 percent of the sons of Canada’s top 1 percent had worked where their fathers worked. In other words, it’s clear enough why so many well-off kids who don’t get a college degree stay well-off.”

Wow. Just. Wow.

70% of rich kids cuddle up and work at dad’s place.

Dollar inequality is creating a world of Donald Jrs and Ivankas running things everywhere.

Is that really what we want!?

Seriously!?

#14 Stone on 01.30.21 at 10:28 am

#6 A Dollar is a Dollar is a Dollar on 01.30.21 at 9:57 am
What is coming down the road from the federal government will be a two-fold earthquake for the stock market status quo.

First, a smaller tremor, Chrystia will target the super wealthy and beneficial treatment of stocks vs regular earnings. Starting next month.

But people will still suffer. It won’t be enough, especially with the after-effects of Covid-19.

So expect a big shift in Liberal policies or an NDP government in power within a couple years or so.

All dollars will be taxed equally. Finally. There will be no other choice.

Otherwise, we will be trapped, with most children just falling off the Great Gatsby Curve. In the midst of an environmental calamity lasting for decades.

https://www.brookings.edu/blog/social-mobility-memos/2015/05/19/the-great-utility-of-the-great-gatsby-curve/

https://obamawhitehouse.archives.gov/blog/2013/06/11/what-great-gatsby-curve

All dollars are equal. None should be treated as better than others.

Why is such clear, simple common sense so hard to grasp? Why do the economic elites constantly try to obfuscate and distract us from this reality?

———

I guess a gouvernment can decide to tax everything equally. I also guess the wealthy who have mobility can then move their money and themselves to a different tax jurisdiction where the tax scheme is more favourable.

The knife can cut both ways.

Just because you may not have the mobility or the imagination of the wealthy doesn’t mean others are limited in their head as you are.

That’s why you are where you are and the wealthy are where they are. Might be harsh but then, that’s life. Suck it up or continue to be rolled over by it.

#15 Lefty on 01.30.21 at 10:28 am

OMG The thieves at Robinhood now have buy restrictions on 36 low float stocks. One of them (EZGO) just IPO’d on Monday.

Anyone with an IQ above room temperature will likely leave the platform.

#16 of course it's a bubble on 01.30.21 at 10:31 am

of course it’s a bubble. of epic proportions.

without central bank money printing the stock market would collapse. there is no growth unless it’s via more printing. and zero interest rates. stop the money printing. raise interest rates, see what happens.

and this can still last for a while. but don’t be confused.
it’s a bubble all right.

#17 T-Rev on 01.30.21 at 10:48 am

I believe the term in this case Ryan is “positive feedback loop”, which describes a system in which movement away from equilibrium triggers a further move away from equilibrium until the system. Negative feedback loops are self regulating, with movement away from equilibrium controlled by a counter-force that increases the further from equilibrium the system becomes.

Positive feedback systems tend to have wild swings in their range of values. Biologically, many of the positive feedback systems relate to sex (just give it some thought) and emotion, while negative feedback systems control the boring stuff like body temperature, blood glucose, etc.

#18 Warren-the-lagging_indicator on 01.30.21 at 11:11 am

Wall street soggy-shorters have ave P/L of 2.7 bil and are being crushed by 70+ bil ytd by shorting US companies. Of course they are going to whine to the power structures they intimately relate to and exclude the retail guys and gals from playing and ruining it all. This is all good because the next financial collapse happening this year will be met with lets just say a very stern objection to a bailout for the banksters this time around. They will rather see it all burn as evidenced by the sentiment even on this blog.

#19 Habitt on 01.30.21 at 11:19 am

The perception is TPTB have rigged the system to their benefit. These people are going to push back hard. They will dominate politics soon. Hold onto your hat.

#20 R on 01.30.21 at 11:21 am

Most financial analysts see Tesla as a car company. They compare it to GM, Ford etc. and shake their heads, mumbling. What if, 2021 will be Tesla’s “Break Out Year “. What if, in 2021, both Giga Berlin and Giga Texas are completed and are posed to go full production in 2022? What if, in 2021, Tesla accomplishes internal battery production of it’s 4680 batteries, with a capacity to supply 2,00,000 vehicles, over and above purchased batteries from LG, Panasonic, CHTL? What if Tesla is able to provide level 5 General Full Self Driving autonomy (doesn’t need a limiting geo-fence crutch), and can self-drive anywhere and do it at a cost per mile ten times lower than an ICE driven ride hail service? What if they built a Simi Truck that was capable of full self-driving, and could platoon trucks together on the highway such that the cost per mile ton driven was cheaper than railway, but was flexible enough to deliver the goods in half the time straight to the loading dock? If you look at Tesla as a Transport as a Services Company, and/ or as a Renewable Energy Management Company complete with utility demand shifting mega batteries, then you may actually believe Tesla is currently undervalued and may eventually have a higher market cap than Apple, Amazon and Google together by 2030. But then, opposing opinions make market.

#21 Sail Away on 01.30.21 at 11:28 am

#12 Tarot card on 01.30.21 at 10:17 am

…a speculative mining exploration that previous had two news releases in two years. Pumpers claiming they bought a million shares and it’s going to the moon.

————–

A mine is a hole in the ground with a liar at the top

#22 Coastalzapper on 01.30.21 at 11:29 am

Ryan
I would like your opinion on not being able to short stocks, you either like a company and buy or you don’t.

#23 willworkforpickles on 01.30.21 at 11:42 am

The music is your only friend..until the end..until the end.

GameStop fueled trader frenzied FOMO has got potentially millions of novice traders on high alert for the next big short squeeze.
Long positions in stocks with high short interest are being taken out on the most highly shorted stocks on the market. Fueled by (near) delusional high hopes of getting rich off the panic-buying of short sellers in another much hoped for…orchestrated mind bending squeeze play. Now the gambling turns exceedingly dangerous where the rules could change on a dime in the war of 2021 with the shorts.
The hoodies (up here) should be re-fueled and ready to go with next months – Justin’s Too Kind Funds For Life – payments in the bank.

When the house is a rockin don’t come knockin.

#24 Flop... on 01.30.21 at 11:47 am

Every single of these young guys warming their hands on the Wall Street bonfire knows exactly what they are doing.

Exhibit A.

Robin Hood Society in Britain now has 33,000 more followers on Twitter…

M46BC

https://www.dailymail.co.uk/news/article-9201091/Britains-Robin-Hood-Society-gains-33-000-Twitter-followers-stock-app-confusion.html

#25 Axehead on 01.30.21 at 11:47 am

I think the cure for this disease is in the phrase, “this won’t end well.” Sometimes it’s the pain that makes you change.

#26 Ryan Lewenza on 01.30.21 at 11:56 am

Karlhungas “Ryan, 2 questions

1)Do you ever consider CAPE? Its looking pretty high these days for the S&P 500.

2)Technically, how do these hedge funds who shorted GME lose money? Is it because the interest they are charged for “borrowing” the stocks goes up relative to the stock price? Or is it based on a certain date that they have to buy the stock ?”

Yes I do monitor the CAPE and it’s part of my valuation toolkit. But too many people rely on this to make investment decisions to their detriment in my view. They cite it’s high level and why they are bearish about the market, justifying their high cash positions. The CAPE has been high for years, but the market has continued to rise. Also they don’t adjust for the current reality of very low interest rates. Of course in a world of zero interest rates the CAPE should be higher than normal. Even it’s creator, Robert Shiller, says you need to adjust the CAPE for low interest rates.

On the GME short, when you short stocks you are borrowing the shares on margin. You have to put up 150% of margin on the short. You get 100% proceeds from shorting the stock so you need to put up the 50%. Say you short a stock at $100/share or a total of $100k. You need to initially put up $50k. If that stock rises to $200/share or $200k, you now need to put up $100k or an increase of $50k. Just like when a stock declines and you have to put in more funds since the firm is lending you a smaller amount, the same applies when shorting stocks and they go up. So when GME is rising, hedge funds who are short either neither to buy back the shares and close out the position at a big loss (which leads to more and more people buying the stock) or they have to put up more capital to maintain their short position, which has gone terribly against them. So some hedge funds have just closed out the position at a huge loss while others have put in more capital to meet the margin call, with the hope the stock will soon crash. – Ryan L

#27 Robert B on 01.30.21 at 11:57 am

Good blog Ryan

I do not agree what the Shorters or the Redditers are engaged in but there is an issue brewing that has to be addressed. This for the average person is Gambling….

Funny that billionaires like Cuban and Musk side against the shorters.

But one thing that is not mentioned on the ” Greater Fool” is that Naked shorting is an illegal practice. Why does the SEC allow companies to have more shares short than actually exist. GME had naked shorting all over it . They have over 100% of its shares short.

The blog demonizes the “Reddit group think” when they give the “Shorters” a taste of their own medicine. The problem is innocent people will lose when this is over.

We have a populist movement in place that is taking something that will not be addressed by the SEC into their own hands.

Just to add a brokerage house can lend out your shares to a shorter for a fee. The brokerage keeps this money not the share holder.

#28 TurnerNation on 01.30.21 at 11:59 am

What’s really going on in Kanada?
This month two dozen elected reps were stripped of power or sanctioned. Holiday travel we were told! But it was a purge, The Party cleaning ranks, just before the next step of this diabolical plan was released. Anyone left in power must be on board with the New System.

This week the virtual Berlin Wall went up. Travel outside the country is impossible unless you are wealthy enough to bribe Party officials for your kamp stays & testing. Local Block Captains in your prefecture are watching over you and the hired Private Security firms. Everything old is new again.

—- Those new ‘quarantine camps’ for travellers?
$2000 per stay in Kamp Kanada, likely this money goes to the favoured friends and business associates of The Party. Three days stay.
SEEN ELSEWHERE:
“3 days at $2000.00 for the duration is $2000/3Days = $666.6666666666 per day. Interesting how that worked out. ”

——————–
And here is the next step. For the past year we have been trained on rationing, snitching, long lineups in the cold outside the stores.
Man this is moving fast this New System – well into 2022-23. Kamp doctors do not want us healthy. No exercise, no sunshine, no recreation. No there’s no money in that.

https://www.iheartradio.ca/580-cfra/covid-19-updates/peel-s-top-doctor-calls-for-restrictions-on-non-essential-items-bought-online-1.14467413
PEEL’S TOP DOCTOR CALLS FOR RESTRICTIONS ON NON-ESSENTIAL ITEMS BOUGHT ONLINE
It could become a harder for you to order that big screen TV or workout gear on Amazon, if Peel’s Medical Officer of Health has his way.
Dr. Lawrence Loh wants the province to restrict the amount of non-essential items being bought online.
In a statement to Mississauga News he says the move would decrease the number of people required to fulfil orders.

—— Prediction. Putting it down on paper.
That Christmas 2021 will get cancelled due to a Stunning New Variant.
Christmas…the only holiday so scary to our global elite that they’ve x-ed it out. XMAS to you.

