Macro losses on the exchanges took a back seat to the internecine skirmishes between billionaire hedge fund managers and the rag-tag recruits from reddit.com group n/wallstreetbets as the mostly-millennial stock traders from the reddit group took the short-sellers to task over shares of GameStop, the beleaguered game retailer targeted by the hedge funds.
Essentially, what the wallstreetbets crowd did was target the most-shorted stocks by buying up shares of down-beaten GameStop (GME), and others, such as Nokia (NOK), Blackberry (BB), Bed Bath & Beyond (BBYB), AMC Entertainment Holdings (AMC), and Koss Corp. (KOSS), sending shares soaring, squeezing the hedge fund shorts, costing them billions of dollars.
Hedge funds, which have extensive short positions in many equities, hoped to capitalize on the misfortunes of companies but failed to take into account retail market forces and the power of social media as the reddit group n/wallstreetbets devised a strategy of buying the losing stocks and holding, forcing the hedgies to cover their downside bets.
In effect, the hedge funds borrowed shares (at fees ranging from 30% to 50% of the share price) of the beaten-down stocks and sold them into the market at prices under the asking price, Their plan was to buy those shares back on the open market as the stock collapsed, return the borrowed shares, pocketing the difference. They also short stocks through put options, bets that a stock will trade lower over time with specific time limits (strike dates).
The reddit crowd, glibly calling themselves "retards" or just "tards," seized upon the opportunity to make massive profits and punish the billionaires at the same time just by buying shares of the targeted stocks. As members of the seven million strong group n/wallstreetbets executed their strategy, shares began to rise, fueled by increased volume from the retards, then accelerating as the hedge funds began to panic and cover their shorts at increasing losses.
Through Friday, the hedge funds have accumulated losses approaching $20 billion on Gamestop alone. For their part, the retail crowd is holding onto their gains, causing the shorts even more pain in the options market. The opposing forces created such a firestorm of volatility that both the puts and calls on some issues were both gaining at the same time, a logical impossibility, exposing the options market to failure.
Launching attacks on multiple fronts in different stocks, the reddit retail crew was not just beating the hedge funds, they were slaughtering them. If this was a football game, the score would be something along the lines of retards 144, hedge funds 0, and it's only the first quarter.
On Thursday, the redditeers got into the commodities game, sending silver futures up nearly 10% in a matter of minutes, taking gold, platinum, oil and many mining stocks, like First Majestic (AG) along for the ride. Using their buy and hold strategy and extending it to the most manipulated market on the planet - silver futures - the reddit gang began openly discussing taking down the COMEX futures market, short sellers and bullion banks, which are particularly at risk in silver, being heavily on the short side to suppress the price of what's known as "the money of gentlemen."
So far, plans include buying up shares of EFTs such as the iShares Silver Trust (SLV) and the Sprott Physical Silver Trust (PSIL), individual miner stocks and lately, purchasing physical silver from local coin shops, online retailers and eBay sellers. The latest move would more than likely be the most successful over time, as excessive physical demand would certainly cause supply shortages, prompting price gains. Longer term, if millions of people begin buying up small amounts of silver coins, bars, and jewelry, the demand spike would naturally result in a supply squeeze and either expose the COMEX as a fraud for failing to deliver physical metal on contract executions or boosting the futures price as spot prices sprint forward. Continued pressure from millions of silver buyers could break the futures market and the bullion banks and cause further chaos.
An article outlining the effects of what r/wallstreetbets is doing appeared on Thursday with a dire warning: Goldman Warns If the Short Squeeze Continues, The Entire Market Could Crash.
Analysts at Goldman Sachs are rightfully scared of the implications of what amounts to a peasant revolt in financial markets, traditionally the province of the rich and not-so-famous. With stocks bubbling out of control and the underclass betting on losers while the hedge funds are trying to savage them, the resulting carnage would cause liquidations earmarked for margin calls, fees, short-covering, and loss mitigation in the billionaire class. With money having to come from somewhere, the billions invested profitably in the Apples, Googles, and Facebooks of the world would depart, setting up a vicious liquidity trap complete with cascading losses throughout the markets.
