GameStop Reddit redux, vaccines & Powell deliver hope as equities shrug off higher yields

Who doesn’t like a McFlurry? McDonald’s ice cream may seem like an unlikely trigger for a fresh bout of frenzied retail trading, but there’s still something odd going on with GameStop shares. And it has something to do with ice cream. Shares in the company doubled yesterday – not so amazing you might think given the recent volatility, but the pop came entirely in the final hour and a half of trading amid heavy volume. Trading in GME was halted twice and the move spread to other names that were part of the recent Reddit frenzy. AMC Entertainment rose 18% on exceptionally high volumes. GME shares rose another 83% in after-hours trade to $168, having started the session at $44.70.

Figuring out why all this occurred late in yesterday’s US session is harder to explain than the short squeeze of January. Heavy buying of bullish call options may have exaggerated the move, but didn’t cause it. The CFO’s departure – which is part of the shake-up that investors are hoping for – was known before the opening bell, so shares would have responded before 7pm GMT. It could, though, be related to a tweet from activist investor Ryan Cohen, who posted a picture of a McDonald’s ice cream just before 7pm, a couple of hours before the US cash equity close. Does it signal Cohen, the founder of and leading investor in GameStop, will fix the company the way McDonald’s finally fixed its ice cream machines? (For those who have never set foot in a McDonald’s, the ice cream machines are broken so frequently it has become a meme on Twitter.) Or could it be even more cryptic and related to a new website that tells you in real time whether your local McDonald’s has a functioning ice cream machine?  Who knows, stranger things have happened. It looks like the Reddit crowd are at it again.


GameStop shares have doubled again.


Yields continued to advance, with US 10 year Treasuries north of 1.4% at a fresh year high, whilst Japanese bond yields rose to their highest in over two years. This failed to worry the market, however, as Fed chair Jay Powell administered more soothing words on inflation. The Dow Jones rallied 1.35% to a record high, briefly touching on 32,000 and closing within 40pts of this marker. The S&P 500 rose over 1%, the Nasdaq recovered 1% and the Russell 2000 of small caps rose by more than 2.3%. European stocks rose tamely in early trade on Thursday. Gains for the FTSE 100 were capped by 13.4pts inn ex-divis but it nevertheless pushed on to almost 6,700. Gold retreated under $1,800, whilst Bitcoin was steady at $50k.

Vaccine progress is underpinning strength in cyclical names, with the Johnson & Johnson covid jab set to get the green light in the US after the FDA staff report said there are no safety concerns with the single-dose vaccine. Energy and Financials are at the top of the Stoxx 600 in Europe this morning. Bond proxies, tech and growth all remain more problematic as yields go higher.

Charlie Munger, long-time friend and partner of Warren Buffett at Berkshire Hathaway has lashed out at Bitcoin, Tesla, Robinhood and SPACs. Sounds like my kind of guy. Asked whether he thought Bitcoin at $50k or Tesla being valued at $1tn was the crazier, he said: “Well I have the same difficulty that Samuel Johnson once had when he got a similar question, he said, ‘I can’t decide the order of precedency between a flea and a louse,’ and I feel the same way about those choices. I don’t know which is worse.” There were some other great nuggets such as: “Bitcoin reminds me of what Oscar Wilde said about fox hunting. He said it was the pursuit of the uneatable by the unspeakable.” To which Bitcoin HODLers would no doubt respond by saying ‘have fun being poor’. Still Munger doesn’t invest in gold, so why would he invest in Bitcoin, since it is clearly not a currency? He also warned about blank cheque special purpose acquisition companies – or SPACs – saying they represent “crazy speculation in enterprises not even found or picked out yet” which is “a sign of an irritating bubble”.

Elsewhere, oil prices rose to their highest in over a year despite a surprise build in US crude inventories as the freezing weather in Texas shut refineries. Stockpiles increased by 1.3m barrels, vs expectations for a draw of more than 5m barrels. Stocks at Cushing, Oklahoma, rose for the first time in six weeks as refiners couldn’t take delivery. Bulls were buoyed, however, as US weekly crude output fell by 1.1m bpd, equally the biggest drop on record. The big freeze in Texas has really thrown the weekly numbers out of whack, but it’s clear demand is picking up. Everyone is now looking at the OPEC meeting next week on March 4th and an expected easing of self-imposed supply constraints.

