As the saying goes, the market can stay irrational for longer than you can stay solvable. And what’s happening now is that the big players are being pushed around – David wants to bully Goliath, if you will – by using the legions of day traders and services, including the Robinhood investment app to raise shares higher.
This is the theory put forward by Michael Batnick, director of research at Ritholtz Wealth Management and author of the Irrelevant Investor blog. ‘These traders are moving from stocks to stocks. They squeeze out all the juice until there is nothing left and then move on to the next one, ‘says Batnick.
He points to this chart from JPMorgan which shows the most short circuits in the Russell 300 RUA,
higher rises. “I can not prove that the digital merchants are the culprits, but I do not think it takes a big leap of faith to make the connection,” he said.
Batnick included this viral video of a young couple sharing their investment strategy on TikTok. (If you do not click on the link, the man says he buys stocks when it starts to rise and sells when it stops. Momentum trading, in other words.)
What is different this time? The network effect. ‘It’s a huge community now, and if we’ve learned anything in the last decade, then we need to be careful about shortening networks. Here are non-monetary considerations, such as belonging. And delicious. Did I mention they have fun? Says Batnick. “I do not think these people can make money forever, but this idea that it ends with their disappearance is not something I see coming.”
The buzz
Supreme Court Justice John Roberts will swear Joe Biden as the 46th President of the United States. The inauguration will be a less important issue due to the COVID-19 pandemic, with about 200,000 flags replacing people at the National Mall. Vice President Mike Pence will represent the departing administration. Biden has also announced a series of first-day steps he will take, including rejoining the Paris climate agreement and the World Health Organization, and halting the construction of the U.S.-Mexico border wall.
In one of his last appearances in office, President Donald Trump forgave the 70 sentences and converted the sentences to 70, including former adviser Stephen Bannon, Republican fundraiser Elliott Broidy, and rappers Lil Wayne and Kodak Black. From the business world, Anthony Levandowski was pardoned after stealing trade secrets from technology giant Google’s GOOG,
self-management program, as did Gregory Reyes, the former CEO of Brocade Communications, who was first convicted of illegal stock options.
Any family member was absent especially on Trump’s list. Joe Exotic, the star of the Netflix series Tiger King, was also not pardoned after renting a limousine in anticipation of his release from prison.
Netflix NFLX,
shares rose 14% in the pre-trading market after the streaming service reported 8.5 million new subscribers in the fourth quarter, saying it no longer needed to finance the programming out of debt. Consumer products giant Procter & Gamble PG,
at the top of the revenue estimate, such as Morgan Stanley MS,
rounded off the earnings season for the Wall Street banks by beating estimates on both the top and bottom lines.
Internet giant Alibaba BABA,
9988,
has risen in trade in Hong Kong after founder Jack Ma made his first public appearance at a charity event since his run-up to Chinese authorities over the cancellation of Ant Financial’s initial public offering.
Tesla TSLA,
Oppenheimer has reportedly raised its price target on electric car manufacturers to $ 1,036.
The short-selling research firm Citron Research is giving a presentation on the video game retailer GameStop GME,
which doubled the price in 2021. In a tweet, Citron said GameStop buyers at this level “are struggling with this poker game.”
The markets
US futures contracts ES00,
points to a stronger start, with the technological Nasdaq-100 NQ00,
contract in progress.
The yield on the ten-year treasury TMUBMUSD10Y,
Was 1.10%.
The graph
Ned Davis, the senior investment strategist at his eponymous Ned Davis Research, says the market looks bubbly, but that the ride will continue. The percentage of stocks reaching new highs weekly has risen, while the percentage of stocks that remain low has remained low, he said. Historically, new highs peaked at 36.5 weeks before the market did. He does agree that the market looks relative to the long-term trend. But it is not as extended as 1929 or 2000, he says.
Random reading
Pink seesaw at the border between America and Mexico won a design award.
A stolen 500-year-old painting possibly created by Leonardo da Vinci was returned to a museum that did not know in the first place that the artwork was missing.
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