So, in case you're thinking these millennial kids (mostly aged 20-45) are a passing fancy, you just failed economics 101, 201 and 401. This is a complete and fully-engaged revolt against money and those who control it and it's unlikely to end well for the people who've been manipulating every market on the planet for the past 35 years. It should not go without mention that Robinhood, the trading platform preferred by the redditeers, had to tap into its credit line through Goldman Sachs and JP Morgan and has placed order limits of five shares down to one share of selected stocks, primarily the ones most targeted by the "retards." Many of the stocks on the restricted holdings list can be referenced here, though as yet unconfirmed, Robinhood has since trimmed the list and boosted the number of shares one can purchase and hold. Seems the online brokerage, Robinhood, has had scheduled meeting with the Sheriff of Nottingham, aka, the SEC.
Elsewhere, the mainstream (if we can call them that) cryptocurrencies became passé even as the world's richest person (today, anyhow), Elon Musk, admitted to buying some Bitcoin with a tweet saying, "It was inevitable." The news shook Bitcoin about 15% higher, but then fomented some selling. Bitcoin jumped to $38,570 on Friday morning, but has since slumped back into its near-term range between $30,000 and $35,000. Etherium caught a sympathetic bid on Friday, though it remains largely in a high range between $1200 and $1500.
Treasuries remained moribund with the short end of the yield curve flat at the zero bound from 1-month (0.07%) bills to 3-year notes (0.19%). Yield on the 10-year note gained one basis point, from 1.10% to 1.11%, while the 30-year gained two, rising from 1.85% to 1.87%. Interest rates in fixed income have remained so low for so long (generally since 2000) that the speculative bubbles in stocks, art, and real estate are approaching breaking points with the Fed powerless to do anything to settle markets.
Since January 6, the unofficial start of the Joe Biden administration, the 10-year has held in a tight range between 1.04 and 1.15%, while the 30-year has maintained even more intransigence, holding between 1.79 and 1.88%.
The Federal Reserve is stuck. Rising rates would murder stocks and they simply cannot lower them any more than what they are unless going into negative territory is seriously considered. Essentially, negative interest rates, a capstone for many European nations has been lauded as a failed experiment though there remains a record amount of more than $17 trillion with negative yields and those have typically terms of seven years or longer. Overall, 75% of the global bond market pays a yield of less than 1%, while only 10% pays a yield of more than 3%. Effectively, global real (inflation-adjusted) yields are almost all negative, upwards of 93% not keeping pace with inflation.
Already a failure on multiple fronts (the economy, education, race relations, civil rights, social justice, Covid, foreign affairs, trade policy, government corruption, and accountability) the Biden administration and Democrat party control of both chambers of congress is likely to oversee a global bond rout with their inflationist policies of spend and pretend, pushing yields higher by boosting the federal deficit and making it more expensive to service, the end result a ballooning federal debt which is rapidly approaching $28 trillion. At $27.86 trillion presently, $30 trillion is likely to be exceeded within months. By the end of the government's fiscal year (September 30), the federal debt could easily be upwards of $32 trillion, the run-rate of profligate spending and dollar dilution approaching half a trillion dollars a month.
These rank amateurs and posers, many from the destructive Obama administrations of 2008-2016, espouse ideas that press hard against beneficial public policy. Their insistence on greening, climate change, and identity politics stoke hatred and anger on both sides of the aisle, while their economic plans rival those of second-graders (with apologies to second-graders everywhere). Within months, Biden and his horde of deviant Democrats are likely to cause a massive stock market collapse, raging unemployment, and general strife. If Biden isn't impeached within the next six to eight months, the US - and with it the global - economy will become completely unglued.