—- Martial Law lite USA –a bunch of rednecks in a totally undefended (wink wink) government building did this?
2 minute video. Building a armed and manned wall. Our elites love walls. We heard that for the past 4 years too.
https://www.youtube.com/watch?v=75y6CLNf7Tk&feature=emb_title
U.S. Military have now expanded outside the capitol building further into Washington D.C.
Jan 29, 2021

#29 Ryan Lewenza on 01.30.21 at 12:03 pm

Coastalzapper “Ryan, I would like your opinion on not being able to short stocks, you either like a company and buy or you don’t.”

To me this is an ethical question and whether it’s right to short a stock and profit from a company’s struggles/demise. From a purely investment perspective shorting is fine since if it’s ok to profit on a stock going up then why not be able to profit from a stock going down? Also shorting can help to keep markets and companies in check. There are pluses and minuses of shorting stocks but ultimately it comes down to 1) does shorting help stabilize and keep a check on markets, and 2) ethically is it right to short stocks. – Ryan L

#30 ElGatoNerodeYVR on 01.30.21 at 12:05 pm

I think (sometimes) that one perspective missing here is personal responsibility..let me explain ,these redditers , millennial.. however who want to slot them did not grow up in a vacuum in the outer space. They are a product of a society that we as a collective created.
If we don’t like the outcome maybe we should reflect back at our actions and decide: was it working two jobs and leave the education to the TV ,or internet, or the game console and shielding them from reality worth it ?
Was outsourcing all of the production followed then by entry level support jobs to foreign countries while leaving swaths of young graduates with multiple degrees with 0 job prospects worth it ?
All in the name of the greater profit for a rarefied elite who keeps piling up on wealth at the expense of everyone else.
Can’t blame the young for seeing the game is rigged and trying to play it to their advantage.
Ultimately this is a revolution and like before some will get burned and some will make wealth.
This is the nature of society, look back some 100 years at how the communism started, by the elites at the time piling up on wealth while the common folk lived on bread and water…
Today the common folk has a better living standard and access to technology so they can fight back better , and they do.
Good luck to them, they need it to make something of themselves.

#31 Ryan Lewenza on 01.30.21 at 12:07 pm

truefacts “Ryan,

Stodgy blue chip example – Colgate.
Earnings growth – 5% over the next few years.
P/E around 25
Yield about 2%.

Bond investors buy it for yield. What happens if rates rise a couple percent?

Quick questions…

Do you think the price is FROTHY?
Don’t markets seem expensive overall (esp. US)?

Thanks for your insights.”

Yes Colgate is expensive at 25x with a 5% EPS growth. But that doesn’t mean it’s a sell or can’t go higher. And yes the markets are expensive but again that doesn’t mean they can’t go higher. Low interest rates support higher valuations, and I see corporate earnings rebounding strongly, which if correct, will help to bring down the PE levels. – Ryan L

#32 Dr V on 01.30.21 at 12:08 pm

So does it make sense, or can it realistically be done, to place a buy option at a higher price, on a shorted stock
to lessen or eliminate a loss due caused by a short squeeze? Or would the cost of the option be so high as to eliminate the potential short profit? Or would the purchase of a large amount of these options trigger the squeeze?

#33 A on 01.30.21 at 12:12 pm

Along our random walk down wall street, I imagine there are quite a few mistaking luck for skill (maybe yourself included). Hard to beat the market over decades…

I cannot give credence to the complaints of professional investors given their own behavior. Speculation is not the sole domain of the retail investor. Adding a veneer of “technical analysis” doesn’t mean someone is carefully valuing a company. Creating a risk model to support your risky short position and being wrong does not entitle you to protection from regulators.

If regulation is required, it should be symmetrical for the professional and the amateur.

#34 Davos on 01.30.21 at 12:14 pm

“Dear billionaires, you will own nothing and you will be happy” – Wallstreetbets

Ryan Lewenza, you will own nothing and be happy, thanks to Trudeau and the red-haired activist Chanty Binx.

#35 TurnerNation on 01.30.21 at 12:16 pm

^ Restricting sale of goods (and people/labour) as essential/non-essential. Kommunist quotas.
Will there be Craigslist and FB marketplace stings? Police undercover selling Non Essential items? You take the bait and end up on the ground.

Science:
“”Essential workers like truck drivers are not required to quarantine for 14 days after returning to Canada, even though the rule applies to other people entering the country”. Nor the airline flight crews I’ve heard.

….
How would you go about forcing a UBI in Kanada?
By shutting down the travel, hospitality, event and convention industries. Airlines, pipelines too.
Economically b0mb selected industries – like Ontariowe shutting down Ski hills (and the tourism $).
Restaurants clubs and bars and live events. Shut them down too.
And LEAVE them all shut for well over a YEAR, 28 days at a time.
Then, people will be begging for the UBI.

— Robinhood has become weaponized for sure. Every system we relied on has been turned against us.
Robinhood…robbed the rich and gave to the poor? Wait flip everything our overlords tell us 180 degrees, to make sense. Screwing the “Poor” and giving to the rich?

Look I get it. Brokers in Canada must remain onside with risk-adjusted capital (RAC) at all times even intra-day and they have the right to liquidate accounts. But this RH thing has become bigger than that, dare I say weaponized?
All brokers sell their retail flow to market internalizers, that flow is worth something. Best-execution rules, I know but nothing is given freely.
Every broker does this, perfectly fine and legal but anything you say/trade can and will be used against you.

https://cdn.robinhood.com/assets/robinhood/legal/RHF%20SEC%20Rule%20606%20Report%20Disclosure%20-%20Q4%202019.pdf
Citadel Execution Services – Robinhood Financial receives payment from Citadel Execution Services for directing equity order flow to this venue.

……

Wait this is a video game not based on real life right? Haha fool me once. Coming out in 2021. Art…imitates life. What are are living through:

https://en.wikipedia.org/wiki/The_Outlast_Trials
The Outlast Trials is an upcoming first-person psychological horror survival video game developed and published by Red Barrels. It is the third installment in the Outlast series, serving as a prequel to the first two games and features test subjects in a mysterious Cold War experiment. The game is scheduled for a release sometime in 2021

From the download site:
Set in the era of the Cold War, human guinea pigs are involuntarily recruited by the good folks at the Murkoff Corporation to test advanced methods of brainwashing and mind control. In a world of distrust, fear, and violence, your morals will be challenged, your endurance tested, and your sanity crushed. All in the name of progress, science, and profit.

#36 Cheese on 01.30.21 at 12:17 pm

I’ve held a Lithium mine on the ASX, that over the past 5 years has been one of the most shorted stocks on the ASX. I think shorters prevent a great many companies from growing anywhere near their potential.

For example, GXY (GALXF on NYSE), no debt, 150m cash, owns one of the largest lithium brine deposits on the planet in Sal de Vida, Argentina. Own a large very well producing hard rock mine, Mt Caitlin in Oz, as well as James Bay in Quebec (also hard rock). They ship a 70kt order, and the stock drops 5% after a great annual report. At one point, secondmost shorted stock on the ASX for no apparent reason as the fundamentals were great.

It’s examples like that, that cause such hatred against shorts, who can borrow shares to keep your investment in the basement.

While I keep the majority of my efforts in indecies like VXC, occasionally branching out to what seem like rational speculative stocks, has always resulted in negative outcomes, usually due to shorts.

Part of me is pleased some shorts got burned, its likely an irrational feeling, but I will enjoy it while its there.

#37 Barb on 01.30.21 at 12:24 pm

Sorry, way off topic.

Last night on Bill Maher.
Two evolutionary biologists.
9-min video re virus.

https://www.youtube.com/watch?v=ZMGWLLDSA3c

Proof it came from a lab?

#38 Sail Away on 01.30.21 at 12:29 pm

#13 A Dollar is a Dollar is a Dollar on 01.30.21 at 10:22 am

“High-income kids who don’t graduate from college are 2.5 times more likely to end up rich than low-income kids who do”

Wow. Just. Wow.

70% of rich kids cuddle up and work at dad’s place.

Dollar inequality is creating a world of Donald Jrs and Ivankas running things everywhere.

Is that really what we want!?

Seriously!?

—————-

Of course it is. Capable and prosperous people achieve success through their actions… which their kids see, learn and emulate as they grow up. Success begets success for good reason.

How successful would I be bird hunting if I picked up 3 random SPCA mutts every year instead of using my crack pack of bred, trained, and experienced dogs?

Then guess what happens when a new pup joins the allstar team? Yep, he learns 90% through osmosis.

Choose your parents wisely.

#39 jal on 01.30.21 at 12:31 pm

“The problem is innocent people will lose when this is over.”
—-
Let’s be more specific.
If you go to the blog they say, “put in only money that you can afford to lose” “…. when this is over.”

Geee! That’s what they say if you buy loto ticket
Geee! That’s what they say if you go into the stock market.
Geee! That’s what they say if you place a bet on card, horses, bingo ….

I guess that there are a lot of mentally innocent challenged people that are being scammed everywhere in our society.

#40 Peter McLean on 01.30.21 at 12:34 pm

I have a coworker that is going to take out a loan to buy AMC stock on monday. I’m sure this will go well, seeing as all the money he lost in weed stocks a few years ago was just a practice run for this.

#41 Steerage on 01.30.21 at 12:45 pm

#6 A Dollar is a Dollar is a Dollar on 01.30.21 at 9:57 am
What is coming down the road from the federal government will be a two-fold earthquake for the stock market status quo.

First, a smaller tremor, Chrystia will target the super wealthy and beneficial treatment of stocks vs regular earnings. Starting next month.

But people will still suffer. It won’t be enough, especially with the after-effects of Covid-19.

So expect a big shift in Liberal policies or an NDP government in power within a couple years or so.

All dollars will be taxed equally. Finally. There will be no other choice.
….

Well it’s obvious I make way more than you and pay way more tax…. so a flat tax rate it will be… then you can start paying your fair share finally instead of me covering for you…
Brilliant idea… you really thought this through

#42 Lord Garth of Izar on 01.30.21 at 12:47 pm

Remember in 2008 when financial terrorists nearly destroyed human civilization with greed and stupidity.

Well not one criminal paid a price. Nothing has changed.

I’m 100% behind the internet being used form a big enough force to destroy the stock market. It serve no purpose to the average millennial.

Remember kids… “Bankers are terrorists. Politicians are puppets.”

When your entire generation is left with nothing, burn the system to the ground.

#43 Toronto_CA on 01.30.21 at 12:51 pm

Thanks Ryan.

Do you share Garth’s view that the WFH status quo will end and we’ll go back to the office more often than not post pandemic?

Cause I’ve gotta say, the leaders I’m working with do not see that as happening and plans are in place for more working from home than office going forward. And that won’t start until September or later. After 1.5 years of working from home, why would anyone HAVE to come into work?

And even 1-2 days a week from home is a complete game changer to office space and the service economy in downtown cores.

What will this mean for REITs and commercial property markets in general?

Or is Garth right, and we’ll all be back to work 9-5, 5 days a week?

