NEW YORK (Reuters) – It sounds like the start of a parable: Investors stuck inside during a pandemic begin to bid up an asset until its price becomes untethered to reality. The value soars until one day the market runs out of buyers and freezes, causing prices to plummet and some unlucky few to lose fortunes more than ten times their annual incomes in the span of a few hours. The date: February 3, 1636. On that day, the infamous Dutch tulip bubble burst during an outbreak of the bubonic plague, illustrating that asset prices can plummet just as quickly as they soar, leaving only pain behind. Now, almost exactly 385 years and another pandemic later, Wall Street waits to see how long it will take for history to repeat itself. Shares of video game retailer GameStop Corp have soared 1,625% since the start of January. Driving the rally are individual investors who have been stuck at home for the last ten months. Many have turned to online forums like WallStreetBets on Reddit and are buying the stock, some as a form of protest against hedge fund managers who wagered that it would fall.
What pro traders, the Reddit crowd and regulators may do next in the GameStop short squeeze saga
What’s next for the Reddit crowd? Wall Street seems unsure.
The “blow-out-the-short-sellers game” is showing signs of exhaustion, but the ramifications are only just being felt.
What traders can’t agree on is what will happen next. There are four buckets of discussions: How will traders/hedge funds react? How will trading platforms react? How will regulators react? And what’s the next move for the “kill-the-hedge-funds” traders?
How will Wall Street react?
A major hedge fund losing money gets the attention of Wall Street. Wall Street does not want to get steamrolled on this short-squeeze game again. Many short sellers like Melvin Capital have already unwound their short positions.
Another response from dealers may be to increase option prices, particularly on out-of-the-money call options.
But many are still trying to profit from the game. “Anyone who knows anything about options is trying to figure out how to sell GME options,” said Larry McMillan, an options advisor with McMillan Advisory.
Why? “There haven’t been too many short squeezes like this in recent history.,” he said. “As long as people believe fundamentals matter, they are going to be selling short stuff like GameStop.”
He noted that with GameStop stock trading at $260 in after-hours trading Thursday night, the $260 call expiring Feb. 19 is selling for $107, which means it would have to be above $367 to make money. The put at the same strike price is selling for $150, so it would have to go below $110 to make money.
“The issue, is how to do this without leading down the road to ruin?” he said. “It’s highly risky but definitely possible.”How will trading platforms react? Online brokers like Interactive Brokers and Robinhood have put the brakes on trading in individual stock and options on many of the heavily shorted names. TD Ameritrade is raising margin requirements and preventing shorts on these names. Robinhood said the decision to restrict trading was a risk-management choice to meet “financial requirements, including SEC net capital obligations and clearinghouse deposits.” While Robinhood has faced considerable criticism from many traders for its actions, Global Markets Advisory Group’s Charles Dolan said the online brokers have significant reputational risk. “If I’m the CCO [chief compliance officer], I will be very conservative and overreact rather than underreact because it is easier to fend off an angry customer than fend off an angry regulator,” said Dolan, whose firm provides strategic advice on market structure and regulatory compliance. Robinhood said it will resume limited trading of previously restricted securities on Friday.
How will regulators and Congress react?
You know it’s a strange situation when ultraliberal Rep. Alexandria Ocasio-Cortez and archconservative Sen. Ted Cruz agree there should be hearings about Robinhood’s decision to block retail investors from trading. Rep. Maxine Waters, D-Calif., chairwoman of the House Financial Services Committee, and Sen. Sherrod Brown, D-Ohio, incoming chairman of the Senate Banking Committee announced they intend to hold hearings.
UBS’ Art Cashin suggested that this could be a rich source of investigation: “The chat book revolt against the hedge funds might not be filled with little guys but rather some bigshots who are portraying themselves in anonymity as the little guys. Only an investigation will tell.”
It’s a far more delicate issue for regulators like the SEC, FINRA, and CFTC, which cannot easily resort to political grandstanding.
“The regulators have to be thinking, how do you remove the incentive?” said Amy Lynch, a former SEC compliance official now with Frontline Compliance.
