08 Mar 2021 / Extra Innings
GameStop. AMC Entertainment. BlackBerry. Are hedge fund traders getting their just desserts? Are retail investors richer, getting their share of the pie? Is this the socialization of the market wherein all, Wall Street and Main Street, have equality of equity – pun intended? Ultimately all swim or sink together!
“Truth is like poetry. And most people hate f…..g poetry.” The Big Short: The Movie.
What are markets, investors, SECs, regulators and governments to do? 🤷♂️ Anything?
Remember you taught the concept of going “nuclear”… as in circa 1970 and those 245 pages (hand written) chem. eng. lab report due Friday!…well many governments, aided by central bankers around the world (with capitalist China the exception this time!) pivoting over $18 trillion sovereign bonds into negative territory thereby shifting risk assets profiles across many institutions and asset class. Yes, anyone can own publicly traded shares including that of central Bank of Japan (BoJ now owns 7% of Japanese equities on top of its bond holdings!). Distorting assets prices is the impact of providing excess liquidity by the Fed (monetary) and then throw in stimulus (fiscal). The recent sale for $5.2 million (US) Mickey Mantle rookie card maybe proof of this distortion but the replicated Non Fungible Token based on blockchain technology (as in NBATopShot) or Fungible as in Bitcoin, reflects that there is always a tulip growing somewhere and Gamestop will not be the last. The 905 area code experienced an 18% increase in home prices year over year, but CPI is based on cost of rent, so no inflation and according to Modern Monetary Theorists (MMT) we can go ahead and print money.
I recommend a book written by James Grant: The Forgotten Depression (1921 The Crash That Cured Itself) to answer the question you raise … No government wants to let a good crisis go to waste, but sometimes it is better to let the invisible hand (Adam Smith) work its magic!
Yup, that about says it all. Well said, John. When algo’s can do 10,000 trades a second (per Mike Lewis’ other book called Flashboys), we not only have Gamestop/Blackberry/Tilray etc oddities, as a result of suppression of the risk-free rate of return to near zero, but we also have passive ETF investing which makes moves in both directions more volatile. ETF creation fuels the upside which is the fun part. ETF destruction…not so much as the “baby gets thrown out with the bathwater”. That is, everything tanks – good and bad – because every underlying stock/bond in the ETF must be sold. Just like it did last March. THEN you get a gamma squeeze in November. “Nowhere to run” by Martha and the Vandellas, comes to mind.
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You mention AMC Entertainment (sym: AMC) too. Reading the Reddit forums, it was funny to see the newbies goose the wrong stock called AMC Networks (sym: AMCX) and then have to bail on it quickly and move into AMC. The flow of information is super-quick now. No question. But so is the flow of mis-information. No algo or Trump-tweet has figured out how to segregate the two….yet!!
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