#44 Sail Away on 01.30.21 at 12:53 pm

“…shorting can help to keep markets and companies in check. – Ryan L”

—————-

Yes! Case in point:

Hydrogen-power vehicle company Nikole went public and rocketed up. Their Youtube video showed a prototype semi cruising down the highway.

Short-seller Hindenberg Research got a tip… then sleuthed and determined through photos the stretch of road was a 2.1 mile downhill stretch in Utah. Short story shorter: the Youtube prototype had no hydrogen engine. No engine at all, actually.

Nikola took a hit, HR did well, scrutiny increased.

#45 Ustabe on 01.30.21 at 12:54 pm

How can it be a pump and dump play if the Reddit kids aren’t dumping?

You’ve by now heard of Trickle Down Economics? Well, from what I can gather so far this is Pinata Economics.

Whack it til it breaks, see what falls out.

#46 Phylis on 01.30.21 at 12:57 pm

The only summarized justification i’ve heard repeatedly is that short selling provides liquidity to the market. My DC pension provider rep even coldly told me the same thing when i asked him why they lend out our shares. It is spelled out in our pension agreement. I guess it’s the bargain struck by our company for pimping out our pension $ we bring to them as a group in return for a plan. So if you wonder who is lending out the shares in the first place…. you might not have to look very far.

#47 Sydneysider on 01.30.21 at 1:07 pm

Mr Lewenza,

Can you, hand on heart, tell us that you didn’t have a little punt on GME yourself? I know I did.

#48 aleksey on 01.30.21 at 1:08 pm

Hi Ryan! Always a pleasure to read your posts :)

I’ve been following wsb crowd for a few months. Last weeks were kind of surreal but GME is quite different in my opinion while AMC seems like a remake of Hertz. I would like to get your opinion about the Volkswagen Infinity Squeeze vs the GME short squeeze. I don’t find any good analysis explaining why i it couldn’t be a short squeeze like the one happened in 2008.

Thank you!

#49 Linda on 01.30.21 at 1:09 pm

#13 ‘A Dollar’ – Seriously? You’ve never before heard of nepotism or the saying ‘it’s not what you know, it’s WHO you know’? Hate to break it to you but this human behavior has been around since we fell from the trees.

Ryan, while I agree with your basic analysis I have to say that the pace of change may well see a lot of the tried & true ways of doing things being updated to reflect the current reality. There have been many studies done on the effect the Boomers had on how our world evolved. I’m a little unsure as to whether it is an aggregate total of younger generations or ‘just’ the Millennials, but they form a larger cohort than the Boomers. With tools that allow them to effect change faster than ever before. Going to be one wild ride!

#50 SimplyPut7 on 01.30.21 at 1:23 pm

I think you are the first investment professional to use $GME Bitcoin and $TSLA in the same article.

I think many of the buyers of $GME understand the stock can go to zero. But if spending the same amount on a stock that I would have on new shoes, clothing or food dining inside restaurants – which I no longer required last year and most of this year due to my indefinite work from home schedule, is making billion-dollar hedge funds and the ultra-rich scared, I think we have bigger problems than an overvalued stock.

Seriously, did the whole financial system almost blow up this week over a few purchases from poor investors? I thought hedge funds were supposed to hedge their bets.
https://www.reddit.com/r/wallstreetbets/comments/l7bpf5/30_seconds_from_triggering_market_nuclear_bomb/
Interactive Brokers at 2:59min admitting they restricted shares to protect themselves
https://www.youtube.com/watch?v=7RH4XKP55fM&feature=youtu.be

Tesla is the perfect example of investors staying irrational longer than shorts can stay solvent. I didn’t see any broker trying to restrict their clients from investing in $TSLA because it was risky or to protect the integrity of clearinghouses /stock markets, there are many stocks in the market right now that are overvalued compared to their fundamentals, telling people they can only have 1 share of a company and can no longer hold more than 5 shares or selling shares without their consent, just makes them want it more.
https://www.youtube.com/watch?v=IjC0hh5WSE0

If there are companies with positions that could cause their investment firm to go under because they did not hedge properly, I’m not sorry for them, there’s no bailout for the retail investors. I would love to see the justification of bailing them out this time around.
https://pbs.twimg.com/media/Es_y-bxXEAEBI0D?format=jpg&name=small

Also, I do not hold $TSLA, $GME or Bitcoin

#51 SWL on 01.30.21 at 1:29 pm

Reporting from OTC penny land where the reddit mob is talking about driving the price up on a stock that currently trades for $0.0008. Their noble plan is to donate a share of their profits to cancer research should the price reach $1. The company they want to drive up supplies vape pen juice and they see this as going after big tobacco

Someone should get out their calculator as the companies float is 86 billion with another 20 billion shares ready for dilution. That’s a lot of stimulus checks and kudos to anyone looking to unload this stock next week

I’ll be watching from a safe distance

#52 Bezengy on 01.30.21 at 1:36 pm

#13 Dollar Guy
—————
Less than 10% of family wealth survives the transition to the third generation. The Trump family may be next, who knows?

https://www.marketwatch.com/story/heres-why-90-of-rich-people-squander-their-fortunes-2017-04-23#:~:text=About%20seven%20in%2010%20wealthy,number%20has%20jumped%20to%2090%25.

#53 The West on 01.30.21 at 1:44 pm

Gamestonk!

The authors and the commenters don’t understand what’s actually happening here. You’re all in the dark.

WSB doesn’t want to get rich, they’re not trying to “play the game” – no. It’s more nefarious than that.

They’re trying to destroy the financial system. All you steerage dwellers railing against “the man” and Garth moving down to the battlefield to unleash a volley of his own…you’ve all been swept up in the emotion of all this.

WSB doesn’t care what happens. They’re trying to destroy the printing press and have stated such – its not a secret. This is not a Robin Hood movement, nor is it a movement of thieves dressed in hoodies.

This is a revolt against the American financial system…

As I’ve tried to explain here over and over and over again – the American populace is finally waking up to the corruption at the top.

It is going to be a very interesting decade.

Re:Occupy Wallstreet moves back in tomorrow. Hope they go armed – because that’s all the declining American Empire has left to offer the discontented.

#54 Don Guillermo on 01.30.21 at 1:53 pm

#49 Linda on 01.30.21 at 1:09 pm
#13 ‘A Dollar’ – Seriously? You’ve never before heard of nepotism or the saying ‘it’s not what you know, it’s WHO you know’? Hate to break it to you but this human behavior has been around since we fell from the trees
*****************************************
A certain spoiled privileged gropey blackfacing man has benefitted immensely by this leading to the eventual demise of what was once a top tier nation.

#55 The Golden Fool on 01.30.21 at 2:05 pm

#1 crowdedelevatorfartz on 01.30.21 at 9:29 am

Another great article Ryan.

I noticed the stock “traders” that got burned have now taken their wrath out on Robinhood.

https://futurism.com/the-byte/google-deletes-negative-robinhood-reviews

Will the children never learn….

The Golden Rule

Who ever has the gold …..rules.

:)

So if I understand you… I should be investing in gold!?

#56 Penny Henny on 01.30.21 at 2:08 pm

A very informative recap of what happened last week with $GME. A very knowledgeable individual who used to regularly comment here.

http://pensionpulse.blogspot.com/2021/01/yolos-of-world-unite.html

#57 Steve-0 on 01.30.21 at 2:13 pm

Ryan, I agree that game stop is a dangerous investment where people could lose the majority of their money. I think you are not being fair to them on why they are buying it, none of them are buying it for the fundamentals, they are buying it to try and trigger a short squeeze.

If they were (are?) successful, who knows what the price would get to, I think the only limit to the price would be the ability of the hedge funds to pay the price. Preventing the little guys from buying the stock appears to have given the hedge funds relief.

I have no idea where this is going to go, but I am in for 3 shares, which is against my usual balanced and diversified interment style. I only used left over money that was just sitting around in my account from dividends. I have probably lost more money through loss productivity following this story than I will lose in the stocks.

If I do somehow end up on the winning side of this, I plan on investing the winnings (gambling reference) on other r/wallstreetbets stocks until they fizzle out, or they become significant. I have a sell order for 1 share @ $600, and another @$1000, and the third is @ $3000, but I might rethink that one because i don’t think the hedge funds could possibly come up with that money.

Some things I don’t know that maybe you could shed light on. Do hedge funds get margin calls? Would who ever lent them the share force a margin call if that could bankrupt them, and then you wouldn’t get your share back anyway? If the choice is bankruptcy or violating SEC rules, which would they choose?

I think I have better chances at this than playing the lottery (which I don’t often play), we will see what happens.

#58 Dolve Vita on 01.30.21 at 2:13 pm

…meanwhile, the Cdn economy grew Oct to Nov 2020:

+0.7%

Nov y/y still down -2.8%. Far too many negative y/y growth rates (a couple of sectors down by 1/3 and 1/2):

https://www150.statcan.gc.ca/n1/daily-quotidien/210129/t001a-eng.htm

Still overall, UP better than down.

———————-

VAX POPULI

EU Confirms Export Controls

“…gives EU countries powers to deny authorisation for vaccine exports if the company making them hasn’t honoured existing contracts with the EU.”

UK in 4h (from this AM CET) went from bombastic to silent. Now negotiating with the EU.

https://www.bbc.com/news/world-europe-55860540

Fired off a bunch of Tweets to his Lordship in Ottawa enquiring if he, or any of his minions, have been on the phone with Ursula or Charles (or both).

Tomorrow VAX CANADENSE though I think you all know it is bad…as is “all vax’d by Sept end”.

“COVID delenda est”

– not looking good for now.

PS:

Nigel Farage on Twitter:

“The EU have shown their true colours tonight and united everyone against them. Quite an achievement.”

Re-ignited the BREXIT debate with that Tweet.

https://twitter.com/nigel_farage/status/1355270437001981952

———————-

Yup, just another Covid-19 day in the EU + UK.

#59 Figmund Sreud on 01.30.21 at 2:15 pm

Robinhood is a financial technology (fintech) company that combines commission free online trading with an investing app where investors communicate with one another.
_____________________________

You wish that all it was, … in fact it is a skim, … perhaps even a form of white-collar crime. Yes. Skim by Citadel Securities, … a financial-services giant, … plus some others, too. But what do I know, … I just read about it in The Washington Post:

Robinhood and Citadel’s relationship comes into focus as Washington vows to examine stock-market moves

… introductory snip:

Robinhood, the online trading app heralded by some as a democratizing force to empower small investors, has spent the past few years nurturing a close relationship with one of Wall Street’s biggest players and building ties with some of the most powerful institutions in Washington.
The Silicon Valley-based trading platform makes a large amount of revenue from Citadel Securities, a Chicago-based financial-services giant. Robinhood’s regulatory filings show the company charges large investment firms called “market makers” fees to access real-time information about which stocks its users are buying and selling, a practice some regulators and industry watchers have seen as a potential conflict of interest. %[…]

… and the continuation:

https://www.washingtonpost.com/business/2021/01/29/robinhood-citadel-gamestop-reddit/

FWIW

F.S.