“The exchanges could step in and limit options trading by placing position limits or other restrictions, but they would need to do an investigation on what market rules need to be changed,” she added. She noted that restrictions and even outright bans on short selling are not unheard of: Europe instituted a short-selling ban when the pandemic started.
Nick Note: I can tell you some really big guys engineered this MANIPULATION. Posing as get rich quick millennials. They can run but they cannot hide. One of the biggest manipulations i have ever seen. It is the high of lunacy that Funds shorted 130% of the outstanding shares. And even more than crazy but criminal that an overt manipulation using internet chat rooms and millions of piss ant trader accounts like Robin Hood and El Toro is allowed. Short seller loses are over $100 billion and climbing. To cover these loses Funds are selling their most liquid profitable stock holdings. That is why the markets are down. Their is the most cash on the sidelines ever. So i am betting on 2 things. And I only need one of the 2 to happen to have this become a MAJOR trade. The first is the exchanges and regulators swoop in raise margins to the moon (I have seen them do this many times) and suspend short selling in the stocks involved in the squeeze play. Second is for the buy on the dip momentum players to swoop in and pick up bargans. In all the smoke many people have not noticed what an outstanding earnings season it has been so far especially for high tech stocks!
SEC issues warning as GameStop short-selling war resumes
(Reuters) – The U.S. Securities and Exchange Commission waded into the battle between small investors and Wall Street hedge funds on Friday, warning both brokerages and the pack of social media traders that it was closely monitoring potential wrongdoing.
The week-long slugfest, pitching the little man against major financial institutions, has inflated stocks of a number of previously beaten-down companies, drawn outrage from politicians and calls for action from regulators.
It took off again on Friday as brokers including Robinhood eased some of the restrictions they had placed on trading, allowing video game store chain GameStop and headphone maker Koss Corp to jump 50% each in value.
In a rare joint statement the SEC, traditionally cautious with public pronouncements, said it was working closely with other regulators and stock exchange “to ensure that regulated entities uphold their obligations to protect investors and to identify and pursue potential wrongdoing”.
“The Commission will closely review actions taken by regulated entities that may disadvantage investors or otherwise unduly inhibit their ability to trade certain securities,” it added.
The showdown between small-time traders and professional short-sellers has also attracted the scrutiny of Congressional lawmakers, the White House, and is being probed by the New York Attorney General.
Global equity markets have also suffered as funds were forced to sell some of their best-performing stocks, including Apple Inc, to cover billions of dollars of losses.
“The (GameStop) rally will continue for as long as these trading platforms allow people to buy these stocks,” said Joe Donohue, an investor in Stocktwits, a social media platform for equity investors. “Once they shut it down — if they do — then there is going to be some selling. But until such time, the Robinhood/Reddit people are going to have their way with these stocks.”Robinhood said on its website that it was easing some restrictions, but still not allowing purchases of fractional shares in GameStop and 12 other companies, effectively meaning smaller investors have to bet more in order to buy in further to the trade. The brokerage, which has said its hand was forced by the surge in market volatility, was also maintaining numerical limits on the number of shares any one account could hold in each of the companies, further hampering players with existing positions from betting on more gains. In one victory for the retail pack, short-seller Andrew Left, who runs Citron Research and sparked the slugfest with his call against GameStop, said in a YouTube video that his company would no longer publish short-selling research. Facebook Inc took down a popular Wall Street discussion group, Robinhood Stock Traders, in a move its founder said was an unjustified response to the market moves. On Reddit forum WallStreetBets, whose almost 6 million members are seen as having driven the rallies, GameStop and AMC remained overwhelmingly favored stocks.
J.P. Morgan has named 45 stocks that may be susceptible to similar “fragility events” in days to come, including real estate company Macerich Co, restaurant chain Cheesecake Factory Inc, and clothing subscription service Stitch Fix Inc.