Oil maintained above $50/barrel for WTI crude, checking out Friday at $52.20, just below the prior week's close ($52.27), though close to the recent high of $53.57. Since October 30, 2020, the price of oil has risen 45.9% form a low of $35.79. Any number of crosswinds are contributing to the price makeup. With holiday travel on the wane, prices at the pump would normally be falling, but colder weather and the re-opening of businesses in many states shuttered by the pandemic are mitigating that factor.
As the main street economy returns to some semblance of normalcy, expect gasoline prices to spike by Spring. The national average is currently at $2.43 a gallon, roughly the same as the pre-pandemic price from this date in 2020. With the Fed's printers working overtime counterfeiting fresh currency and the federal government hell-bent on doling out another $1400 to just about anyone making less than $75,000 a year (about 85% of the population), price inflation in food and energy are about as certain as water turning to ice below 32 degrees.
No state is selling unleaded regular for less than $2.00 a gallon, with Mississippi and Louisiana on the low end at $2.09 and $2.10, respectively, Hawaii ($3.26) and California ($3.41) the only states with average prices above $3.00. Nationwide, drivers could be looking at gas above $3.00 a gallon in pretty short order, especially if states continue lifting COVID-related restrictions. Consumers may be screaming for relief by Memorial Day.
WTI crude's last peak was October of 2018, when it topped off at $76.18 a barrel. While unlikely to hit that number anytime soon, a range of $60-68 a barrel is a very real short term possibility. While that number isn't exactly appealing to end-users, it would likely rally US frackers and shale unaffected by Joe Biden's executive order banning new leases on federal land. The main beneficiaries of Biden's boneheaded approach to energy are Russia and OPEC, as the United States will have to import more oil at higher prices.
Americans have to face up to the reality that the person sitting (or mostly sleeping) in the White House is illegitimate, as the Democrats conspired to steal the election from Donald Trump. Simply put, Biden should be thrown out of office, tried for his crimes and jailed as soon as possible. Just days into his term he's already tried - through executive orders - to reverse much of the good done by Trump. He's an ass, a thief, a liar, a crook, a seller of influence, and his policies are mostly opposed to the public good. Most people don't like him, don't accept him as their president, and will remain angry about the stolen 2020 election until he is removed.
Fittingly, in the face of last week's ramping of beaten down stocks and the fast foray into the silver space, silver far outpaced gold, rising swiftly as its more pricey counterpart suffered a slight decline.
Gold ended the week at $1847.76, down from the prior Friday's price of $1855.90 per ounce while silver, courtesy of the reddit crowd from r/wallstreetbets, caught a long-overdue bid Thursday and Friday, slingshotting from a low of $25.26 on Wednesday to close out the week at $27.71, a sharp, 9.7% move, a five-month high, with more upside straight ahead.
As the assault on silver shorts commenced over the weekend, premiums rose notably at delaers and online markets. Local coin shops and online merchants reported record volumes, many selling out of popular products, imposing shipping delays and quantity restrictions as demand soared.
Here are the most recent prices for popular gold and silver items sold on eBay (numismatics excluded, shipping - often free - included):
Item: Low / High / Average / Median
1 oz silver coin: 33.00 / 46.45 / 37.55 / 36.47
1 oz silver bar: 34.50 / 44.98 / 38.79 / 37.60
1 oz gold coin: 1,936.30 / 2,050.00 / 1,980.73 / 1,979.89
1 oz gold bar: 1,925.00 / 1,995.42 / 1,959.40 / 1,956.83
Weekly survey results from April 2020 to present can be found here.
At the Close, Friday, January 29, 2021:
Dow: 29,982.62, -620.74 (-2.03%)
NASDAQ: 13,070.69, -266.46 (-2.00%)
S&P 500: 3,714.24, -73.14 (-1.93%)
NYSE: 14,397.20, -272.32 (-1.86%)
For the Week:
Dow: -1014.36 (-3.27%)
NASDAQ: -472.37 (-3.49%)
S&P 500: -127.23 (-3.31%)
NYSE: -554.65 (-3.71%)
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