#60 Lefty on 01.30.21 at 2:23 pm

#13 A Dollar is a Dollar is a Dollar on 01.30.21 at 10:22 am
https://www.theatlantic.com/business/archive/2013/06/the-great-gatsby-curve-why-its-so-hard-for-the-poor-to-get-ahead/276943/

70% of rich kids cuddle up and work at dad’s place.

Dollar inequality is creating a world of Donald Jrs and Ivankas running things everywhere.

Is that really what we want!?

Seriously!?
———————-

You left out Trudeaus..

#61 jal on 01.30.21 at 2:28 pm

Look at what I found

https://wallstreetonparade.com/2021/01/gamestop-shares-5-count-felon-jpmorgan-could-have-made-upwards-of-174-million-yesterday/

GameStop Shares: 5-Count Felon JPMorgan Could Have Made Upwards of $174 Million Yesterday
By Pam Martens and Russ Martens: January 29, 2021

#62 wallflower on 01.30.21 at 2:34 pm

These ponzi bubbles are everywhere.
What about this one?

Quite possibly one of the growingest (word?) sources of parental down payment contribution is reverse mortgages.
So, let’s get this straight … parents reverse mortgage their house so their kid/s can up-bid a house purchase?

#63 Hawk on 01.30.21 at 2:53 pm

Robinhood is not a free trading platform.

The reason why many service providers and communication companies project that information or access granted to users is “free” is because the general population lacks critical thinking skills.

The moment you provide your information, to any corporation that can be used for marketing or commercial purposes, you have in fact provided them with contractual “consideration”.

Simply the fact that the consideration happened to be non-monetary in nature, does not change the fact that it was given.

This is why democracy without the provision of inalienable rights that majorities cannot over ride is so critical to civilization.

That’s because there are endless sheep that do not have a clue as to the value of liberties they relinquish to power players in exchange for a few pennies and then the people who do value freedom get squeezed along with them.

Now all flights are getting cancelled to so called sun destinations at Trudeau’s latest whim. Anyone care to guess how far this is going to be taken before it stops?

#64 Penny Henny on 01.30.21 at 2:53 pm

Is this something?
Stonk. Stank. Stunk!

#65 Bill h on 01.30.21 at 2:57 pm

Haven’t seen this many pump and dumps since the late 90s. Wowsers.

#66 Bill on 01.30.21 at 3:00 pm

I personally dumped a few 100k in my cash and corp accounts. Ill keep my RSPs. Its way to volatile for me and always leads to bad things.

More importantly…. WAY more important is the coming communist take over. I worked on Huawei Cell equipment for years part of CCPs takeover plan. Trudeau is instrumental in supporting them and he is the only meat head leader that supports this 5G roll out from China. Well in play now and I’ve mentioned this before here. Canuckle heads need to wake up or Goodbye way of life.
Most may not know this but Huawei is supported and funded by the CCP and they pretty much own it. I don’t work on their crap anymore.
Other companies around the world can’t compete as they are not subsidized by governments.

#67 Ryan Lewenza on 01.30.21 at 3:13 pm

Toronto_CA “ Thanks Ryan. Do you share Garth’s view that the WFH status quo will end and we’ll go back to the office more often than not post pandemic?”

100% agree with GT. Time heals all wounds and six months post-Covid most of us will be back in the office. Now it probably won’t be five days a week as I see a mixed and more flexible work schedule (ie 2 days at home and 3 days in the office per week) but we’ll be back there later this year and into 2022. God I hope so. My kids are driving me nuts! – Ryan L

#68 S.Bby on 01.30.21 at 3:20 pm

The biggest market manipulator on earth is the Federal Reserve.

#69 Winterpeg on 01.30.21 at 3:23 pm

Ryan: “First, these Reddit investors look for beaten down companies with large short positions. A short position is simply selling the stock first, then hoping it goes down and buying it back at a lower price”.

Question: How do the Reddits find out that there are large short positions in these beaten down companies?
Public knowledge? Inside info?

#70 Bill on 01.30.21 at 3:27 pm

I warned a while ago that this is no market for a wise investor and the kids are going to get BURNED.
Just like that, the bear is back.
DJIA topped on inauguration day, January 20th, the massive market bubble finally popped by totally inexperienced clueless kids who think they suddenly and somehow have all the answers thus can affect some grand form of “justice” or “revolution” against an “inherently unfair, rigged system” and against “evil short-sellers and market makers” while “taking from the rich”.
Possibly that ridiculous rhetoric all sounds familiar. It’s virtually verbatim from the market top in 2000 when online message boards were populated by young neophyte day-traders who were certain they’d found the key to easy big money if they could just stick together, hold their positions, call in their certificates, etc. etc.
Nothing new. Not at all. A few will walk away with some money left, while the vast majority will lose it all and more in the tsunami of margin calls to come. Ironically, many will try to become “value” investors right at the top while others will turn short-sellers subsequently suffering incessant crippling losses due to the massive bear market rallies to come as their timing will be dead wrong at every turn.
Speaking of crippling loses and having nothing left, what’s gone under the radar is the fact the Robinhood trading app, used by most of these self-stylized “market warriors”, faced insolvency yesterday, having gone cap-in-hand to borrow a billion dollars before opening trading back up for their rabid horde of lemmings racing rapidly over the proverbial cliff to their financial demise.
Have you tried to call a brokerage lately? It takes them days to reply to emails where it once took an hour. It takes hours of waiting on hold to talk with someone, as they’re overwhelmed by new accounts and feverish traders flipping portions of a share (yes, really, Robinhood allows this and a .gif of confetti appears on the screen when you make a trade).
Exactly like 2000, except back then people had to buy at least a full share.
There’s never just one cockroach. Perhaps some traditional brokerages are also facing insolvency. It will be shocking if that weren’t so.
Grab some popcorn this should be a good show. People never learn.

#71 SoggyShorts on 01.30.21 at 3:36 pm

#45 Ustabe on 01.30.21 at 12:54 pm
How can it be a pump and dump play if the Reddit kids aren’t dumping?
**************
I guarantee that some of those reddit kids have dumped.
“Yeah let’s stick it to the man!”
has a hard time competing with
“If I cash out now I’ll have more money than I have ever seen”

The “heroes” buying a handful of shares might be willing to hold until it crashes in order to…prove a point(?) or something, but there’s no way that all of those bigger influencers are willing to risk all of their X00% gains.

#72 CJohnC on 01.30.21 at 3:37 pm

The person who started the GME thing and leads is Keith Gill and is no amateur. He is a fully licensed trader working in the industry.

https://wallstreetonparade.com/2021/01/gamestop-promoter-keith-gill-was-no-amateur-trader-he-held-sophisticated-trading-licenses-and-worked-in-the-finance-industry/

#73 Ken M. on 01.30.21 at 3:39 pm

What? None of the usual hockey card money articles on Saturday here?

#74 Don Guillermo on 01.30.21 at 3:47 pm

#65 Bill on 01.30.21 at 3:00 pm
Trudeau is instrumental in supporting them and he is the only meat head leader that supports this 5G roll out from China. Well in play now and I’ve mentioned this before here. Canuckle heads need to wake up or Goodbye way of life.
*************************************
Our brilliant, steady and manly leader (as BB so eloquently describes him) gambled with China on vaccine procurement. Didn’t work out so well. My wife’s brother in Colorado will be vaccinated months before their 92 y/o mother (in a Canadian memory care home) will be. I’m quite confident that my wife and I will be vaccinated in Mexico before her as well.

#75 KLNR on 01.30.21 at 4:15 pm

@#45 Ustabe on 01.30.21 at 12:54 pm
How can it be a pump and dump play if the Reddit kids aren’t dumping?

You’ve by now heard of Trickle Down Economics? Well, from what I can gather so far this is Pinata Economics.

Whack it til it breaks, see what falls out.

exactly.
kind of amusing how ignorant some folks on here are.

#76 joe on 01.30.21 at 4:32 pm

“Another great article Ryan.

I noticed the stock “traders” that got burned have now taken their wrath out on Robinhood.

https://futurism.com/the-byte/google-deletes-negative-robinhood-reviews

Will the children never learn….

The Golden Rule

Who ever has the gold …..rules.”

What a suckup.

When the grown ups with the suits do the same thing and screw up they get bailed out by the govt.

#77 crowdedelevatorfartz on 01.30.21 at 4:33 pm

@#54 The Golden Fool
“So if I understand you… I should be investing in gold!?”

++++

No.
Metaphorically speaking.
In this cash who ever has the dinero, the scratch, the banans, the loot, the coin, etc etc etc…..makes the rules

#78 Loonie Doctor on 01.30.21 at 4:37 pm

If I were the CEO/board of Gamestop, I’d be thinking: Time to issue more stock if they can. They raise a bunch of capital at inflated rates and the system gets flooded with more shares to bail out the shorts. Order restored.
-LD

#79 Sheesh on 01.30.21 at 4:40 pm

42 Lord Garth of Izar on 01.30.21 at 12:47 pm

When your entire generation is left with nothing, burn the system to the ground.

………

First, I doubt that you speak for your entire generation. There are plenty of very successful mils out there.
Second, drama much? Mark my words, you’ll be embarrassed by that when you’re older.

#80 Steve on 01.30.21 at 4:41 pm

Ryan,
Regarding Tesla vs gm & Ford, so gm a few years back said they were going build a Tesla killer, the bolt. Well that didn’t happen. I am very disappointed, I hoping for a cheap ev. So if the world going electric. Does help or hinder have a lot of ice capacity? Also, Tesla seems closer to self-driving than the old guys. Btw I don’t own any car company other than what is index etf. Just very curious.

#81 westcdn on 01.30.21 at 4:59 pm

I try not to confuse luck with skill. There are somethings I do well – such as exercising my back which suffers from a back disc injury that I got in my youth. Picking stocks has been a long journey for me. I grew up in Scamcouver. I read the movers and shakers who traded on the VSE which moved to Calgary. I bought the book “Fleecing the Sheep”.

For some reason I was drawn to the stock market. I would read the Vancouver Sun ticker tape symbols trying to guess where they would go. I did not have money then but I do now.

These guys were amazing for tricking the gullible. I remember their stories for selling the next best thing – my favorite was google eye glasses.

I avoid mining stocks but I own a few of them that have positive cash flow. As Mark Twain wrote, “A gold mine is is a hole in the ground with a liar on top”. I still get things wrong and as long I get more things things right, I will be okay.

As always, finding good people is hard and I get burned – just makes me tougher.

#82 jess on 01.30.21 at 5:00 pm

What is your opinion on SPAC’s
“blank check”

#83 Pete from St. Cesaire on 01.30.21 at 5:02 pm

I hope the Robinhood traders do it to silver next. Silver is terribly underpriced due to the manipulation of the market with paper-silver trading far exceeding the total amount of physical silver existing. Listen-up guys; if you really want to bring the whole rotten system down push the price of physical silver through the roof. 10 years ago Max Keiser said we need a Silver Liberation Army to once-and-for-all bring down the robber barons of Wall St and the criminal banks. I’m hoping to see that army materialize.