Like GameStop, AMC and American Airlines Group Inc all have high “short” interest ratios, making them subject to a squeeze on funds that have bet on the shares falling. The retail frenzy also appeared to spread into other asset classes on Friday, with Bitcoin jumping as much as 14% to a two-week high after Tesla Inc chief Elon Musk tagged the cryptocurrency in his Twitter biography. A tweet from Musk, who has a record of making market-moving comments on the site, had fueled a 50% surge in GameStop shares on Tuesday. Robinhood said on Friday it had also temporarily disabled a feature on its app that allows users to buy crypto securities instantly. The chief executive of the London Stock Exchange, David Schwimmer, said regulators needed to be mindful of when the line was crossed into market manipulation. “We’ve seen disruption by new technology and social media in a number of other industries so in some ways it’s not surprising to see it in financial markets,” he said. “I will let the regulators determine whether there’s a need to take a careful look at this if it moves into the realm of market manipulation ,” Schwimmer added. Robinhood has been one of the hottest venues in the retail-trading frenzy but its sudden curbs on buying set off a raft of online protests as the firm tapped credit lines to ensure it could continue trading. The brokerage also said it had raised more than $1 billion from its existing investors, having been strained by the high volumes and volatility of trading this week. A website on the short squeeze strategy set up by one WallStreetBets participant, http://isthesqueezesquoze.com/, told traders with Robinhood accounts to “find a new broker asap,” listing rivals Vanguard, Ameritrade, and Fidelity. Both Ameritrade and Charles Schwab placed some restrictions on trade on Thursday. Fidelity says it has not limited trading in the stocks. Venture capital investor Chamath Palihapitiya named SoFi, CashApp, and Public as alternatives to Robinhood in a tweet late on Thursday. Palihapitiya is planning to take SoFi public through a reverse merger in Social Capital Hedosophia Holdings Corp V.
SEC: Manipulative trading must be avoided
https://youtu.be/Lo_CzRMbc2Q
GameStop surges over 100% premarket after RH allows buys
Shares of gaming merchandise retailer GameStop rallied over 100% in premarket trading on Friday after trading app Robinhood and El Toro said it would allow “limited buys” of the stock today amid allegations of market manipulation by the company. Robinhood restricted buys of GameStop and other heavily-shorted stocks on Thursday, prompting speculation the broker is unfairly manipulating markets. Lawmakers in the United States from Democratic Congresswoman Alexandria Ocasio-Cortez to Republican Senator Ted Cruz criticized the move, calling for a Congressional hearing on the matter. Robinhood was hit with a class-action lawsuit in the state of New York in the meantime as well.
Racing the virus: Why tweaking the vaccines won’t be simple
CHICAGO (Reuters) – After developing and rolling out COVID-19 vaccines at record speed, drugmakers are already facing variants of the rapidly-evolving coronavirus that may render them ineffective, a challenge that will require months of research and a massive financial investment, according to disease experts.
Executives from Moderna Inc and Pfizer Inc and partner BioNTech SE are considering new versions of their vaccines to respond to the most concerning variants identified so far. That is just one piece of the work needed to stay ahead of the virus, nearly a dozen experts told Reuters.