In FX, sterling is trying to mount a fresh challenge at $1.42 after yesterday’s reversal. This looks more like a pause on the way to the $1.45 area for GBPUSD. Turning to Bank of America comments on sterling, which says the “backdrop could not be more conducive to further GBP gains as UK steadily re-emerges from lockdown and vax rollout remains exemplary. BoE discussion on neg rates is likely to be delayed into Q3, whilst GBP should benefit from structural seasonality in April”. That sounds bullish.

The kitty roars, Vlad gets impaled, GME doesn’t stop sliding, sterling hits $1.40

Morning Note

“I’m not a cat”. If there are aliens on Mars, I think this would be a suitable gambit to commence our inter-planetary communication. Yesterday we reached a moment of meme perfection when Keith Gill, aka Roaring Kitty, aka DPV (look it up), told the House Financial Services Committee that he is no feline. He also stressed he is not an institutional investor, nor a hedge fund. The politicians were instantly on side. GameStop shares popped higher as he started talking and set out his fundamental bull thesis on GME, but by the close it ended the day down another 11% to $40. 


So, what have we learned from the hearing? Gill comes out of this rather well; intelligent, well-informed, a true deep value investor. But he still faces a class action lawsuit. The focus point for lawmakers’ ire was Robinhood and its rather uncomfortable-looking boss Vlad Tenev, who was forced to admit to making mistakes. A $3bn margin call sounds like Robinhood wasn’t prepared for this kind of event. Melvin Capital’s Gabe Plotkin admitted that in future you won’t see the kind of enormous short interest in single stocks like there was on GME before the squeeze. Real time settlement will one day happen, but not yet.  


You got a sense that the main thrust of some Representatives was: why aren’t customers entitled to a refund when they lose money on stocks? There also seems to be an inordinate amount of attention on why Robinhood blocked buy orders on some stocks like GME but not sell orders at the peak of the frenzy in January. Like, why did you stop Redditors buying at the very top and losing even more money? Even more so, you got a sense most politicians don’t understand how markets function. It’s not a retail shop. You don’t get a 14-day money back guarantee. Lawmakers focused on the payment for order flow, when this is what allows the free trading in the first place – markets don’t make themselves. There are costs. If you’re not paying for lunch, either your dining partner, or the restaurant owner, is. 


Grandstanding: As usual this seemed more about chastising some Wall Streeters to look good in front of voters. Maxine Waters, the Democrat chair of the committee, insisted Tenev answer ‘yes or ‘no’ to  a series of convoluted questions that required some explaining, and in the end she cut off answers because of the time rather than allowing anyone to explain themselves in full. One lawmaker raised a question about a 2004 options market filing…which had nothing to do with the current situation. Patrick McHenry, the senior Republican on the Committee, pursued a bizarre line of attack asking why Robinhood traders could not purchase stock in Robinhood, a private company. Now there may be a case for individual investors to be able to participate in private markets – albeit a shaky one since the disclosures and reporting requirements are much less rigorous than they for listed entities. But it was not in any way related to GameStop, Citadel or Reddit. There is always the risk that this will lead to some bad regulation, but it could be good. Quicker settlement times would reduce problems. Indeed, you could argue that this episode was the market working efficiently to highlight stress points like aggressive shorting practices (more than 100% of stock on loan is clearly problematic) and settlement times. 


Diamond hands: Gill said he’d buy the stock now at $46. But we kind of know this already – it’s never been in question that a bunch of the /wallstreetbets crowd are a) very aggressive investors and b) prepared to YOLO their savings on a single stock. That’s up to them. But it is the duty of market watchers to point out that these things tend to end one way, with most losing out.  


Elsewhere, Wall Street closed lower and could head for a choppy finish with options expiries today. European shares are wobbly this morning, chopping around the flatline. The FTSE 100 is just about holding on 6,600. US 10-year yields crept back above 1.3%. US initial jobless claims were worse than expected, pointing to a more sluggish recovery than retail sales numbers would indicate. New claims totalled 861,000, the highest level in a month. UK retail sales fell in January for the first time in months as the never-ending permanent lockdown started to gnaw at confidence.


