A Funny Thing Happened on the Way to Wall Street

Per Slope of Hope: https://slopeofhope.com/2021/02/a-funny-thing-happened-on-the-way-to-wall-street.html#more-193031

Originally published by friend-of-Slope MoleCool, AKA EvilSpeculator:

So a funny thing happened on the way to Wall Street last week. A rabid rabble of Robinhood retail rats on Reddit took advantage of a perceived market inefficiency in Gamestop (GME) and decided it would be a fun idea to drive up the stock and in the process stick it to the ‘man’ as an extra bonus. As you would expect it didn’t take long until all hell broke loose, for the high priests of finance don’t enjoy seeing their sacred privileges challenged. So they did what any self respecting incumbent would do: They decided to make a phone call…

Now say what you will about Gamestop’s true valuation, let’s be clear about the fact that there is nothing illegal whatsoever about a stock someone wants to buy and hold. Maybe he likes that stock. Or maybe she just loves to HODL. As Mark Cuban quipped ‘there are many reasons why someone would want to BUY a stock.’ NOT rapidly bounce it back and forth in an organized manner to devalue the stock in question. Like some people may have done – allegedly.

And it’s not that they all colluded and somehow accumulated 140% in short float in order to drive down the price of GME and then later buy it all back for chump change. Ridiculous! I mean that would not only be illegal but outright impossible, right? How could anyone ever borrow more stock than there is in actual existence? Asking for a friend.

Which is the reason why the current Kabuki theater that is playing out across the financial MSM may surprise the astute observer. Not me of course, as I’ve long learned that, just like the Pope, the Fed is infallible and that Wall Street insiders are all tripping over themselves in order to do God’s work. May the Lord bless them and their Swiss bankers.

So who’s to blame here? Many point to r/wallstreetbets and claim that a concerted DoS style buying spree of GME, AMC, BBBY, and a few others clearly constitutes ‘insider trading. To that I should point out that Wall Street funds regularly host ‘idea dinners’. Which basically means they all get together for a show and tell of which ‘stocks’ are a great buy and then all go off to their respective lairs to gobble them up in large quantities.

How exactly is that different from a bunch of retail rats ceasing a clear and present short squeeze opportunity? How come 15 major fund managers with $10B each under management can plow into a stock after having a ‘private conversation’, but a group of passionate retail investors are considered domestic terrorists for doing the exact same thing? Again, asking for a friend.

Of course it all has backfired ignominiously. On both sides I may add. The hedge funds involved took a massive loss but to quote Monty Python: It’s only a flesh wound. Given their access to capital and the help of their connected elders they’ll survive this and surely will live to trade another day.

Which may not be said about the hordes of HODLers, many of which saw an opportunity to not only bank some ill-gotten gains but to also point a giant middle finger toward Wall Street. I love the idealism but unfortunately, much to my detriment, I also know human nature.

Many of these kids dumped their shares at near $100 after purchasing them at $300 or above. What really surprises me the most however about the entire affaire is not the Street’s response and demonization of literally millions of retail traders. No, what completely took me by surprise was the seething anger directed toward Wall Street and the financial industry in general.

Maybe this can be ascribed to the crypto community that has been growing rapidly over the past decade. These kids are incredibly red pilled and although most of them couldn’t trade their way out of a shoebox they hold an almost instinctive disregard for anything even resembling Wall Street. I better work on an alibi!

Which didn’t always use to be the case by the way. Back in the 80s and 90s we all knew the game was rigged but the difference was that we wanted IN – not OUT, we wanted a piece of the action. None of us ever dreamed of tearing it all down, well let’s say almost none of us. But that’s exactly the type of sentiment I’m getting when lurking not only over at r/wallstreetbets but on many other retail trading watering holes these days. The anger is palpable.

So from a PR perspective the GME saga has been an outright disaster for the industry and I fear it’ll only get worse from here. What doesn’t exactly help matters of course is a tone deaf MSM demonizing and accusing a large portion of the public despite the fact that they did not break a single law or financial regulation when legally purchasing shares through their retail broker – with their own money I may add.

That may not be true for some the participants involved, if you get my drift.

THE FUTURE

And that brings us to the future. Right now clamping down on buying interest in GME and other controversial issues is fairly easy due to an island topology in the financial industry in combination with circuit breakers and other exchange tools designed to keep market participants from getting ahead of themselves.