A global surveillance network to assess emerging variants must be built. Scientists need to establish what level of antibodies will be required to protect people from COVID-19 and determine when vaccines need to be altered. And regulators must convey what is needed to demonstrate updated vaccines are still safe and effective. “At this point, there is no evidence that these variants have changed the equation in terms of protection from the vaccine,” said Dr. Michael Osterholm, an infectious disease expert at the University of Minnesota. “But we have to be prepared for that.” Johnson & Johnson told Reuters the concerning variant first identified in South African has got its attention and will tweak its vaccine accordingly if needed. Pfizer said it could produce a new vaccine relatively quickly, but a top vaccine executive said manufacturing it presents additional challenges. Moderna on Monday said lab studies showed antibodies made in response to its vaccine were six times less effective at neutralizing a lab-created version of a South African variant than prior versions of the virus. A study released on Wednesday ahead of peer review found the South African variant reduced neutralizing antibodies 8.6-fold for the Moderna vaccine and by 6.5-fold for the Pfizer/BioNTech shot, although a separate Pfizer-backed study released on Wednesday suggests its vaccine may be more hardy. Moderna said this week it is starting work on a potential booster shot. Just how far protection can drop before a COVID-19 vaccine needs to be altered is not yet known. With influenza, an eightfold drop in vaccine-induced antibody protection means time to update. That does not necessarily apply to this coronavirus. “The problem is we don’t know what the cut point is for coronavirus,” said Dr. John Mascola, director of the Vaccine Research Center at the National Institute of Allergy and Infectious Diseases (NIAID), whose scientists helped develop Moderna’s vaccine. Mascola said both studies testing the Moderna vaccine against the South African variant are roughly in the “same ballpark.” It could be that antibody protection is high enough from the vaccine that it will still be effective, he said. NIAID scientists are analyzing data from Moderna’s late-stage trial to see what level of neutralizing antibodies is required for protection. They are comparing individuals who were vaccinated but got sick anyway to vaccinated people who remained healthy. It could take two months to complete this work, Mascola said. They hope to produce a benchmark for the minimum level of vaccine-induced antibodies needed to protect against COVID-19. A global surveillance network is also needed to identify troubling new variants as they emerge, similar to one used to track fast-mutating flu viruses. That could cost tens to hundreds of millions of dollars in the United States alone. Richard Webby, a flu surveillance expert from St. Jude Children’s Research Hospital, said the United States could probably build a system to identify variants fairly quickly. Developing the capability to determine whether they evade current vaccines will take more time. The United States is currently conducting genetic sequencing to look for changes in the virus in just 0.3% of positive coronavirus tests. That pales compared with 10% in the UK, which was first to discover a major mutation in the virus that increases transmission by at least 50%. Experts said countries should sequence at least 5% of positive cases to detect significant changes in the virus. Companies are waiting for the U.S. Food and Drug Administration to relay what testing will be needed for altered vaccines, said Phil Dormitzer, one of Pfizer’s top viral vaccine scientists. With influenza vaccines, companies can make changes without new trials. “But that’s after doing it for 50 years,” he said. Peter Marks, who oversees the FDA’s vaccine approval process, has said small trials testing updated vaccines in around 400 participants may be needed at first. Even that could add months to the process. Norman Baylor, chief executive of Biologics Consulting and a former FDA vaccines official, said the agency will lay out the regulatory road. But public health agencies like the U.S. Centers for Disease Control and Prevention and the World Health Organization would decide when vaccines should be updated, as with flu.
Thunderbolts and Lightning Very Very Exiciting
This is forced Fund liquidation
Nick Note: The panic selling in equities is mindless liquidation by hedge funds of longs in index funds to cover loses and raise cash because of short squeezes on their heavily-shorted individual stocks like GameStop, AMC and BlackBerry.
When there is fund liquidating, word gets out and everyone tries to front run it. The timing — right at the open — is also a indication of fund liquidation to raise and preserve cash. We saw panic stop loss liquidation into the close as well. Because their trade book was overwhelmed. It usually is a big mistake. My preferred strategy is not to liquidate into a selling panic. I prefer to buy… See i am willing to lose money to make money. Sometimes a LOT of money. I am not a investor but a speculator. A much different job description
Regulators are getting all kinds of calls about market manipulation and a consistent problem lately of brokerages web sights going down. The demand among individual investors has overwhelmed online brokerages, with companies including Fidelity Investments Inc. Charles Schwab & Co., TD Ameritrade and Vanguard Group experiencing slowness or other technical glitches.
Fundamentals do not apply to retail traders. It’s all about momentum. ANd the internet means they call all jerk off online and whip themselves into a frenzy. Their is no need for the regulate rs to do a dam thing. The laws of the markets will soon wipe them out and they will return all the money we have loaned them at leg breaker loan shark interest rates…. Their exotic Italian sports cars and cocaine white mansions will soon be up for auction.
The only reason why Tesla is worth what it is is because people are buying the shit out of the company.” This kind of trading ALWAYS ends in disaster!
Panic liquidation is more like an explosion then a forest fire. A forest fire it rages for weeks on end. In a explosion the smoke clears away in a day or two and the markets revert back to their former state. Which means I like to hold as many positions as possible in market action like this.
