GameStop Short Squeeze by the Reddit Wall Street Bets Traders Explained
Release Date: 01/31/2021
MMT Modern Monetary Theory’s Fatal Flaw? – What is in US Federal Budget? – Is the Tax Rate Irrelevant to Revenue Collected?
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Spencer Wright from Halbert Wealth is back on the program to engage in a discussion around what makes up the Federal Budget. How much does all this cost and where do revenues come from? Plus, some thoughts around why MMT or Modern Monetary Theory may never work despite some economists’ best intentions. US Federal Budget Items What does the US government spend money on? What is the net interest payments on the national debt? Where does the revenue come from? Comparing US government tax revenue collected across high and low tax rates. Overview of MMT or Modern Monetary...
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Stock Market Overvalued? – Stock Market Bubble and Inflation Google Searches Trending – Treasuries Worst Quarter Since?
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Recently I looked up Google Trends to see how terms like inflation and stock market bubble were doing? They have been popular which means people are searching for them. Is this contrarian? How to play armchair stock market valuation game by looking at expected earnings. US Treasuries had the worst quarter performance since 1980 and third worst since 1830. GDP growth according to Goldman Sachs will be 8%. Is that inflationary? Goldman Sachs says 2021 GDP growth will be 8% Does this point to higher inflation or just a regaining of the previous trend? US Treasuries issued in 1812 to...
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Deal or No Deal – Hedged Equity – Option Value of Cash – Utility of Bonds in Portfolios
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Recently John Hussman put out a piece that the expected value of a 60/30/10 stock and bond portfolio over the next 12 years would be -5%. Future projections can be wrong or right, but what he explained that the option value of cash or a hedged equity approach may be more suited. So how does hedged equity play into this? How Deal or No Deal game show explains the expected value calculation. And why bonds with low rates and risk of rising rates might present challenges in the typical 60/40 portfolio. How to Calculate expected value Deal or No Deal Example on expected value...
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How Has the Stock Market Done Historically During Rising Rate Periods? Be Hedged!
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Watch CNBC for more than 5 minutes and you are bound to hear discussion around is inflation coming? Are rising interest rates going to sink the stock market? But what has the stock market done historically during periods of rising rates? You might be surprised to find out. Take a look back at S&P 500 Returns in rising rate environments, rising inflation, rising unemployment, and more. Once again, worries about the stock market led us to a Hedged Equity Strategy How have stock markets performed during rising rate environments? How have markets done during rising...
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U.S. Dollar Index Explained and Strong vs Weak US Dollar Pros and Cons
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Recently financial news media mentioned that bearish short bets against the US Dollar were the highest since 2011. But what is the dollar index and is it the best measure? What is the Trade Weighted US Dollar Index? What is the good and bad of a strong vs week US Dollar? US Dollar Index Trade Weighted US Dollar Index Pros and Cons Strong Dollar Pros and Cons Week Dollar Short US Dollar position reaches highest level in a decade. US Dollar and commodities How to figure out how many US dollars needed to exchange. Exchanging foreign currency into US dollars. US Dollar...
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Interest Rate Shock! Is Inflation Coming?
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Interest rates made a historic move higher last week as the treasury bond market sold off. But is this spike in interest rates previewing a higher move in inflation in the short term? What are breakeven inflation rates saying? Is the FED owning 30% of the TIPS bond market skewing inflation expectations? What is duration risk in bond portfolios? How does lower rates extend duration risk in bonds? Investor expectation of annual returns equal to the current yield to maturity? 2018 when both stocks and bonds via the US Aggregate Total Return Index were negative. Fed has purchased 30%...
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Are Bonds Riskier with Low Interest Rates?
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Bonds prices are a function of current interest rates compared to their present value of cash flows and return of capital (baring defaults) at maturity. So, with interest rates so low around the world, is this a period of higher risk in bonds (fixed income)? How much more sensitivity to interest rate changes do we currently see in the sector? How do callable bonds mute the positive effects of reductions in market rate of interest? How does the US Aggregate Bond Index compare to the Global Ex-US Aggregate Bond Index from a yield and duration risk comparison? Derek Moore discusses these and...