#84 Phylis on 01.30.21 at 5:05 pm

#68 Winterpeg on 01.30.21 at 3:23 pm
Here’s one place you can comb thru.

https://www.iiroc.ca/industry/marketmonitoringanalysis/Pages/consolidated-short-position-report.aspx

#85 Decel on 01.30.21 at 5:08 pm

Nice article Ryan, with a lot more info and argumentation than the namecalling the head honcho posted a few days ago.

Now as for this part:
My problem with all this is: 1) the potential impact to the broader markets and financial stability; and 2) it’s based 100% on pure speculation and market manipulation rather than based on any fundamental research or real economic value.

I totally agree with 1, but for argument 2, how is this situation any different than say Ackman vs Icahn on Herbalife a few years ago?

I do agree that there should be adjustments to trading rules to minimize global financial impact, but I have not read anything that doesn’t make me think that hedge funds are also at fault for this whole situation.

And speculation has always been in financial markets and will always be present. It just needs to be managed correctly and evenly between the big firms and retail.

#86 jess on 01.30.21 at 5:09 pm

open for business
https://www.usatoday.com/story/travel/news/2021/01/30/dubai-blamed-covid-cases-abroad-after-tourists-bring-variants-home/4311188001/

Since late December, Israel has required those coming from the UAE to go into a two-week quarantine. Israel later shut down its main international airport through the end of the month over rising cases.
“In Israel, more than 900 travelers returning from Dubai have been infected with the coronavirus, according to the military, which conducts contact tracing. The returnees created a chain of infections numbering more than 4,000 people, the Israeli military told the AP.”

#87 crowdedelevatorfartz on 01.30.21 at 5:11 pm

@#75 joe schmoe
“What a suckup.

When the grown ups with the suits do the same thing and screw up they get bailed out by the govt.”

+++++

Another penniless, angry, non investor shouting into the wind on a financial advice blog…….

Keep blaming “the suits” while we blue collar tradesman rake it in baby.
Finished another profitable job today, ahead of schedule and under budget…..
As the billionaires in China say when they make a huge profit……
“Cha—–Ching”

#88 the Jaguar on 01.30.21 at 5:29 pm

@#38 Sail Away on 01.30.21 at 12:29 pm

Your response applies equally to poster # 30.
++

I am curious Sail Away. ( what cat is not? )
What kind of dogs does the Sail Away own?

I am going to take a wild guess and say ‘Short Haired German Pointers’.

If I am correct my prize should be you making a donation to the Meow Foundation.

https://www.meowfoundation.com/

#89 Elon Fanboy on 01.30.21 at 5:30 pm

“ First, these Reddit investors look for beaten down companies with large short positions.”

Not just any company being shorted. They chose GME because it’s in a totally unique situation. Those greedy hedge companies have illegally shorted it with naked shorts, i.e. sold shares that don’t exist.

This isn’t a simple pump and dump. r/WSB is quite clear the strategy is to out wait those hedge funds who are haemorrhaging short interest payments on GME, and force the mother of short squeezes. Similar to what happened with the VW short squeeze in 2008.

GME’s share price has to go up for a simple reason, the Hedge companies have to buy every single share (and then some) to close their short position.

#90 Benge on 01.30.21 at 5:33 pm

We need to up the due diligence here. A simple YouTube (so it must be true) search on the mind blowing stupidity of the hedge funds along with the mechanics of the counter-trade indicate to me that the wallstreetbets longs are in an incredibly powerful position so long they hold, hold, hold in their sparkling diamond hands to bleed the shorts who need to but their shares to cover their losses.

A good 8 minute video explaining the trade is https://www.youtube.com/watch?v=0VUql_xILpI

#91 mark on 01.30.21 at 6:15 pm

What are the odds there’s a core group of young financial professionals who are on there instigating and coordinating a lot of what’s going on.

Multiple accounts. VPNs. Emotive posts whipping the crowd into a frenzy.

I’m guessing it will come out eventually.

#92 S.Bby on 01.30.21 at 6:32 pm

what a fool this guy is. Take the profits and run !

https://www.cnn.com/videos/business/2021/01/29/trader-millionaire-gamestop-stock-orig.cnn

but he says it will go higher ???

#93 Nonplused on 01.30.21 at 6:37 pm

It will be interesting to see how this GameStop business ends. Right now the Robinhood traders are sitting on “notional gains”. They ain’t going to get any money until they sell. So who are they going to sell to?

Of course the natural counterparty would be the hedge fund short. But they don’t have the money and will go bankrupt, so they won’t be buying. Not at these prices anyway.

That’s the problem with “running someone’s book”. The game is kind of over once they run out of money. Sort of like when somebody goes broke playing poker. There is no point playing another hand.

Also, I hope the Robinhood traders who are smart enough to sell and take their profits know what a capital gains tax is and plan accordingly.

#94 tkid on 01.30.21 at 6:51 pm

Ryan, the AMC story gets crazier. $600,000,000 worth of debt converted into AMC stock courtesy of WSB’s antics:

https://www.polygon.com/movies/2021/1/29/22256360/amc-stock-price-reddit-rally-robinhood-debt-conversion

#95 Dominic Cummins on 01.30.21 at 6:59 pm

https://www.jccf.ca/federal-government-faces-imminent-lawsuit-over-unlawful-confinement-of-returning-canadian-travelers/

Worse than Soviet Union brought to u by a fascist silver spoon fed clown PM..

#96 Nonplused on 01.30.21 at 7:24 pm

#6 A Dollar is a Dollar is a Dollar on 01.30.21 at 9:57 am

I couldn’t disagree more. Dollars are a unit of exchange, nothing more. When the things being exchanged rise in value, you haven’t really gained anything.

Let’s look at houses and assume Chrystia has granted you capital gains taxes on primary residences and 100% capital gains inclusions.

So our happy couple in this example bought a small house for $500,000, which they have been paying for with after tax money, so let’s say they have $400,000 left on the mortgage. But the crazy Robinhood traders have driven house prices in the area to $1,000,000 with their insane profits. Our couple has a couple of kids now so they want to move to a larger but further out house in the suburbs, also costing $1,000,000. Seems pretty straight forward, right?

Except that that $500,000 capital gain will most certainly put them in the highest tax bracket for the year of the sale. Let’s say it’s 50% to keep the numbers simple. With a 100% inclusion rate that means the government is going to want to see a check for $250,000. Where are they going to come up with that? Well, they are probably going to have to mortgage it. So now the mortgage goes from $400,000 to $650,000 when all they did was move from one 1,000,000 house to another. Add realtor fees and land transfer taxes, which are typically mortgaged already, and it will simply be impossible for them to move.

The same thing already happens in stocks which creates friction in the markets. Even with your B&D portfolio much thought has to be given to tax planning when rebalancing outside of an RRSP or a TFSA. If you take profits on one position you aren’t going to be able to buy the same net in another position. Your overall net position will decline by the amount of tax you owe even though you got no money. This already happens.

So, not all dollars are the same. The source and destination of those dollars is an important aspect to the nature of them, even if the unit of measure is the same.

The only place I could reasonably see capital gains taxes on primary residences and 100% inclusion for all capital gains is upon death, since we know at that point the assets are heading to money as a final resting place before being distributed to the heirs. Otherwise it places too much friction on markets and traps people in their current house and other assets.

But this has problems too. What do you do about grandma who had a large capital gain on her house but sold it when she moved into the old age home?

A simpler and much more effective way to go if they really want to go after this wealth is an estate tax upon death. This way the government gets part of the gains on the house, but minus the money grandma had to pay the old age home so she doesn’t have to live in a chicken coop. And of course the old age home is already generating plenty of taxes on the employees and the corporation itself. And of course RRSP’s already get cashed out at the maximum tax bracket encountered as if it were income in one year, so it would only be any residuals on the house that they would be going for.

The tax system is the way it is for a reason.

————————————-

Of course that doesn’t mean they won’t make other tweaks. If Trudeau follows Biden’s 401k plan big changes are coming to RRSP deductions in the name of fairness. It will be in the form of a “flat” tax deduction. Here is a rough example.

Right now the amount of tax you get refunded when you contribute to an RRSP depends on your tax bracket. So the higher your tax bracket the larger as a percent of income your refund, up to your contribution limit. Savvy tax planners only contribute up until their highest tax bracket is exhausted, or maybe the second highest if they are of lower income.

Well, Biden thinks that is “inequitable”. So they are floating a flat deduction. Let’s say it’s 20%. So it won’t matter if your effective tax rate is 10%, 20%, 35%, or 50%, everybody gets a 20% deduction. This means someone in a 10% tax bracket could protect a much larger share of their income from taxes than a person in the higher tax brackets (assuming they have anything to save).

I expect them to mess with things like this in the name of “equity” before they go after capital gains.

And remember, “equity” means you and me will have equal outcomes, it doesn’t apply to the really rich who fund election campaigns. The elite will never pay more tax.

#97 willworkforpickles on 01.30.21 at 7:29 pm

Regular shorts hop on the bandwagon and just play along. They sometimes get burned.
Shorts privy to inside information through a company mole cover their shorts just prior to a substantial pr through a tip-off by an insider playing both sides of the trade via proxy contacts.
Illegal but done quite often within some companies burdened with a high float but good fundamentals.

#98 Nonplused on 01.30.21 at 7:30 pm

#10 truefacts on 01.30.21 at 10:07 am
Ryan, one more question – then I’ll stop (promise).

“…hedge funds, who have no qualms over shorting stocks and trying to force companies into oblivion”

I don’t see how shorting a stock would affect a company directly unless they are trying to raise money a stock issuance. If we had trillions and shorted Berkshire Hathaway and it traded down to a penny, I don’t see how that would affect the long-term business???

Am I missing something?

——————————-

Hey zefrank1, nice to see you.

When a stock price is artificially suppressed, it makes it so they cannot raise capital on the markets and makes their creditors very nervous so they can’t borrow either. In your extreme case they probably couldn’t get enough working capital to buy products to sell in their stores. It can kill the business.

#99 Ponzius Pilatus on 01.30.21 at 7:36 pm

#53 Don Guillermo on 01.30.21 at 1:53 pm
#49 Linda on 01.30.21 at 1:09 pm
#13 ‘A Dollar’ – Seriously? You’ve never before heard of nepotism or the saying ‘it’s not what you know, it’s WHO you know’? Hate to break it to you but this human behavior has been around since we fell from the trees
*****************************************
A certain spoiled privileged gropey blackfacing man has benefitted immensely by this leading to the eventual demise of what was once a top tier nation.
————–
Agreed.
Trump did a lot of things, but blackfacing he did not.

#100 Nonplused on 01.30.21 at 7:39 pm

#32 Dr V on 01.30.21 at 12:08 pm
So does it make sense, or can it realistically be done, to place a buy option at a higher price, on a shorted stock
to lessen or eliminate a loss due caused by a short squeeze? Or would the cost of the option be so high as to eliminate the potential short profit? Or would the purchase of a large amount of these options trigger the squeeze?

———————————–

Sure you can do that but options are expensive. You need a quite a bit of being right about the stock going down to pay for the premiums to hedge it going up with options. Most times this will be a losing trade.