In FX, sterling broke through an important psychological level at $1.40 for the first time since April 2018. After some likely profit taking around this region you can now see GBPUSD start to look to edge up to around 1.44-45. Partly it’s a sign of emerging confidence in the UK’s economic recovery thanks to vaccines – and the end of the Brexit cliff-edge – but also just plain old dollar weakness. Looking forward, sentiment wise a lot will depend on Boris’s unlocking plan on Monday. So far, he has stressed caution and said reopening will be gradual and conducted in stages. Schools will undoubtedly be first, pubs likely last. Pound strength will be a partial headwind to the FTSE 100 thanks to the dollar earners, but as stated previously overall I think we are back into a stronger correlation between sterling and UK equities now that the Brexit risk has been removed. We will also pay attention to the pace of vaccinations, which may already be starting to slow after the government scrambled to hit their 15m target by Feb 15th. 


Bitcoin: Yet more institutional support. DoubleLine Capital LP chief and long-time gold bug Jeffrey Gundlach is backing Bitcoin as the asset to insulate investors against the great monetary inflation. He tweeted: “I am a long term dollar bear and gold bull but have been neutral on both for over six months. Lots of liquid poured into a funnel creates a torrent. Bitcoin maybe The Stimulus Asset. Doesn’t look like gold is.” Prices remain supported above $51k this morning with near-term resistance marked around the $51,800 level. 


Gold bugs beware: gold keeps looking like it wants to break under the key support at $1,763, but holds a little above this level in early trade today.  

Gold keeps looking like it wants to break under the key support.

Pass the popcorn: Reddit, Robinhood, Melvin and Citadel go to Washington, Bitcoin marks new high at $52k

Morning Note

Get the popcorn ready: The bosses of Robinhood, Melvin Capital, Reddit and Citadel walk up the hill to Congress today, ready to testify in front of the House Financial Services Committee. We also get to hear from Roaring Kitty – aka Keith Gill – the day trader who has been at the centre of the recent pump and dump in GameStop shares, which yesterday declined another 7% to $44. Gill ends his prepared remarks: “I like the stock. And what’s stunning is that, as far as I can tell, the market remains oblivious to GameStop’s unique opportunity within the gaming industry.” 


Aside from the likely grandstanding by certain Democrats, the hearing will be fascinating, and is likely to focus on Melvin’s shorting, Robinhood’s relationship with Citadel – paying for order flow and the possibility it is front running trades – and the decision by brokers like Robinhood to restrict trading on GME and other volatile stocks. It all relates to the incredible short squeeze on GME shares (Something strange is happening on Wall Street) which jumped to $483 at the highs, before losing 90% of their value. 


Armed with $600 stimulus cheques, American consumers were out in force last month. US retail sales soared 5.3% in January. Excluding autos, sales were +5.9%, well ahead of the +1% expected by economists. It came a month after Congress approved a $900 billion stimulus package, which came on top of the $2.2 trillion that was approved earlier in 2020. Capital Economics said this “smashed our own and the consensus expectation … and highlights how quickly reopenings and the $600 stimulus cheques have translated into stronger spending. Q1 GDP could be stronger than the already above-consensus 6% annualised we have pencilled in.” 


Inflation also rose – the US producer price index jumped 1.3% in January, the biggest month-on-month gain since the price series started in 2009. Imagine what is going to happen when $1400 cheques arrive, perhaps as early as mid-March, at a time when the US economy is already recovering thanks to vaccines. 


Why does this matter for stock markets? Higher nominal yields are usually a headwind for growth and tech (think of the last 10 years of monetary policy being like a blank cheque) and should be positive for cyclicals, financials and energy. For the broad market it maybe matters less what the absolute yield is as it does the rate of movement and the flows: any rotation out of equities back into bonds would be a headwind for prices. Nomura analysts say: “We would expect only a mild downward adjustment in US equities if the 10yr yield stays between 1.3% and 1.4%, but in a risk scenario in which the yield tops 1.5%, US equities could correct downward more sharply – by 8% or more.” 


Minutes from the last Federal Reserve meeting showed policymakers are willing to look past higher inflation prints this year. A number of participants expect imminent price increases for goods “whose production has been subject to supply chain constraints, or soon could be; others anticipated that a possibly abrupt return to normal levels of activity could result in one-time increases in certain prices,” the minutes read.  