But what do you imagine will happen once we are all able to trade 24×7 on a blockchain based market that is widely distributed and inherently impossible to control by any interest group? This may sound like science fiction today but if the events of the past year have taught us anything then it is that today’s outlandish imaginations can easily turn into tomorrow’s reality.

Fact is that millions of millenial and gen-Z hobby traders just learned how this game is being played and there’s no putting that genie back in the box. They are fast learners and unlike us old dogs back in the days, they have access to instant communication and a huge pool of like minded contemporaries willing and clearly capable of putting the entire system on its head.

The playbook is now out there for everyone to see and emulate. And if any hedge fund is ever foolish enough to put itself into the squeeze box like the one Melvin Capital found itself in, they will get instantly burned to a charred crisp and then some. Which in my estimation is a good thing because 140% of short float represents exactly the type of excess and moral hazard that regulators should have clamped down on hard a long time ago.

A Funny Thing Happened on the Way to Wall Street

Send Lawyers, Guns, and Money

Members of the Black Panthers join other gun rights advocates in front of the Virginia State House during a rally, in Richmond, Va., on Jan. 18, 2021. (Spencer Platt/Getty Images)

Per Epoch Times:

Newly released FBI background check data from January shows Americans are buying guns at a “blistering pace,” a firearms expert said.

“That’s undoubtedly connected to President Joe Biden’s plans to attack the firearm industry by undoing and rewriting regulations and executive actions to target the firearm industry,” Mark Olivia, director of public affairs at the National Shooting Sports Foundation, said in a statement.

Olivia pointed to the freezing of the publication of the Office of the Comptroller of the Currency’s “Fair Access” banking rule, and promises to seek to repeal the Protection of Lawful Commerce in Arms Act to tighten restrictions on gun licenses and a ban on AR-15-style rifles by the Biden administration.

The White House didn’t immediately respond to a request by The Epoch Times for comment.

According to the FBI’s National Instant Criminal Background Check (NCIS) data, 4.3 million firearm background checks were initiated in January. That’s the highest number on record, and up more than 300,000 in comparison to December 2020. Three of the top 10 highest weeks are now from January 2021.

The National Shooting Sports Foundation’s adjusted background check figure of 2 million, reached by subtracting background code permit checks and permit rechecks and checks on active concealed carry permits, was a jump from its adjusted figure of 1.1 million in January 2020.

“These are jaw-dropping figures to start the New Year. Americans are claiming their Second Amendment rights to provide for their own safety in record numbers,” Olivia said.

The new year “certainly started off with a sales ‘bang’ due to the turmoil surrounding the confirmation and inauguration of Mr. Biden as the new U.S. president,” Jurgen Brauer, the chief economist for Small Arms Analytics, said in a statement.

“The 79 percent year-over-year increase, however, was NOT unprecedented—an even higher increase, of just over 100 percent, was experienced in January 2013, the month Mr. Obama’s second presidential term began,” he added.

The gun-control group Everytown for Gun Safety said the continued increase in background checks highlights the need for Congress and Biden to implement gun restrictions.

“As the country reels from multiple crises, the gun industry has cashed in with record sales that have made Americans less safe,” Nick Suplina, managing director of law and policy for the group, said in a statement.

“Without swift changes in policy, our already devastating gun violence epidemic could get even deadlier. The good news, though, is that we finally have leaders in the White House and in both chambers of Congress who recognize that this crisis demands action.”

https://www.theepochtimes.com/americans-buying-guns-at-blistering-pace-fbi-data-shows-expert_3683064.html?utm_source=news&utm_medium=email&utm_campaign=breaking-2021-02-03-2

Centrally Planned Shock and Awe

Per Sven Henrich: https://northmantrader.com/2021/02/03/bounce-2/

Sharing is caring and in this spirit I wanted to share some technical insights into this week’s market bounce following the aggressive flush down last week.

As of late I’ve been hearing more and more people throw their hands up in the air and declare that technicals no longer work in face of some of the historic price action we’ve witnessed in markets in the past year. It’s all about printing I hear. And it’s true we have distortions in markets and broken relationships courtesy of central banks printing.