Also call options tend to be more expensive than puts. That’s because you can only lose everything selling a put, so in the case of GameStop a few weeks ago $24/share, but in the case of selling a call you can lose multiple times everything.

#101 KLNR on 01.30.21 at 7:41 pm

@#94 Dominic Cummins on 01.30.21 at 6:59 pm
https://www.jccf.ca/federal-government-faces-imminent-lawsuit-over-unlawful-confinement-of-returning-canadian-travelers/

Worse than Soviet Union brought to u by a fascist silver spoon fed clown PM..

lol, not at all.
you decide to travel and potentially bring back covid.
it’s on you.

#102 Comments! on 01.30.21 at 7:46 pm

We have to stop pretending that the markets have any connection and fundamentals that are remotely connected to the economy in the past 9 months, now and the next 2 years. A massive gasbag of printed money at zirp No mention as to who is going to pay for tens of trillions of new world wide debt, not a word about massive world wide structural unemployment with, millions of businesses gone for good and no bullets left in the chamber to fix it all. Any nothing further can go wrong in the world right? Take the shot and all of the world’s new potential problems become an impossibility?

Seriously, where is the chart for all of that?

#103 willworkforpickles on 01.30.21 at 7:49 pm

#51 SWL
Well that’s one way for a shell company to sidestep one hell of a reverse split for awhile anyway.

#104 Tripp on 01.30.21 at 7:53 pm

With highly-paid fund managers performing like this, why are we surprised the kids are into gambling?

https://www.barrons.com/articles/if-you-still-own-actively-managed-stock-funds-get-ready-for-some-bad-news-51579691701

#105 Nonplused on 01.30.21 at 8:02 pm

#58 Figmund Sreud on 01.30.21 at 2:15 pm

True dat. But I can explain a little about how they do it.

So you have the last trade, which is what we get to see on our iPhones. Someone bought GameStop at $350 and someone sold said shares at $350. But what Citadel can also see and Robinhood and others provide to them is the depth. Some trading platforms like NGX (ICE) will show traders depth but you don’t get that on retail platforms. But Citadel does. So that means they can see all the other bids and offers that aren’t at market that you cannot.

So they used to do this manually but now they have computers to do it. When the computer sees that the total $ of bids exceeds the total $ of offers down the board, they lift all the offers and hit all the bids pocketing the difference. And they will also do it the other way around. This is where much of the money in being a “clearing house” is to be made, and why Robinhood is so valuable to them.

#106 jeffre on 01.30.21 at 8:11 pm

another industry exposed love it

#107 "NUTS!" on 01.30.21 at 8:17 pm

Hi Ryan,

Really enjoy your perspectives. If possible, at some point it would be great to hear your (or GT’s) assessment of the fragility with the Repo market. There are different theories on the potential threats, in particular another incident like we saw overnight last September.

#108 fancy_pants on 01.30.21 at 8:23 pm

Remember when senators got coronavirus briefings before the public and sold off millions of dollars in stocks before the crash last year and faced no consequences and no regulation? Then reddit made one stock into a meme and they’re talking about restructuring the whole market.

#109 crowdedelevatorfartz on 01.30.21 at 8:30 pm

hmmm

Seems like the Worldometer covid new infection rate is about to reach the rate of 1,000,000 people worldwide PER DAY.

https://www.worldometers.info/coronavirus/

#110 SoggyShorts on 01.30.21 at 8:40 pm

Wow, the Robin Hood team making the rich richer here:

https://www.investors.com/etfs-and-funds/sectors/gme-stock-gamestop-investors-instantly-make-16-billion-gamestop-stock-squeeze/

#111 Palpha on 01.30.21 at 8:41 pm

Trudeaus handling of covid response is a disaster. We are Dong worse than the US who had Trump!
https://ourworldindata.org/grapher/covid-vaccination-doses-per-capita?tab=chart&stackMode=absolute&country=CAN~USA~ISR~GBR&region=World

#112 Nonplused on 01.30.21 at 8:43 pm

#82 Pete from St. Cesaire on 01.30.21 at 5:02 pm
I hope the Robinhood traders do it to silver next. Silver is terribly underpriced due to the manipulation of the market with paper-silver trading far exceeding the total amount of physical silver existing. Listen-up guys; if you really want to bring the whole rotten system down push the price of physical silver through the roof. 10 years ago Max Keiser said we need a Silver Liberation Army to once-and-for-all bring down the robber barons of Wall St and the criminal banks. I’m hoping to see that army materialize.

———————————

Why silver? Is there a large demand for silver coming that markets are not aware of?

Commodity markets, like any market, can be manipulated for a while. The Hunt brothers famously did it with silver. But look how that turned out.

There are large shorts in silver and gold but it is mostly due to producers hedging. The gold miners sell their production forward so they can get financing, which means the banks have all these gold contracts they don’t want either so they sell them. It only looks like the banks are short gold and silver, they have corresponding contracts with the miners.

Gold is valuable because it makes the best bling. That is why it goes up and down with the economy. More up economy, more need for bling. More down economy, less bling.

Of course there are supply and demand issues as well.
Gold, like most resources, is getting more expensive to extract. But the main use is bling and that is one of the most responsive demand curves out there. More so than ice cream.

Silver is the poor man’s gold and also has a large bling market. But people only have so much money to spend on bling.

So I don’t buy the silver – gold conspiracy theory. Whenever times get tough or the price of either goes up too much, all the bling goes to the pawn store and they offer you melt value unless it is a really fine piece. So where do these heirlooms go? If it is nice the pawn operation will try and sell it for a while with a markup over melt, but if it doesn’t sell it gets melted and made into brand new bling.

So the problem with trying to squeeze the gold and silver markets is that unless you can convince all the unemployed people not to sell that neckless they never wear, there is a lot of supply.

#113 Cus Gauge on 01.30.21 at 8:49 pm

The whole system is rigged…

https://www.cnbc.com/2014/06/03/how-aluminum-became-a-cash-cow-for-goldman.html

#114 Bert on 01.30.21 at 8:57 pm

“Pockets of bubbles” is again the Wall Street consensus. Everyone is saying this. It means there’s no bubble at all. They were claiming TSLA was a bubble BEFORE it went up 7X. Same with bitcoin.

I think the trap is in traditional assets. Banks, oil, insurance, transports, rail, etc. These industries are in trouble.

#115 Ustabe on 01.30.21 at 9:03 pm

#100 KLNR on 01.30.21 at 7:41 pm

@#94 Dominic Cummins on 01.30.21 at 6:59 pm
https://www.jccf.ca/federal-government-faces-imminent-lawsuit-over-unlawful-confinement-of-returning-canadian-travelers/

Worse than Soviet Union brought to u by a fascist silver spoon fed clown PM..

lol, not at all.
you decide to travel and potentially bring back covid.
it’s on you.

Not only that, K, but the Justice Centre for Constitutional Freedoms is situated in prime strip mall offices, sharing space and the parking lot with a Starbucks, a UPS store and a Shoppers Drug Mart. No crematoriums or adult services stores that I can tell. I’m sure they are very able to mount such a case. Lots of Staff Lawyers on the website.

#116 willworkforpickles on 01.30.21 at 9:10 pm

They say the madness of wallstreetbets is enough to have financial advisors bleeding from their ears…whatever that means.
…(maybe from the height of stupidity and from the velocity by which it can come crashing down)…

Translation:

“It’s not even the ends that matter. It’s the means. It’s the fact that you’re placing this bet, that’s where the value in all this is. Sure, you may get money, or you may end up broke, but you played the game, and you did it in some crazy way.”
(quote unquote)

#117 Yukon Elvis on 01.30.21 at 9:25 pm

#86 crowdedelevatorfartz on 01.30.21 at 5:11 pm

As the billionaires in China say when they make a huge profit……
“Cha—–Ching”
…………………………..

And when they look at Game Stop they say….sum ting wong.

#118 Ponzius Pilatus on 01.30.21 at 9:29 pm

No dog in the fight.
Sitting on the sidelines.
Wait until I can see the fear in the eyes.
Then go for the kill.

#119 Sail Away on 01.30.21 at 9:39 pm

#87 the Jaguar on 01.30.21 at 5:29 pm
@#38 Sail Away on 01.30.21 at 12:29 pm

I am curious Sail Away. ( what cat is not? )
What kind of dogs does the Sail Away own?

I am going to take a wild guess and say ‘Short Haired German Pointers’.

————–

Nope, not GSPs. They are fantastic dogs, though, and several of my friends own them, mostly from the Standing Stone Kennel in Kansas.

My old vet is a 10yo Chesapeake, the performer is a 5 yo Springer, and new talent is 10 month Munsterlander from Fourpoint Kennel in Cochrane (your neck of the woods). Then we have a family doodle who sometimes pretends to hunt but fools nobody. She’s always first to food, first for treats and last up in the morning. Almost a permanent fixture in front of the fire in winter- sort of like me, actually.

#120 Next Future Ex-GG on 01.30.21 at 9:41 pm

I just started a hedge fund. I plan to put a row all the way around the yard. Then I won’t have to keep going out on the porch to yell you kids get off my lawn.

#121 KLNR on 01.30.21 at 10:01 pm

@#98 Ponzius Pilatus on 01.30.21 at 7:36 pm
#53 Don Guillermo on 01.30.21 at 1:53 pm
#49 Linda on 01.30.21 at 1:09 pm
#13 ‘A Dollar’ – Seriously? You’ve never before heard of nepotism or the saying ‘it’s not what you know, it’s WHO you know’? Hate to break it to you but this human behavior has been around since we fell from the trees
*****************************************
A certain spoiled privileged gropey blackfacing man has benefitted immensely by this leading to the eventual demise of what was once a top tier nation.
————–
Agreed.
Trump did a lot of things, but blackfacing he did not.

Why would he bother when he owns the white robes and funny hat.

#122 willworkforpickles on 01.30.21 at 10:11 pm

There is virtually little to no risk to trading pennies if you know what you’re doing. (its cheap with good money to be made)
Never let anyone tell you fundamentals don’t matter (anymore). They do matter if you want to be safe…if you want to make money. Don’t let anyone tell you a high float is problem with penny stocks either. They only are if sound supporting fundamentals are non existent.
I’ve played many a high float stock that got shorted inside and out but only go for the ones with strong fundamentals backing it and showing reasonably good volume on any given day. The swing traders dream with virtually no risk. Sell the highs (on quarterly often times good news) (generally a given trading pennies with good fundamentals) then let the shorts do their thing and buy back in low before the next quarterly release. After all, its that high float that keeps a company even with good fundamentals other than its os spinning its wheels… padding my bank account 4times a year via rinse lather repeat seemingly to no end.
The craziness of late…not for the sane investor, or gambler for that matter.

#123 Sail Away on 01.30.21 at 10:32 pm

#120 KLNR on 01.30.21 at 10:01 pm

Why would he bother when he owns the white robes and funny hat.

————–

Wow! First president and now Pope?!