Bitcoin continues on its merry way and broke above$52,000. More support came in the shape of Rick Rieder, the chief investment officer of fixed income at BlackRock, who said the firm has “started to dabble [in Bitcoin]”. To paraphrase Ron Burgundy, this is kind of a big deal. Number two cryptocurrency Ethereum also rose to a fresh all-time high.  


Oil prices rose to fresh 13-month highs as traders bet shut-ins in Texas will affect oil producers and refiners for a while longer. It’s estimated that US crude output is down by as much as 3.5m bpd as freezing temperatures and power outages have hit the Permian Basin. The Texas governor has halted natural gas exports from the state. API figures showed a draw in crude oil inventories of 5.8 million barrels last week, vs about 2.4m expected. EIA figures are due today, a day later than usual thanks to the Presidents’ Day holiday. Meanwhile sources indicated Saudi Arabia is ready to reverse its unilateral output cut, a flash that weighed on prices after they’d jumped again as the weather in Texas shut in production. OPEC+ meet March 4th to decide on quotas for April.  


The Dow Jones rose 0.2% to record another all-time closing high, boosted by gains for Chevron and Verizon after Warren Buffett’s Berkshire Hathaway revealed sizeable stakes in the companies. Apple dropped almost 2%  as Buffet cut his stake in the company. Berkshire also upped stakes in AbbVie, Bristol-Myers Squibb and Merck. The S&P 500 was flat, paring losses after the Fed minutes. Treasury yields retreated a touch, with 10s dropping a shade under 1.3%. Shares in Wells Fargo jumped 5% even after Buffet revealed he’d cut his stake on reports the Fed is ready to approve the bank’s turnaround plan overhauling risk management governance.


Moonpig shares rose to 444p as the company delivered its first trading update since its IPO. The online greetings card and gift retailer said the significant increase in demand seen in the first half of the year continued through the third quarter. It also reported its strongest ever trading week ahead of Valentine’s Day.  Purchase frequency, say management, remains “unusually elevated” due to Covid-19 related restrictions. The company expects revenues to be “approximately double” the £173 million reported last year. Margins won’t lift however due to increased costs, which include a higher marketing spend and the partial shifting of production to the UK following the Guernsey lockdown. Whilst people are buying cards more often and adding on margin-enhancing gifts more regularly thanks to lockdowns, management expect both to decline as restrictions ease. 


Barclays beat expectations and announced a £700m share buyback programme and said it will restart dividends. However, shares fell 3% as provisions for bad loans offset a strong performance in the investment banking division. Profits slipped 68%, but this was not as bad as feared. Meanwhile provisions for credit losses were also lower than the previous quarter. Corporate and Investment Bank (CIB) income rose 22% to £12.5bn due to strong trading revenues. Consumer, Cards and Payments (CC&P) income dropped 22% to £3.4bn. 


In FX, the dollar index has tested resistance at 91 but is offered at the start of European session, retreating to 90.70. GBPUSD put in a solid defence in the 1.3840-60 channel and has this morning recovered 1.39.

Silver-tongued Redditors drive up prices

Morning Note
  • Silver jumps on Reddit interest
  • European shares rally
  • Fresnillo lead silver miners higher

We’re not in Kansas anymore: Silver prices jumped to 8-year highs as investor interest turned on the metal due to expectations Reddit traders will attempt to squeeze prices higher. Retail traders are herding into silver in the same way they have driven the likes of GameStop over the last week. Prices gapped up from Friday’s settlement at $26.914 to north of $28 and quickly cleared out the daily resistance from the Sep 1st high at $28.91 and then kicked on to $30 by the start of the European session. At send time spot silver was trading +9% around $29.70. That’s about 20% since Thursday and there is clear divergence from gold, which has remained range-bound at $1,865. Could gold be next? I doubt it, but we live in interesting times. What we don’t know is exactly how this is happening – clearing out of shorts by worried hedge funds, retail-driven bid, ETFs flows driving the physical market, smart-money front-running the trade, or a combination of all these.