After all liquidity injections have consequences according to Fed governor Kaplan:

Dangerous truths his boss Jay Powell continues to deny, as yes, the Fed is partially responsible for the current stock mania:

Best to just keep printing and make the mania and wealth gap even worse.

Yet despite all the distortions the market offered a technical master class this week and the precision of it all is something to behold.

Let me explain.

In my experience confluence of multiple factors interjecting at the same time often prove to be the most important tools for technical traders to assess shifting risk and reward and identify key price pivots. It’s akin to finding all the various puzzle pieces and sorting them for relevance.

And what happened Friday and into Sunday night in futures trading was monumental in this respect as multiple key factors came together at exactly the same time.

First off we knew about about one key pivot in advance, it was the basic 50 day moving average reconnect that was overdue and it was the playbook from the year 2000 that called for a 50MA reconnect by the end of January, something I’ve discussed back in early January and highlighted again this weekend:

And indeed we got the 50MA reconnect into the end of January:

But why the bounce? Just because of the 50MA reconnect? No, there are a lot more factors at play.

One other key factor was the $VIX gap fill at 37, part of the very gap constellation outlined as a check list in December:

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Gaps are key pivots and seeing $VIX fill the final gap on Friday suggested a counter reaction was lining up, and it did as $VIX reversed precisely from there:

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That gap filled on Friday, but Sunday night futures dropped further. Why? Another important check point was ready to be ticked off, a key trend line tag and I highlighted it as a key save or break moment at the time:

And the save reaction off of the trend line has been impressive:

If we zoom in on the daily chart we can note not only the precision of the trend line tag, but also the supporting confluence with the November 9th highs and the early January lows:

This is as close to a technical bulls eye as you get.

So in summary: We had a 50MA tag, we had the final $VIX gap fill, a trend line tag while intersecting with a previous high and a previous high turned support level.

In short: 5 points of confluence interjecting virtually at the same time. And not only on $ES, but also the $DJIA hitting the same support level at the same time:

And now the bounce precisely off of that support zone:

I offer all this to highlight how the bounce from these levels has made perfect technical sense. Without understanding these technical puzzle pieces one is flying blind and I submit it is abundantly clear that markets continue to respect technicals and hence traders must as well or get caught offside in a major way. This applies to the buy side as well as to the sell side.

In terms of what is next: Gather your puzzle pieces. The 2000 example says new highs. The current technicals say show me as the battle for price control is ongoing and new highs haven’t been made yet, hence it is critical to understand the price pivots that determine who is in control and when.

Bulls have managed a sizable bounce off of key pivot support confluence. Now sustained new highs are needed for any further downside would risk a break of the now confirmed rising trend line of support. As long as this trend line holds this rally is intact, but should it break the nature of this market could changed profoundly and rapidly. Our job is to continue to evaluate to evolving picture and react accordingly.

What is clear for now is that markets just offered a technical master class and a teaching moment for participants.

Indeed, it was a Master Class

CoVid/CCP Virus Phylogeny: 02/03/2021

SARS-CoV-2 (“CoVid-19”) continues to show unusual evolution for a coronavirus.

Ray et al., 2021:

The genome of the novel severe acute respiratory syndrome 2 (SARS-CoV-2) has been observed to be between 29.8 kb to 29.9 kb in size, and its sequence differs substantially from some of the previously identified human corona viruses including SARS and the Middle East respiratory syndrome (MERS) (Khailany et al., 2020; Chaw et al., 2020).

Chakraborty and Lee, 2021:

Reference:

Ray, M., Sable, M. N., Sarkar, S., & Hallur, V. (2021). Essential interpretations of bioinformatics in COVID-19 pandemic. Meta Gene, 27(100844), 100844.

Pay No Attention to the Man Behind the Curtain

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Charles Hugh Smith:

In effect, Greenspan et al. assumed there would always be a pool of buyers willing to buy whatever stocks sellers were unloading. One potential pool of such buyers are those traders who bet on a market decline by selling short–selling shares at the top that they would buy back after a decline, pocketing the difference as profit.

What Greenspan did not acknowledge in his mea culpa was central banks’ role in goosing markets so relentlessly that short selling dried up. Why bet on a market decline in a central-bank managed melt-up? Why lose money by betting against managers with trillions at their fingertips? So short interest declines to a negligible backstop against a crash–precisely the situation now as short interest has declined to recent lows (See chart below).