#124 Sail Away on 01.30.21 at 10:40 pm

#117 Ponzius Pilatus on 01.30.21 at 9:29 pm

No dog in the fight.
Sitting on the sidelines.
Wait until I can see the fear in the eyes.
Then go for the kill.

————-

I did not know house elfs were killers.

#125 Calgary on 01.30.21 at 10:42 pm

Golden opportunity to buy very cheap stocks in 2021.

#126 STeve French on 01.30.21 at 11:06 pm

#56 SteveO

Get your own moniker Steve O.

THis is Steve French and SteveO is my sign off.

IVe had it for years starting way back in the Smoking Man days of this blog.

ANd get off my lawn too!

#127 Dave on 01.30.21 at 11:24 pm

Anyone have stock tips for Robinhood…..Im will to gamble….Live ony once

#128 Ponzius Pilatus on 01.30.21 at 11:51 pm

#2 Adele on 01.30.21 at 9:36 am
Ryan, I like how you use the term “commission free” trading for Robinhood’s business model. Lazier people shorten it to “free” trading. Robinhood gets paid in the form of rebates from market makers. So, are Robinhood customers paying slightly more for the shares that they buy compared to someone who had a trade for the same number of shares at the same time but routed through an exchange? Are the Goliath market makers making a killing from all Davids by front running the trades?
———————-
I got the same feeling.
We probably find out that it’s Goliath vs. Goliath.
And little David will be squashed again.
When will they ever learn?

#129 Ponzius Pilatus on 01.31.21 at 12:11 am

#73 Don Guillermo on 01.30.21 at 3:47 pm
#65 Bill on 01.30.21 at 3:00 pm
Trudeau is instrumental in supporting them and he is the only meat head leader that supports this 5G roll out from China. Well in play now and I’ve mentioned this before here. Canuckle heads need to wake up or Goodbye way of life.
*************************************
Our brilliant, steady and manly leader (as BB so eloquently describes him) gambled with China on vaccine procurement. Didn’t work out so well. My wife’s brother in Colorado will be vaccinated months before their 92 y/o mother (in a Canadian memory care home) will be. I’m quite confident that my wife and I will be vaccinated in Mexico before her as well.
———————
So you leave your 92 y/o mother dying in a Canadian care home, while you live it up on the beach.
Shame on you.

#130 Nonplused on 01.31.21 at 1:19 am

#120 KLNR on 01.30.21 at 10:01 pm

Trump did a lot of things, but blackfacing he did not.

Why would he bother when he owns the white robes and funny hat.

—————————–

I have a real problem with that sort of slander. It shows that you are willing to say anything at all with no evidence at all to defame anybody you don’t like or agree with.

Trump’s many follies stand on their own. We don’t need to make stuff up and assume that we can insert it into civilized conversation. But it seems to be the way of things these days.

What’s next? We are going to call Trump an anti-Semite when his son-in-law and daughter are Jewish? Many of his big financial supporters were Jewish? He was more friendly to Israel than perhaps any recent president? The fact that he is friendly with Jews excludes him from the KKK.

People got to get a grip. There is no record that hasn’t been debunked of Trump saying racist things. Misogynist things, yes, but not racist. Uncle Joe on the other hand…..

#131 Ponzius Pilatus on 01.31.21 at 1:28 am

I did some research.
Robin Hood has a valuation of 1.3 billion.
Average value per account is about 2,500.
There are 660 billionaires in the US.
Their wealth is estimated at 4.1T, about 1T was added during the pandemic.
Do the math.

#132 Office of the er, what? Who am I again?? on 01.31.21 at 1:51 am

Not to worry. Those laid off Keystoned er, what, workers, they can get new green jobs. That’s right. They can pack barrels of oil on their heads and walk them down to Texas! Ya that’s right! Green jobs! And good exercise!

#133 Dre on 01.31.21 at 2:15 am

All the institutional guys don’t get it. This isn’t about well capitalized people making bad decisions. It’s about millions of kids investing $100 who see no downside to seeing if their 10 AMC stocks might go to $150.

#134 Al on 01.31.21 at 3:03 am

“but it’s still just a car company, who soon will have much more competition (GM just announced that it will stop selling gas powered cars by 2035). Consider this.”

I’ve considered the competition, and there is none. Model 3SR+ or Bolt Premium? Same Msrp. Almost no one would choose the latter, and the latter is a good car but with the wrong price. Model Y SR or Kia Niro, Kia Soul Limited, Mustang EV, Vw ID4? Not even close. You can do the same for their entire lineup ( however the first two are their meat and potatoes so far atm). I don’t expect the cybertruck to be any different. Dollar for dollar no competition. Buyers are thinking “how much cheaper must the competing car have be for me to buy it’. And they’re not that much cheaper. Some clearly inferior products at 47k or much lower range EVs. The competion keeps introducing product after product of inferior vehicles (many low volume) at same price or higher prices. It should be pretty clear to anyone that the reason they can’t compete is not because they’re not trying, they just can’t. Unless tesla’s stops innovating I don’t see this changing this decade.

#135 BillyBob on 01.31.21 at 3:57 am

#100 KLNR on 01.30.21 at 7:41 pm
@#94 Dominic Cummins on 01.30.21 at 6:59 pm
https://www.jccf.ca/federal-government-faces-imminent-lawsuit-over-unlawful-confinement-of-returning-canadian-travelers/

Worse than Soviet Union brought to u by a fascist silver spoon fed clown PM..

lol, not at all.
you decide to travel and potentially bring back covid.
it’s on you.

===============================

Well, no. What if someone left Canada before Covid was even a thing? Or what if someone has to travel for non-frivolous reasons? I know it’s hard for petty little parochial minds that rarely venture beyond their little bubbles to wrap their heads around, but not everyone on airplanes is jetting off to the beach. People have businesses to run, family funerals to attend, longstanding commitments to meet in person.

I’m not opposed to the concept of controlling the spread of a disease by all available measures. What is aggravating about the latest paternalism from PM Punchable Face, is

a) putting in measures like this now – more than a year after the outbreak started, laughably asinine timing, and

b) falsely inflating the cost far beyond what other countries charge for similar programs.

But then, doing things to a poorer standard, for a higher cost, is pretty much what Canadian government is world champion at.

#winning

#136 Ferdinand Mech on 01.31.21 at 7:04 am

It seems that no one here understands the price discovery function have in investing. The idea that a few pimply turds are sticking it to the man is ridiculous. If you know nothing I’m not here to teach you. Study something about Citron or Muddy Waters and find out what they do.

#137 AFTR on 01.31.21 at 7:16 am

This analysis was done about 6 months ago. It follows up on some others. The big takeaway for me

” Large institutional owners have lent and continue to lend their shares to short sellers despite having reason to recall them from loan. Over the past year alone, the interest rate on borrowed shares have ranged from 30% to as high as 200%. As an institutional investor, lending shares has become an incredible source of investment return. However, without this level of shorting, GameStop could very well be priced multiples higher than its current trading price.”

https://seekingalpha.com/article/4356058-gamestop-zero-near-term-bankruptcy-risk-yet-still-priced-for#comments

#138 unbalanced on 01.31.21 at 7:23 am

I have to admit. I am not the smartest investor out here. I don’t understand a lot of jargon that is being stated. But I’m learning. Great article by the way Ryan. There has been a lot of insider, shenanigans, senators, mutual fund advisers in on GME. Calls,puts, shorts, longs. OH VEY!!! Why is it OK if the big players do it? Legal for them should be legal for all. Some still pay taxes from their mothers basement. Just saying. Thanks

#139 Do we have all the facts on 01.31.21 at 7:51 am

As I mentioned last week the block chain created to support the concept of a virtual currency could easily morph into a block chat room where instructions to buy bitcoins could drive up the price and as the price increases the block could sell their coins into the frenzy making millions of dollars.

Jordon Belfort became extremely rich using a team of con men to pump up value, promote the high value to new customers, sell the shares they hold into the froth, pocket millions at the expense of the late arrivals. Bitcoin pays their block of con men in virtual currency so they have a strong vested interest in pumping and dumping.

Once Bitcoin caught the attention of mainstream media the blockchain that was being ‘compensated’ in virtual coins could easily collaborate to pump up the value of their virtual holdings to the general public.

Regulatory authorities have no way of controlling the manipulation of a virtual currency since it only exists in the minds of the individuals that became convinced that virtual coins have value. The trading of baseball or hockey cards amongst collectors comes to mind. To non collectors the cards are worthless pieces of cardboard but to collectors they have serious value.

The creation of confidence has become easier with the introduction of the internet and social media networks. If enough people come to believe that a Bitcoin has value
it will actually have value until confidence is lost.

Once again I am offering a nice selection of rare tulips at $1,000 a bulb.

#140 SOMETHINGS UP on 01.31.21 at 8:05 am

“You can’t sell a house you don’t own, you can’t sell a car you don’t own, WHY can you sell stocks you don’t own? – SCAM”

~ Elon Musk

People sell real estate they don’t own all the time. It’s called ‘assignment’. – Garth

#141 Sky on 01.31.21 at 8:13 am

WSB meets Robinhood & the BIG money :

Annnnnnnd it’s gone !

https://www.youtube.com/watch?v=Y3AM00DH0Zo

#142 Earlybird on 01.31.21 at 8:32 am

#127
‘We’ll probably find out that it’s Goliath vs. Goliath.”
Now that would be terribly interesting….what a thought!

#143 Masks really do make some people more attractive on 01.31.21 at 8:55 am

#129 Nonplused on 01.31.21 at 1:19 am

People got to get a grip. There is no record that hasn’t been debunked of Trump saying racist things. Misogynist things, yes, but not racist. Uncle Joe on the other hand…..

××××××××××××××××××××××××××××

He just wanted to have Black and Hispanic kids put to death, for a non-capital crime that they didn’t commit.

https://www.usatoday.com/story/news/politics/2019/06/19/what-trump-has-said-central-park-five/1501321001/

https://time.com/5597843/central-park-five-trump-history/

Oh, and the whole “no blacks renting in Trump buildings” thing.

https://www.nytimes.com/2016/08/28/us/politics/donald-trump-housing-race.html

#144 crowdedelevatorfartz on 01.31.21 at 9:05 am

@#134 BillyBob
“What is aggravating about the latest paternalism from PM Punchable Face”

++++

Good one.

The faux gravitas on display at the “Cottage” pressers is nauseating.

The promises unfulfilled are almost as extravagant as the excuses.
Here we are 1 year after this virus reared its head.
And NOW the govt is slowly closing the door on travel with another knee jerk, populist, “sticking it to the rich traveller” set of rules.
But what the hell. It gets the mobs mind off the death in care homes and the dreadful, disjointed, haphazard roll out of vaccines
The vaccine program is gaining speed as another over analyzed, increasingly bureaucratic, oh so typical, govt shambles.
A slow motion train wreck that we are all forced to ride.

Picking lint from ones navel while collecting obscene salaries and benefits seems to be the only thing the feds do well.

This fiscal, medical and political debacle isnt over by a long shot and one can only hope and pray that Trudeau wears the political mud from his trendy brown shoes to his trendy salt and pepper beard.