APMEX released a statement saying it has seen a “dramatic shift” in silver demand in recent days. The US bullion broker said: “For example, the ratio of ounces sold per day was running about two times earlier in the week and closer to four times the average demand by the end of the week. Once markets closed on Friday, we saw demand hit as much as six times a typical business day and more than 12 times a normal weekend day. Combined with the extremely high demand levels, we are also seeing a surge in new customers. On Saturday alone, we added as many new customers as we usually add in a week.”

The fact that such a large and liquid market as silver can be targeted by retail investors says much about the shift we are witnessing., though despite appearances this morning it’s going to a lot harder to squeeze silver shorts as the market is so much deeper and more liquid. We should also note that some bigger smart money may have be front-running this trade to piggyback the rally and further fuelling the move up. (George Soros: “When I see a bubble forming, I rush in to buy, adding fuel to the fire.”) Targeting physically backed ETFs like SLV may be smart, as it will drive physical demand and push up spot prices perhaps more acutely than just by trading futures. I would reiterate that this kind of herding to coordinate a squeeze up is risky and likely to create a bubble that will hurt more than helps on the way down. Whether GameStop or silver, these are purely speculative bubbles that rely on the Greater Fool to keep it going. Examples of these manias litter the history of financial markets: it’s just the same, only in a different wrapping.

Fresnillo, the silver miner, saw its share jump 15% in early trade as a result of the squeeze on the underlying price. Polymetal rallied 6%, whilst Hochschild rose 13%. Tiny Australia-listed Argent rose 60%. Watch the likes of Canada’s Pan American Silver and Fortuna Silver Mines later. BlackRock  iShares Silver Trust (SLV) saw a stunning $944 million net inflow on Friday.

GameStop meanwhile opened up more than 30% in Frankfurt having closed up over 67% on Friday in New York to $325. AMC Entertainment finished 53% higher at $13.26. Both will be open for trading at 14:30 when the US cash markets open.

European stock markets were broadly higher on Monday morning as investors try to arrest a decline over the last fortnight that has wiped out YTD gains made during the first week of January. Wall Street had a tough session on Friday, closing down by around 2%. Meanwhile we have a coup d’etat in Myanmar, strife in Chinese repo markets and a raging pandemic to deal with. This week the focus is on the Bank of England, Alphabet and Amazon earnings, and US nonfarm payrolls.

Chart: Silver gap open, backing off at $30

Silver gap open, backing off at $30

Reddit bandwagon rolls on…


I don’t know about anyone else, but I cannot wait for the next GameStop earnings call. It will be an event to behold. That’s some way off; for now the frenzy continues: GME shares opened more than +100% above $400 before paring early gains to trade +60% or so. Efforts by the big brokers, notably RobinHood, to open up their platforms for trading the securities again has helped fuel a renewed bout febrile trading after yesterday’s selloff. If you want to know just much carnage is being done out there, S3 reports that GME shorts are down $19.75bn YTD (mark to market)– on just one stock.

Big questions and uncertainty remain ahead: first can RobinHood keep squaring its VaR problem with more regulatory capital to keep the show on the road, or it will be forced into halting the trading again? Doing so could be the death knell for the platform as users are already fed up and leaving. What are the implications for the IPO? Not good I’d say right now, but things can seem worse when you are in the middle of it. It’s got to build up trust again but once lost, trust can be hard to find again. (Of course, we should remember the real RH customer are the Wall Street market makers paying for the order flow…but enough of that for the time being.)

Which goes back to the point that RH only halted trades because of VaR, reg capital requirements; the clearing house (DTCC) looked at at the price action on these stocks and said it’s just too risky so demanded more collateral to clear the trades. I cannot believe they actually wanted to halt trading like that. If RH fails because of an exodus of users it would be very troublesome for the wider market.  Other questions remain, like whether shorting will ever be the same again (probably not, more on that below) and what kind of behaviour and bad market functioning do US regulators require before they step in? Thirdly, clearly it’s not just the Reddit crowd making the market – there are secondary actors riding and in some cases front-running expected Reddit trades, exacerbating the price action. Fourth, who’s going to use the share price gains to raise cash? GME might struggle due to timing issues but we have already seen American Airlines (AAL) say it will tap the market for $1bn after its shares soared this week as it too seemed to get swept up by the Reddit short squeeze trade.

Latest scores on the doors

Reddit stocks performance



Latest name to join the fray is Siebert Financial Corp (SIEB) which rallied over 300% in early trade on no news, having jumped over 600% in pre-market trading.