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Bitcoin vs Gold vs Just Be Hedged on You Stock Portfolio?
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This week Jay Pestrichelli and Derek Moore are back to discuss whether Bitcoin or Gold are good hedges. What the appeal of cryptocurrencies are? How just being long the market while have a hedged floor in the portfolio allows investors to be in the historically best inflation adjusted return asset. Appeal of Bitcoin How Inflation is hurting the dollar’s purchasing power Gold as an inflation hedge Golds real return might be less than people think. Aren’t bitcoin transactions all recorded via blockchain anyway? Stocks for the long run Stocks real return, after inflation, higher than...
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Gamestop Short Squeeze Follow Up – Naked Shorts – Short Interest – Secondary Offerings – Short Sellers Good or Bad?
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This week we follow up on or episode last week covering what the Gamestop short squeeze was all about. Are hedge funds naked shorting stocks? How margin accounts cause risk to brokerage firms like Robinhood. Why didn’t Gamestop do a secondary offering selling shares when the price was high? Why short sellers don’t ruin companies outright. Naked Short Selling Failure to Deliver Shares Reports FTD Short Interest Reports Secondary equity stock offerings AMC convertible debt into shares How margin accounts work and raise firm risk How short sellers (or short squeezes) do and don’t...
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GameStop Short Squeeze by the Reddit Wall Street Bets Traders Explained
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The Wall Street Bets community executed a short squeeze through Reddit on stocks like GameStop and AMC Theatres this week. But what is a short squeeze? How did they and others buying stocks and options cause the stock to go up at least in the short term? Is short selling bad? Why potentially some brokers had to halt trading in certain names? A look back to the late nineties when internet chat rooms were pushing stocks. Examples of the little investor turning thousands into millions, and vice versa. How short sellers can root out fraud in companies with examples. Jay Pestrichelli and...
info_outlineThe Wall Street Bets community executed a short squeeze through Reddit on stocks like GameStop and AMC Theatres this week. But what is a short squeeze? How did they and others buying stocks and options cause the stock to go up at least in the short term? Is short selling bad? Why potentially some brokers had to halt trading in certain names? A look back to the late nineties when internet chat rooms were pushing stocks. Examples of the little investor turning thousands into millions, and vice versa. How short sellers can root out fraud in companies with examples. Jay Pestrichelli and Derek Moore get into this and more in this very timely and fascinating episode.
What is a short squeeze?
What is the GameStop short squeeze?
How did Reddit group Wall Street Bets execute a short squeeze?
How some people have made a lot of money
How other people may lose a lot of money?
What is short interest ratio?
What is short interest as percent of float?
What is a delta or gamma squeeze in options on stocks?
Large in the money option open interest in GameStop at expiration
How short selling adds liquidity.
What are short days to cover metric?
Short sellers uncovering fraud in Amazon Prime documentary the China Hustle.
Short sellers with Enron, Nikola, Wirecard
Trading halts and liquidity requirements on brokerages
Congressional hearings coming on Robin Hood and Wall Street Bets GameStop activity
Examples of pump and dump in 2000 by Michael Lewis in New York Times
Short selling was found useful even in 1918.
How short selling in itself does not bankrupt companies.
How short selling that drives price lower can impact ability for secondary equity offering.
Mentioned in this Episode:
Explaining Delta and Gamma Options Squeeze Robinhood vs Softbank Whale https://brokenpiechart.libsyn.com/robinhood-option-traders-vs-the-softbank-whale
Derek Moore’s Book Broken Pie Chart https://amzn.to/2YoxRaF
Documentary “The China Hustle” on Amazon Prime Video https://amzn.to/39uBJgm
Michael Lewis article on 16-year-old penny stock trader 2001 https://www.nytimes.com/2001/02/25/magazine/jonathan-lebed-s-extracurricular-activities.html
ZEGA Financial www.zegafinancial.com
Jay Pestrichelli’s Buy and Hedge Book on Amazon https://amzn.to/2YoJDSg