Updated: Feb 1
Social media platforms will take on a larger role in markets going forward, including becoming a “breeding ground for targeted disruption of companies”, especially those perceived to be behaving badly, Robinhood crowd gets all the ‘blame’, it is also argued, by some.., that the Hedge Fund crowd were wrong is establishing the risk they were taking by being short single stocks, knowing full well WSB was after some of these single names.. WallStreetBets is now 8 million users, up 2 million in the past 24 hours (was 2mio at the start of last week..)…until the SEC gets really angry, ie, if markets get really disruptive..as we saw last Thursday, rules can change overnight..
President Biden is meeting GOP representatives today to discuss their $600bn counter to his $1.9trn
China factory activity expanded at the slowest pace in seven months, Caixin PMI 51.5 vs f/c 52.7 (miss on PMI and China has been tightening lately)
Melvin Capital lost 53% in January, hurt by GameStop and other bets. Citadel, its partners and Point72 took losses from their investment in the hedge fund. It started the year with about $12.5bn and now runs ~$8bn, incl $2.75bn in emergency funds. GME despite short-selling funds losing a collective ~$20 billion so far this year, short interest in GameStop is only down 8% from last week (it’s a fast moving market, but if true…). Goldman: "The typical US equity long/short fund returned -7% this week and has returned -6% YTD."… According to Goldman Sachs Prime Services, last week represented the largest active hedge fund de-grossing since February 2009
SPAC Listing Boom Drives Record $63 Billion January for IPOs – another sign of euphoria in recent months
Germany, Real yields (10y Bunds-inflation) plunged to -1.52% after inflation jumped to 1% in January from -0.3% in December. Real yields are now negative for 57 consecutive months, a fresh historic record (chart)
Germany's retail sales collapsed by 9.6% in December as a result of the strict lockdown. In most of Europe, there is little to no trade-off between public health, personal freedom and economic prosperity.
Markets : If anyone wants to end the market madness, then the FED only needs to hike 25 or 50bp (and/or talk properly about taper)….they probably won’t.. Having said all this, higher Vols, slowly forcing a few issues, Crude, Copper look to have peaked, USD is firmer, stocks 'look' exhausted, Volatility remains high..
Silver !...as mentioned last week….The poor man’s gold….The real fun would start if/when WSB figures out how to take delivery of precious metal futures contracts.. SLV took in almost a BILLION dollars Friday, nearly double the old record for this 15-yr old ETF, after being targeted by WSB as way to go after the banks.. The Silver Squeeze is a hedge-fund coordinated attack so they can keep fighting the GME fight…/Redditt…again no making any judgement on any of it – only pointing that it would be/might be wrong to underestimate the potential of this movement..
Last week saw the sharpest rise in the Fear index in about 3yrs. On Wed’s Vix, which is linked to S&P 500 Index options, jumped by 62%. Chart highlights that VIX’s surge is excessive relative to moderate S&P 500 sell-off (chart)
Equity markets, as long as daily vols remain elevated (across assets) it will force further reduction. U.S. small caps/Russel vs trailing 12months earnings (chart). SPX chart below
$$$ - the last thing this market needs is a higher USD..been a big consensus short lately..
Expect the unexpected, if VOLS remain high, and the Reddit ‘movement’ continues to push for pain in parts of HF community positioning (and you can have no doubt that some other hedge funds will be targeting some of the consensus trades out there..) – Be careful out there – volatile times ahead – either way!
https://www.youtube.com/watch?v=MLpwgWb_4AU Jim Bianco joins BloombergTV to discuss the Retail Investor Revolt – so who should be investigated ?..
Kalakanis: Robinhood is very upfront that companies are frontrunning client order flow….yes, Citadel (is that legal?...)
https://www.bloomberg.com/news/newsletters/2021-01-30/your-weekend-reading-the-democratization-of-investing-arrives-messily The Democratization of Investing Arrives Messily
https://www.reuters.com/article/us-retail-trading-shortbets-idUSKBN29X1SW Losses on short positions in U.S. firms top $70 billion - Ortex data
The lesson here is not "Wall Street is manipulating the system"
The lesson here is you need a better broker.
Preferably one that doesn't sell your order flow and shut down your trading and keep your short rebates and keep your cash interest.
But hey, free trades.
https://theglobalherald.com/business/silver-demand-has-been-incredible-sd-bullion-ceo-says/ Silver Demand Has Been Incredible, SD Bullion CEO Says
https://youtu.be/rWEPSKkkdKQ Long but informative podcast - Well worth 90mins of your time though while on your bike or jogging 🏃♀️
It was a matter of insolvency on the part of the broker, as a result of them taking the clearing risk so they could sell the order flow to HFs such as Citadel Securities.
As the volatility ramped up, they needed to post more collateral to their counterparties and this caused them to close down their clients trading.
Strangely enough Janet got paid 800k from Citadel recently for a few speech and now will investigate them ..
Lots in there
Remember..LCTM had 4.8bn in cash and ended up with 1.4 trn
The elephant in the room has always been, always is and always will be ‘leverage’.
President Biden is meeting GOP representatives today to discuss their $600bn counter to his $1.9trn https://www.bloomberg.com/news/articles/2021-01-31/ten-gop-senators-ask-for-biden-meeting-on-stimulus-compromise?srnd=markets-vp&sref=8muHewSg
Myanmar military seizes control of the country from Aung San Suu Kyi https://www.bbc.com/news/world-asia-55882489
The EU triggering Article 16 then revoking it within hours is politically humiliating for them https://www.belfasttelegraph.co.uk/news/northern-ireland/eu-mask-slipped-when-article-16-was-triggered-nigel-dodds-40032659.html
https://www.bloomberg.com/news/articles/2020-08-12/hedge-funds-warn-crowded-dollar-shorts-in-danger-of-backfiring Hedge Funds Warn That Shorting Dollars Is Now a Crowded Trade – as discussed a few times recently – no real damage done mind you, yet anyway
https://www.cnbc.com/2021/01/30/the-indian-government-may-ban-cryptocurrencies-like-bitcoin.html India might ban private cryptocurrencies like bitcoin and develop a national digital coin
Russian police detained thousands of protesters. Authorities cracked down on a second consecutive weekend of demonstrations in support of jailed opposition leader Alexei Navalny. https://www.themoscowtimes.com/2021/01/31/navalny-supporters-defy-crackdown-to-protest-across-russia-a72786
No matter what anyone thinks about it all – all I’m saying is the biggest mistake is to underestimate them and their ability to ‘disturb’ some markets. IF tesla taught us anything in recent times…Who would have thought Tesla would have hit a $4’000 level (before split) a year ago - Nearly 8mio by now..