Meanwhile Citron Research – a key pillar of short seller community on Wall Street for the last two decades – has thrown in the towel. If you want to see a signal of a market top, then look no further than a long-time dedicated short like Andrew Left giving up on the short side.

Citron Research said it will discontinue short selling research, saying it will no longer publish “short reports” and will instead focus on giving “long side multi-bagger opportunities for individual investors”. One thing is for sure – hedge funds will not be taking such risky short side bets in future. You are liable to get squeezed. This upends certain assumptions we have worked under in the marketplace, so is likely to have far-reaching repercussions for the market. There is a clear risk also of bad, ill thought-out regulation coming over the hill as politicians on both sides of the aisle get involved. It is worth noting that in the UK and Europe all short positions of more than 0.5% are disclosed so it is more transparent, and this is something that the US could reasonably look at. Moreover, allowing more than 100% of the float to be out on loan is asking for trouble and probably could be looked at.

The SEC is monitoring it all very closely and I would not be surprised to see a clampdown in order to prevent this getting totally out of hand. In a statement today the SEC said it is “closely monitoring and evaluating the extreme price volatility of certain stocks’ trading prices over the past several days”.  It said the core market infrastructure remains “resilient under the weight of this week’s extraordinary trading volumes” but that “extreme stock price volatility has the potential to expose investors to rapid and severe losses and undermine market confidence”. This is an important point – volatility begets volatility. There was a suggestion that RH and co could face real scrutiny over the halt to trading yesterday, saying it would “closely review actions taken by regulated entities that may disadvantage investors or otherwise unduly inhibit their ability to trade certain securities”.

I would think there is good reason for the SEC to look at the manipulation/inducement side of this pump and dump. One, many will lose out and it will undermine confidence longer term. Two, let’s not forget that the primary purpose of the stock market is not naked speculation, but for companies to raise capital to fund growth, which all else being equal, increase net wealth and living standards. Trading and speculating are a secondary outcome of capital markets access. Clearly the SEC needs to consider whether we have “fair and orderly securities markets” right now.

Meanwhile, the hunt goes on for which stocks could be next in the firing line. There has been a fair bit of chatter around Pearson and Cineworld, which both have a lot of short interest and we did see a pop higher earlier this week of about 10-12% on what appeared to be some short covering in the wake of the GME trade. But so far we are not seeing this move much any more. Silver has been discussed already. There are obviously some names that have been talked about on Reddit and the lists of big put options by some hedge funds (easily available online).

Wall Street is broadly lower as it caps a pretty lacklustre week in the red, whilst shares in Europe are also down for the day and the week and now the month/year. 2021 started with a buzz and a lot of excitement about vaccines but it’s quickly fizzled out amid this circus.

RobinHood anger, silver linings

Morning Note

Now for the recriminations. RobinHood and other US brokers stopped trading in a number of stocks such as GameStop and AMC Entertainment that have lately been the target of retail investors seeking to ramp prices to spook hedge funds shorting the shares. Cue the upset: a class action lawsuit has been lodged against RobinHood, Democrat and Republican politicians are wading in by calling for Congressional hearings, and the SEC and even the White House say they are monitoring the situation. The fact is, the US brokers have obligations to maintain capital requirements mandated by the SEC – it’s been reported the company raised $1bn. There are things like counterparty risk. Free trading apps don’t run on fumes and markets don’t make themselves. But that won’t stop the Reddit crowd from claiming RobinHood is a poacher turned gamekeeper.


Seemingly, RobinHood and other brokers pricked the bubble – shares in GME fell 44% to $199. AMC dropped 56%. Hold on your hats, though, as shares are soaring in pre-market trading this morning with the US brokers set to allow some limited trading on the stocks today. I would issue the usual warning: it’s always riskiest when it looks easy, and usually these speculative crazes end in tears. 


Our Reddit watchlist had a rough day, but pre-market and trading in Frankfurt suggests another rollercoaster today

Our Reddit watchlist took a hit but may rebound in pre-market.

Keep an eye on silver – the /r/wallstreetbets thread is laced with mentions of effecting a massive short squeeze on the metal. Yesterday we did see a sharp spike higher but it coincided with a swift reversal for the US dollar and gold also shot higher. One to watch though.