I believe the upside is still intact. And stimulus and happy check hysteria along with vaccines are here to save the day hyperblow will drive the markets to new higher highs.
So to be clear here. I want to maintain our bullish spread. I am always a buyer in senseless panic liquidations… Everyone is selling kind of thing. Soon everyone will be buying again and then i am looking to turn our spreads to the bearish side……Nick
PS surprise events like this is part of trading. Their is no way to predict these events a head of time.
Came Down With The Flue!
Dear Mr Lizard, Glad to see your never far away……. This is not savings. this is not investing…… This is balls to the wall speculating and you can lose a shit pot full of money. As in Busted….. I love today’s market action……
What are the symptoms of new Covid strains? The 6 signs to watch for
AS the coronavirus continues to spread, it has also mutated – with three significant new variants of the virus now present in the US.
Experts have warned the UK variant, which was first discovered in Kent in the south of England is up to 70 per cent more infectious – and has now emerged in the US. One cluster was found in Florida on November 6 and the other in California on November 23. The first discovery in the US was around six weeks before Sage told the UK government about its concerns about the new strain. In the US, the first case of the Kent strain was diagnosed on December 29. Researchers concluded the new UK strain is between 29 and 91 per cent more likely to be fatal – with three different studies showing very different results. The London School of Hygiene and Tropical Medicine said it could be 1.35 times more deadly, Imperial College London said it was between 1.36, or 1.29 (depending on the method used), and the University of Exeter found it may be 1.91 times more deadly. Experts also revealed this week that the South African strain could also be more deadly. Nervtag scientists said today they had done some analysis on data in South Africa, finding “a hint of increased mortality”. But they cautioned there has not been detailed research into the mortality of the South African variant, as there has been with the Kent one, so they cannot be confident in the finding. The third variant originates in Brazil and has now spread to the US. It also is considered to be rather resilient to the coronavirus vaccine. After the new variants were detected, the UK’s Chief Medical Officer, Professor Chris Whitty, said that symptoms aren’t any different to the original strain that emerged in 2020. Scientists agree that the virus affects different people in various ways and what has become clearer as the pandemic has unfolded are the signs to look out for. As the nation continues to battle with a rise in coronavirus infections it’s important to know the official symptoms of Covid-19.
1. New persistent cough
Britain’s National Health Service (NHS) states that one of the three key coronavirus symptoms is a new persistent cough. This is defined as coughing a lot for more than an hour or three or more coughing episodes in a day. If you usually have a cough then it will be much worse that your usual cough and it’s likely to be more frequent.
2. Loss of taste and smell
In May 2020 Public Health England (PHE) added anosmia to the official list of Covid-19 symptoms, falling in line with the World Health Organisation (WHO). Many people who contract the virus reported being unable to taste their food or smell things – this is known as anosmia. Andrew Robson, ENT Consultant at North Cumbria Integrated Care said: “It has been known for some time that viruses can cause anosmia, and this can last for considerable lengths of time. “Anosmia also affects the sense of taste and is understandably quite distressing, affecting an individual’s appreciation of food and drink among other pleasurable scents. “This condition also potentially gives rise to dangerous situations, such as an inability to detect gas leaks, fire or spoilt food.”
3. High temperature
Another key symptom of Covid-19 is a high temperature.
This means you feel hot to touch on your chest or back and the NHS states that you don’t need to measure your temperature with a thermometer in order to check it. If you do measure your temperature – a high reading would be classed as anything above 38C. A high temperature is usually caused by your body fighting infection. If you have any of the three main symptoms as stated above then you should get a test and isolate. But some testing centres are now also offering tests to asymptomatic patients and almost one third of people who have the virus don’t have an signs.
4. Tiredness
Tiredness isn’t one of the main coronavirus symptoms listed by the NHS but many people are left feeling fatigued when they contract the virus. The World Health Organisation (WHO) lists tiredness as another key coronavirus symptom. Many people who contract the virus say they don’t feel as though they have the energy to undertake every day tasks in the same way that they could before.