The other source of bids is buy the dip traders conditioned by the melt-up to aggressively buy every drop in the market. These buyers may be retail (individual) human speculators or they may be computers programmed to buy the dip. This buy the dip reaction (greed) was on display in 2020’s mini-crash, as every plunge was aggressively bought. However, each spike higher was soon sold (fear) and the market promptly fell to new lows.

Many of the buy the dip players are leveraged, meaning that they are using borrowed money (margin debt) to buy more stocks. Should the market drop instead of rebounding, their account will fall below minimum requirements and they will have to add cash or sell stocks. When buy the dip fails, those with margin calls add to the selling.

Most of the trading volume nowadays is generated by computers–called algos because they’re programmed to trade based on algorithms that have been tweaked by very smart people and machine learning.

The problem with algos is it’s difficult to program for black swans or unpredictable rogue-wave monstrous moves. So the prudent programmer takes the computer offline to avoid the risk of the algo making a trading decision in a rare and thus difficult to model crisis that ends up wiping out the financial firm.

This is why liquidity–traders willing to buying stocks at the bid–dries up incredibly fast. Short sellers are such a thin slice of the market now that their buying is little more than a sand castle in a tsunami. Algos programmed to escape a decline by selling pile in while algos programmed to buy the dip quickly reverse and sell when the expected rally fails to materialize. As the rogue wave washes away all the sand castles, the algos are taken offline and liquidity goes to zero.

This is how the price of oil crashed to a negative number in the 2020 mini-crash. The market went bidless, meaning there were no buyers at any price. In Street jargon, trying to buy on the way down is called catching the falling knife: the knife is in free-fall, and buying in at what you guess is the bottom can turn out to be only halfway down the decline. Oops.

This is the consequence of managing markets to only melt up and reversing every decline with trillions in freshly created “money.” The market structure has been stripped of actual market dynamics, leaving it exquisitely fragile and brittle.

Put another way, this heavily managed market structure is far from equilibrium and extremely prone to instability. All this is hidden behind the curtain, where the managers are furiously pulling levers and pushing buttons to maintain the illusion of stability needed to forecast melt-ups are forever.

What’s going on behind the curtain? Few seem to care. Eventually they will, but like Greenspan in 2013, it will be long after the losses have been wept over.

http://charleshughsmith.blogspot.com/2021/02/our-fragile-brittle-stock-market.html

Z Man on Oligrachy and the Theory of Egalitarian Collectivism

The New Regime
photo credit: Bigstock

The nation-state was the recognition that human identity groups were the basis of human organization. A stable country like Great Britain had a common language and history. Identity groups like Welsh and English were sublimated to the British identity. Even so, they had their own cultural spheres that were tolerated and respected by the whole.

Unstable countries like those in the Middle East or Africa were riddled with competing identity groups that had no shared sense of identity. Tribes were often split between two or more countries. Someone in Iraq does not primarily identify as Iraqi. Instead, he is an Arab or a Shiite or one of the many powerful Arab tribes. Lacking those basic necessities of human organization, these countries are inherently unstable.

This is something to keep in mind as the new ruling regime tries to figure out how to keep America from breaking apart. Even with the anointing of Mumbly Joe Biden as president, half the country still hates the other half, and that second half is working up a good hatred for the first half. A big reason for that is the rulers cannot answer any of those important questions that define any human organization.

In fact, they are actively making war on the first question. For close to a generation now they have been denying there is such a thing as American. It is merely a social construct with no fixed meaning. Anyone can be an American. This is the argument for inviting the peasants of the world to settle in your neighborhood. When Axmed Yusuf Qaasim, formerly of Darfur, is as American as Bob Smith from Georgia, “American” no longer has meaning.

On the second question as to who is in charge, we no longer really know who is running things anymore. Corporations with whom you have no business dealings now dictate what you can say in public. Banks can cut people off from the economy without fear of the government. Politicians do things, but nothing the public wants or expects. Someone is pulling their strings, but those people in the overclass are a complete mystery to us.

As far as those rules, customs, and taboos that grease the wheels of human relations, those have been systematically dismantled and replaced with weird new rules. The great and the good say being white is a crime, but the worst crime is noticing that nonwhites commit most of the crime. Not only has morality been turned on its head, but the underlying logic of human relations has been destroyed.