Watch the FAANGs today – German finance minister Olaf Scholz said a global tax on tech giants was now “highly likely”, following a call with US Treasury Secretary Janet Yellen. She had backed the moved in her Senate confirmation hearing last week.  The Biden administration seems all but certain to engage with the OECD, which plans to establish a global tax regime this year. 


European equities stumbled out of bed this morning, but we await the US session for our cup of ambition. There was a late blitz higher in the latter part of the European session yesterday as the US markets rose and the Vix eased back from multi-month highs (though it’s back up this morning). This week has wiped out year-to-date gains in several of the major indices as investors start to look rather hesitant to call for the next leg up. Worries about lockdowns ad infinitum in Europe are a clear weight and the EU’s rollout of vaccines, which has been marked more by threats to restrict access to Pfizer jabs than by anything very positive, is proving as painfully slow as its delivery of fiscal relief to member states.


Bank of America this morning calls for a 10% correction in equities in the coming months. I’ve said lately a 5-10% drawdown in Q1 was likely. Wall Street is about 3% down since I made that call, so could see a little more downside and a test of 3,500 is possible. Beyond this, the backdrop for equities should be quite positive as vaccines kick in and the recovery takes off (fingers crossed).  

GameStop update – Melvin Capital out


Having spent most of the first part of the morning wrestling with Microsoft systems to get into the matrix, we are seeing some serious funny business in some corners of the market. My earlier note talked about the problems with the whole Reddit /r/wallstreetbets thing, and how it clearly needs to be looked at by the SEC because large numbers of retail traders will get hurt as a result. Since then shares have gone ballistic in pre-market trading: GME +100%, AMC +110%.

It’s been reported that Melvin Capital has been closed out of its short position in GME as of Tuesday morning – this could be a turn as the short covering has been a key driver of the price action. If there are no shorts left to target, it could be the moment for the dump after the pump. Having said that, the dealer gamma squeeze is also to be considered and may allow for further upside on the stock.

We are also seeing some interesting activity in the UK, where heavily shorted shares like Pearson and Cineworld are off to a flyer. I would be careful about seeing this as a case of the Reddit crowd finding new targets right now. It is likely down to short covering as hedge funds back out of their positions in light of what has happened to heavily shorted stocks like GME. This is very much about managing risk. Given the situation across the pond vis-à-vis Merlin, I would think all hedge funds are taking a good hard look at all their short positions and deciding whether they are worth it. Shorting can result in potentially infinite losses, so the risk management is always against you if the flows are there from buyers. As a result of the short covering, or rather in anticipation of it, some traders (maybe some on Reddit, who knows?) may be front-running and contributing to the pump.

We are seeing increased interest in a number of the names most associated with the /r/wallstreetbets trades, including GME, NOK, BB, BBY, AMC, PBI. I would exercise extreme caution around these since the price action is proving to be exceptionally volatile.


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  • Client’s funds are kept in segregated bank accounts
  • FSCS Investor Compensation up to GBP85,000
    *depending on criteria and eligibility
  • £1,000,000 insurance cover** 
  • Negative Balance Protection


  • CFD
  • Spread Bets
  • Strategy Builder operated by Finalto Trading Ltd. Regulated by the Financial Conduct Authority (“FCA”) under licence number 607305.


  • Clients’ funds kept in segregated bank accounts
  • Electronic Verification
  • Negative Balance Protection
  • $1,000,000 insurance cover**


  • CFD, operated by Finalto (Australia) Pty Ltd Holds Australian Financial Services Licence no. 424008 and is regulated in the provision of financial services by the Australian Securities and Investments Commission (“ASIC”).

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**Terms & conditions apply. Click here to read full policy.

An individual approach to investing.

Whether you’re investing for the long-term, medium-term or even short-term, Marketsi puts you in control. You can take a traditional approach or be creative with our innovative Investment Strategy Builder tool, our industry-leading platform and personalised, VIP service will help you make the most of the global markets without the need for intermediaries.

La gestión de acciones del grupo Markets se ofrece en exclusiva a través de Safecap Investments Limited, regulada por la Comisión de Bolsa y Valores de Chipre (CySEC) con número de licencia 092/08. Le estamos redirigiendo al sitio web de Safecap.


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