5. Headache
The WHO also lists headaches as a common symptom and this is also one of the main symptoms in children, according to the ZOE Symptom Tracker App. The study found that 53 per cent of children who contracted the virus also suffered from headaches.
6. Rash
Many people who have contracted Covid-19 have also developed a skin rash. In some cases this is seen on the back and arms, and others have developed conditions such as “Covid-toes” due to the inflammation caused by the virus. While the ZOE study didn’t suggest a rash was one of the five main symptoms in children – it did state that 15 per cent of kids who test positive also present with an unusual skin rash. Just last week one nurse shared shocking pictures of her 17-month-old son’s rash which she says was caused by Covid. Jade Roberts said that her son Bertie had first developed a runny nose before the rash started. She said the rash spread to his cheeks, ears, knees and stomach. Nick Note: Pay close attention to these symptoms. This is not something to trifle with.
US to buy 200M vaccines from Pfizer, Moderna – Biden
The Biden administration plans to buy 100 million more doses each of Pfizer and Moderna’s COVID-19 vaccine in order to vaccinate 300 million Americans by the end of summer. ‘The biggest problem, I hope you’re all asking me by the end of summer is that you have too much vaccine leftover,’ Biden said at the White House Tuesday afternoon. Biden delivered the update Tuesday on the heels of Vice President Kamala Harris getting her second shot of the Moderna vaccine at the Bethesda, Maryland headquarters of the National Institutes of Health. Biden said at his appearance that the vaccine program ‘is in worse shape than we anticipated or expected.’ Going forward, Biden said the administration will increase the supply of vaccines to states, tribes and territories from 8.6 million doses to a minimum of 10 million doses. ‘Starting next week, that’s an increase of 1.4 million doses per week,’ Biden said. ‘And so this is going to allow millions of more Americans to get vaccinated sooner than previously anticipated,’ he added. He also promised the state and local leaders ‘will now always have a reliable three-week forecast of the supply they’re going to get.’ ‘Until now, we’ve had to guess how much vaccine to expect for the next week and that’s what the governors had to do: “how much am I getting next week?” This is unacceptable,’ Biden said. By knowing these figures, Biden explain, governors, mayors and local leaders can carry out their plans to vaccinate the largest number of people possible. Both the Pfizer and Moderna vaccines are two-shot doses. Biden said by increasing the supply and being transparent about the supply, the U.S. should ‘God willing’ be able to get to his goal of 100 million shots in the first 100 days of the administration. ‘But I also want to be clear, 100 million shots in 100 days is not the end point, it’s just the start,’ the president said. ‘We’re not stopping there. The end goal is to beat COVID-19. And the way we do that is to get more people vaccinated, which means we have to be ready after we hit the goal of 100 million shots in 100 days.’ Biden then relayed the administration’s plan to buy 100 million doses of the Pfizer vaccine and 100 million doses of the Moderna vaccine, which would be enough to vaccine 100 million more Americans. Biden continued to call fighting the coronavirus a ‘wartime effort,’ noting that the 400,000-plus death toll topped all the World War II American dead.’And we’re using the Defense Production Act to launch a full-scale wartime effort to address the supply shortages we inherited from the previous administration,’ Biden explained. The president said the administration was continuing to work to get the vaccines into local pharmacies around the country. ‘But the brutal truth is, it’s going to take months before we get the majority of American vaccinated. In the next few months, masks, not vaccines are the best defense against COVID-19,’ the president also said. ‘Experts say that wearing masks from now on, just until April would save 50,000 who otherwise will pass away if we don’t wear these masks.’ Nick Note: Do the math and you will see their will not be enough people vaccinated to build heard immunity (90% vaccinated) until next year. And these numbers do not take into consideration the FACT that at least 1 of the3 more deadly mutations circulating will require a boaster shot. I predict after this latest wave subsides the South African mutation which will become the dominate strain will pour cold water on the stock market wet dream. Reality is contrary to the illusion is the economy will start opening up this spring their will be the most severe lock down yet.