What the new regime inherits is a tinderbox of its own creation. Generations of making war on the basic rules that make human organization possible have led us to civil unrest and a divided, embittered people. They took away that which made it possible for disparate people to coexist. Now they demand that everyone come together and celebrate the people who made it impossible to live a peaceful life.

https://www.takimag.com/article/the-new-regime/

Daily Babylon Bee

Fauci Spins His Handy ‘Wheel Of Science’ To See What He Should Recommend Today

WASHINGTON, DC—In a development no one saw coming, Dr. Anthony Fauci has again changed his recommendation about what to do with masks by consulting his tested and proven “Wheel of SCIENCE.”

“Now I know it confuses people when the science changes so quickly, as if we are just making all this up as we go along,” explained Dr. Fauci from his bunker full of neckties. “That’s why I developed this handy ‘Wheel of SCIENCE’ for us to spin every morning, so people can really see that this isn’t just me saying whatever pops into my head!”

“Now– let’s give this puppy a spin!” he exclaimed as he gave the wheel a mighty turn.

“What will it be today, gang?” asked a giddy Dr. Fauci. “‘Masks Cause Bladder Cancer?’ ‘Eating Dirt Prevents Halitosis?’ hmmm…” 

The dial slowed, clicking just past “Cover Your Kids With Grocery Bags” and finally came to rest on: “Attach A Live Octopus Directly To Your Face.”

“There it is, folks!  Science has proven that the best way to prevent COVID transmission is to affix a live octopus directly over your mouth, nose, and probably eyes. I’ve been keeping this little guy here for this very moment,” said Dr. Fauci, reaching into an aquarium and plastering the surprised sea creature’s tentacles directly onto his face.

“AAAA!!! AAA!!! THE—mmrghh—INK!! AAA!!!” screamed Dr. Fauci as he thrashed on the floor. The journalists watching on Zoom stared in shock, then went straight to work spreading the news of Dr. Fauci’s latest advice to the masses.

The government media channel dedicated a segment to the updated recommendation, complete with each CNN anchor hand-selecting their own octopus. After some hilarious banter about how bad other people are, Don Lemon and Chris Cuomo slapped on their respective octopi and promptly collapsed on the floor into heaps of screams and ink.

Still, being the professional mouthpieces that they are, they managed to garble out, “THIS IS—AGHH!—WORKING PERFECTLY!! DON’T KILL GRANDMA!!!

https://babylonbee.com/news/fauci-spins-wheel-of-science-to-see-what-science-is-recommending-today

The Sock Puppet Administration – NOT “The Onion”

This is not a joke though it is pretty funny:

Kamala Harris says the West Virginia coal miners who have lost their jobs because of the policies she and Joe Biden are pushing can be trained to reclaim “abandoned land mines.”

“Job creation around, for example, all of those skilled workers who are in the coal industry and — and — and transferring those skills to what we need to do in terms of, in dealing with, reclaiming abandoned land mines,” she said.

Twitter users speculated Harris might have meant to say “abandoned mine lands” on which reclamation projects are done.

One Twitter user said, “More ridiculous than the gaffe however is the idea of trumpeting creating energy jobs in the Biden administration while his actions so far have been to kill energy jobs.”

Here’s her comment:

Talk-radio host Rush Limbaugh noted the reaction from Sen. Joe Manchin, D-W.Va.Does Kamala Harris have the intelligence to be vice president or president?

“I saw it; I couldn’t believe it,” Manchin said. “No one called me. We’re gonna try to find a bipartisan pathway forward. I think we need to. But we need to work together. That’s not a way of working together, what was done.”

One of Limbaugh’s callers suggested “that she was going to take miners who were out of work and teach them how to reclaim the land in which the mines, the coal mines were being closed.”

“You’re saying that she meant to say “abandoned mine lands,'” Limbaugh said, “and instead she said, ‘abandoned land mines’? Here I’ve been feeling sorry for abandoned land mines.”

Various headlines called Harris “confused,” and a “source” told CNN that the White House had talked to Manchin, although the content of the discussion was concealed.

Harris continued, after her “abandoned land mines” reference: “What we need to do around plugging leaks from oil and gas wells; and, transferring those important skills to the work that has yet to be done that needs to get done.”