#145 Bezengy on 01.31.21 at 9:27 am

#87 the Jaguar on 01.30.21 at 5:29 pm
#38 Sail Away on 01.30.21 at 12:29 pm
———–
Had to check but as I suspected, Calgary has the most dogs per/cap in Canada. It seems everyone has a dog here, and don’t be confusing the breed either, you’re not going to make friends by assuming a Portuguese Water Dog is just a labra-doodle.

https://winnipeg.ctvnews.ca/winnipeg-has-second-highest-dog-to-person-ratio-in-canada-ctv-news-data-1.3346854#:~:text=Only%20Calgary%20tops%20Winnipeg%20with,dog%20for%20every%2014%20people.&text=Winnipeggers%20are%20willing%20to%20go,care%20for%20their%20furry%20friends.

#146 crowdedelevatorfartz on 01.31.21 at 9:32 am

@#128 Pensive Pouting
“So you leave your 92 y/o mother dying in a Canadian care home, while you live it up on the beach.
Shame on you.”

++++

Speaking before thinking again ponzie?

I dont believe the parent was “dying”.
And even if they were dying …..it wouldnt matter.
Just another parent with legions of other parents stuck in the care homes where family and visitors…. are… not allowed…..
Chalk one up for the rigid rules of quarantine when you cant hold your parents hand as they take their last breath because…..you might get sick.

pElderly Parents waiting for their vaccine shots …..and waiting , and waiting…… they will be waiting for months as our PM assures us for the umpteenth time that he has PERSONALLY spoken with the heads of all the vaccine companies and they, “assure him that Canada will receive their allotted amounts in the near future” ( unless the EU govts wanting the same vaccines pass a Law that keeps them all in Europe).

Do you really expect the vaccine roll out to be smooth and substantially completed by Sept 2021?
Sept 2022?

So does a person who flew down to their condo/house/ timeshare in Mexico/Hawaii/Caribbean where they can self isolate just as easily as a Canuck in cold/wet/ miserable Canada?
Do they fall on their sword to appease a populist Prime Minister who wants to appear to be “doing something” for his easily swayed, gullible voters ( that would be you)?

No . I dont have a problem with travelers that show proof of a negative covid test, return and quarantine and then provide a second neg test….

It would be more than the govt has done in the past 12 months.

#147 Wrk.dover on 01.31.21 at 9:45 am

What about the commute half way around the planet on five week rotation crowd, what do we do with these people?

It would be inhumane to force them to stay in place on their five weeks off no?

Good chance that they alone can keep the NS healthcare industry employed. (Where do infections and variants that show up here come from?) (Hint: not the back 40)

#148 SOMETHINGS UP on 01.31.21 at 9:55 am

#139 SOMETHINGS UP on 01.31.21 at 8:05 am
“You can’t sell a house you don’t own, you can’t sell a car you don’t own, WHY can you sell stocks you don’t own? – SCAM”

~ Elon Musk

People sell real estate they don’t own all the time. It’s called ‘assignment’. – Garth
——————————————————————

Another SCAM – The “Hoodies” will be all over it soon.

Of course it’s not a scam. By the way, Musk is a masterful manipulator. – Garth

#149 Yuus bin Haad on 01.31.21 at 10:01 am

OK PTB – let’s see how smart you REALLY are

#150 Dharma Bum on 01.31.21 at 10:26 am

I miss the long horned bare chested viking patriot dude.

#151 Ponzius Pilatus on 01.31.21 at 10:44 am

#143 crowdedelevatorfartz on 01.31.21 at 9:05 am
@#134 BillyBob
“What is aggravating about the latest paternalism from PM Punchable Face”
———————
What’s with the hate, boys?
BTW, the Czechs are closing their border to all foreigners, even their old buddies, the Slovaks.

#152 Don Guillermo on 01.31.21 at 10:49 am

#145 crowdedelevatorfartz on 01.31.21 at 9:32 am
@#128 Pensive Pouting
“So you leave your 92 y/o mother dying in a Canadian care home, while you live it up on the beach.
Shame on you.”

++++

Speaking before thinking again ponzie?
**************************************

ponzie – typical silly Trudeau apologist conjuring up fantasy stories instead of holding him accountable for endless failures.

#153 baloney Sandwitch on 01.31.21 at 11:06 am

You have to give it Musk – the new Tesla-S is a beast with 660 km range and 3 motors. https://driving.ca/tesla/auto-news/news/tesla-refreshes-its-model-s-with-a-new-interior-and-longer-660-km-range
I have been unloading some AMC – but I think the company can triple from here – so will hold on to some shares. People will come back to the movies with a vengenance after herd immunity kicks in by summer/fall. AMC is rapidly converting debt to equity and should survive until then.
Finally I should point out that bonds are also in a bubble, so a balanced portfolio is not as safe as you think.

#154 Sail Away on 01.31.21 at 11:09 am

“By the way, Musk is a masterful manipulator. – Garth”

————-

Well, I hope so. The Master of the Universe is masterful at all things.

#155 Damifino on 01.31.21 at 11:09 am

#143 crowdedelevatorfartz

…one can only hope and pray that Trudeau wears the political mud from his trendy brown shoes to his trendy salt and pepper beard.
————————————

Hope is all one has. But sadly, Canadians will see no viable alternative and stick with the tried and useless.

#156 Ryan Lewenza on 01.31.21 at 11:18 am

Winterpeg “Question: How do the Reddits find out that there are large short positions in these beaten down companies? Public knowledge? Inside info?”

This info is easily found in financial data services like Bloomberg or Factset. It’s public info and is easy to attain if you have a subscription to these services. I’m sure this can also be found on the web. – Ryan L

#157 Ryan Lewenza on 01.31.21 at 11:36 am

“NUTS!” “Hi Ryan, Really enjoy your perspectives. If possible, at some point it would be great to hear your (or GT’s) assessment of the fragility with the Repo market.”

I’ll add this to my list and try to address over the next month or two. I’ve had a few requests for this. – Ryan L

#158 Ryan Lewenza on 01.31.21 at 11:43 am

Nonpulsed “It will be interesting to see how this GameStop business ends. Right now the Robinhood traders are sitting on “notional gains”. They ain’t going to get any money until they sell. So who are they going to sell to?

Of course the natural counterparty would be the hedge fund short. But they don’t have the money and will go bankrupt, so they won’t be buying. Not at these prices anyway.

That’s the problem with “running someone’s book”. The game is kind of over once they run out of money. Sort of like when somebody goes broke playing poker. There is no point playing another hand.

Also, I hope the Robinhood traders who are smart enough to sell and take their profits know what a capital gains tax is and plan accordingly.”

Some will make millions (the early ones who get in and sell) and some will lose millions (the ones that get in late and don’t have an exit strategy), which is why I commented that ‘someone is going to get hurt’ from this. – Ryan L

#159 Doug t on 01.31.21 at 12:06 pm

2021 = stock market crash

“The Fed is a fraud. All the Federal Reserve has accomplished in 13 years of goosing the stock market is unprecedented wealth and income inequality as the fraud of the Fed has boosted the fraud of the market, which has fatally undermined America’s social and economic orders.

Ten percent of Americans now control 97 percent of all capital income in the country. Nearly half of the new income generated since the global financial crisis of 2008 has gone to the wealthiest one percent of U.S. citizens. The richest three Americans collectively have more wealth than the poorest 160 million Americans.”

#160 Kevin BC on 01.31.21 at 1:39 pm

Great read, thanks Ryan! 100% agree with you on TSLA, I love the company and the cars, but is it worth this much? It’s a great story stock, lead by an impressive founder and visionary. That’s all it takes to 10X a stock now… Looks like many investors are ‘gambling’ in 1 way or another.

#161 ADAM on 01.31.21 at 2:43 pm

As they say on WSB, “We can stay retarded longer than the hedgies can stay solvent.”

GME remains heavily shorted, and the hedgies are pulling every dirty trick in the book, lobbying at every opportunity, and leaning on every media crony they can to convince people the rally is done.

Most beautifully, combatting them doesn’t require the use of any exotic instrument. Just buy, and hold.

I got a little bit of GME to take the ride. Who knows where it ends up. But there is a chance it could be the moon.

Investing is not a war. It’s not combat. But, stay retarded. See where it gets you. – Garth

#162 Blobby on 01.31.21 at 3:24 pm

“Who knows where it ends up. But there is a chance it could be the moon.”

If you’ve bought shares in a failing brick and mortar company, just because everyone else was doing so.. Then the only “moon” you’ll be getting – is the equivalent of owning a piece of the moon (e.g. you’ve just thrown your money away as it’s gonna drop quicker than underwear on prom night)

#163 Nonplused on 01.31.21 at 8:07 pm

#158 Ryan Lewenza on 01.31.21 at 11:43 am

Some will make millions (the early ones who get in and sell) and some will lose millions (the ones that get in late and don’t have an exit strategy), which is why I commented that ‘someone is going to get hurt’ from this. – Ryan L

————————————

Doesn’t seem like we are actually in any major disagreement. But I don’t think the reddit crowd understands that once they reach the limit of the shorts ability to pay the music stops and bankruptcy ensues.

Today I Found Out

It takes up to 2 days for securities to be transferred from one broker to another. Until the transfer is complete the broker must post cash. So that is what happened to Robinhood, why they stopped trading GME (and a bunch of other shares). At the heightened share price, they simply couldn’t post enough cash.

Robinhood has also defended themselves saying they only closed out positions that were bought on margin. Brokers do that if they think there is a risk they could be left holding the bag. People don’t understand that about brokers I think. They are intermediaries. Yes they can and do hold the stock for short intervals themselves and cash in on bid-offer anomalies, but in the end they do not own the stock and you are not buying from them unless they are also buying from someone else.

So the problem Robinhood faced is that they had all these people buying shares which Robinhood did not own and had to buy from Citadel, but Citadel wants cash in the bank before delivering the shares.

Ryan, you are aware of all of this but I typed it al out incase any other curious readers of this comment section bother to read it.

Robinhood shut down trading because they ran out of money. It is simple as that. It is kind of interesting that the reddit crowd, attempting to “stick it to the man”, almost and may have killed the vehicle they used to do it.

Anyway keep up the good work. I read your articles. I wouldn’t if I thought they were not worth it.

#164 ADAM on 01.31.21 at 10:20 pm

#162 Blobby on 01.31.21 at 3:24 pm

“If you’ve bought shares in a failing brick and mortar company, just because everyone else was doing so.. Then the only “moon” you’ll be getting – is the equivalent of owning a piece of the moon (e.g. you’ve just thrown your money away as it’s gonna drop quicker than underwear on prom night)”

_____

You may very well be correct, thus my “investment” is extremely modest. I consider it schmuck insurance.

I think many here underestimate the conviction of these GME holders, both the redditors and the institutional side, and their ability to attract additional buyers. From everything we’ve witnessed, it’s undeniable that they’ve hooked a live one.

#165 D tree on 01.31.21 at 11:29 pm

GM will be bankrupt long before 2035