Monday 1 February 2021

#Wallstreetbets - the madness continues

What will we see this week.

Last week we have not seen the biggest short covering by Hedge Funds since 2009. Around 30% of short positions have been closed in favour of longs. This does not move the market yet, as the net impact is very little (you buy  longs to cover shorts and sell shorts to buy longs). But it does show the Hedge Funds don't want to end up like Melvin Capital, who are $7 billion down on shorting GME. 

The regulators have stepped into to stop the retail madness, by limiting purchases in the likes of #GME and #AMC through regulatory pressure. This is not going to end well for Robinhood trading, who would struggle under ther weight of capitl being deployed through the platfom anyway. 

#GME is going to continue this week, the issue is the underlying company is not worth anything like the value now ascribed. The WallStreetbets reddit's are full of the 'gamma' surge as Melvin and others are forced to quit their shorts and buy up the shares- forcing the price astronimically high. This happened with VW in 2008, when it briefly because the most valuable company in the world, after annoucing its merger with Porsche. 

Newly rich retail investors in the US are going to like this game and look for other options. Odd cryptocurrency choices like Dogecoin will have a wild week and there is talk of buying physical silver. This is an interesting play, there has long been an excess of paper contracts in the silver market and a huge price spike could well cause an issue. Silver is an in demand product with a rising price in any event. But it is 100x the size of #GME at worst. The player on on the other end is not a small hedge fund, but he largest and canniest bank in the world, JP Morgan. 

Not gonne lie, very exciting week and have freed up some play money to get involved, should be fun. The worst part is the pump and dump scum who are masquerading at WallStreetBets types, just creaming money off the newbies, sad to see by creating Whattsapp and Telegram groups with 'tips' they are all set to be short on. In the world of finance though, playing nasty is the only way. 


Thud said...

Reviewing shares last week I saw a stock I had bought as a recovery bet (macerich, high end malls) at 9 had jumped to 25 because of all this craziness, I sold and they are already on the downward path so I'll maybe rebuy this week so thanks, you crazy people out there.

Nick Drew said...

Long silver here (physical). But it's a much bigger game than anything that's been happening recently. As CU says: JPM ain't no hedgie, it is way, way too big to fail. Also Citi, MS and BoA (and Scotia). The Fed has their backs - so no margin problems there!

Oh, and JPM is a convicted manipulator of the metals markets ...

Yup, not quite just another hedgie: this one can fight back

So - no recommendations here! Mind how you go.

Thud said...

JPM....war,famine,revolution and plague, at the end JPM are always there and always making a profit and have done for generations. Who am I to argue? I'll stick with them for the long run.

andrew said...

The only silver thing I have bought is a 1oz silver coin - the 2021 ox.
Makes a nice present for OH to have ~12 Feb with (sadly) a Chinese takeaway.

CityUnslicker said...

Andrew - real physical silver is probably the way to go.

dearieme said...

Could Adolfina von der Leyen not solve this problem with one of her aggressive, decisive intrusions into a complicated system that she knows nothing about?

APL said...

"The regulators have stepped into to stop the retail madness, by limiting purchases in the likes of #GME and #AMC through regulatory pressure. "

Yep. The establishment is closing ranks. The 'retail' buyer, is supposed to be skinned by the professionals. The Pros don't like it up 'em.

Janet Yellen reputedly got $810,000 for a speaking gig with Citadel ( business relationship with Melvin Capital ). It's true, I don't know if that was one speech or one hundred speeches, either way, for a 'no strings attached' relationship. that's a lot of money.

Nick Drew: "Long silver here (physical). "

There did seem to be a bit of a pop in silver today, but it got monkey hammered down pretty quickly.

CityUnslicker said...

I got in and out of Silver trying to catch the wave, failed 10% loss.

Anonymous said...

reading reddit r/wallstreetbets is like another language.
Someone will get burnt badly this week.
Hope there aren't too many 'retards' and 'apes' (reddit language) who put money in they can't afford to lose.

Free money for all LOL

Anonymous said...

really are some excellent comments on reddit

just now
This has been the most fun I've had in years. I'm just an amateur but this has really got me thinking about losing money professionally."