| Robinhood's dash for cash, regulators monitor day trading, and vaccine news. Rattled Robinhood Markets -- the Silicon Valley venture with the wildly popular no-fee trading app -- found itself at the center of the GameStop Corp. retail frenzy as Wall Street's central clearing hub demanded large sums of collateral from brokerages amid the surge in the much-shorted shares. After first attempting to rein in risk by banning certain trades, igniting an outcry from customers and even U.S. politicians, the company raised more than $1 billion and drew on credit lines to weather the storm. As for GameStop, it's up more than 100% in premarket trading. Mania spreading While GameStop has been the poster boy for the Reddit-driven market moves, companies such as AMC Entertainment Holdings Inc. have seen their prices surge too, while capitalizing on the action to raise cash. The buying mania is not limited to the much-shorted stocks either, with silver getting a bump yesterday. While U.S. regulators have said they are "actively monitoring" volatility in options and equity markets, finance veteran Mark Mobius said there shouldn't be any action, and that regulators should only ensure trading is done "efficiently and fairly." Meanwhile, it took nothing more than Elon Musk adding the 'Bitcoin' to his Twitter profile for the cryptocurrency to spike 15%. Vaccines The European Union is expected decide today whether to approve the AstraZeneca Plc vaccine for use as politicians in the bloc continue to pressure the company over supply issues. Novavax Inc. soared after a large trial in the U.K. showed its shot is effective. A spokesman for Johnson & Johnson said that the company expects to supply 100 million doses to the U.S. government in the first half of the year. In further hopeful signs of a return to normality, Hollywood labor unions said productions can resume on Feb. 1, while New York City Mayor Bill de Blasio asked government employees to come back to the office in May. Markets dropEquity markets are under pressure again today as major economies still face headwinds from the pandemic and the higher levels of volatility means investors are becoming more risk averse. Overnight the MSCI Asia Pacific Index dropped 1.4% while Japan's Topix index closed down 1.7%. In Europe, the Stoxx 600 Index had slid 1.1% by 5:50 a.m. Eastern Time with banks the biggest fallers. S&P 500 futures pointed to a drop at the open, the 10-year Treasury yield was at 1.071%, oil rose and gold was higher. Coming up...U.S. personal spending and income data for December as well as the PCE report are at 8:30 a.m. MNI Chicago PMI is at 9:45 a.m. December pending home sales and the January University of Michigan Sentiment reading are at 10:00 a.m. The Baker Hughes rig count is at 1:00 p.m. Dallas Fed President Robert Kaplan and San Francisco Fed President Mary Daly speak later. Caterpillar Inc., Eli Lilly & Co., Chevron Corp. and Colgate-Palmolive Co. are among the many companies reporting results later. What we've been readingThis is what's caught our eye over the last 24 hours. And finally, here's what Joe's interested in this morningBy now obviously The GameStop Trade has taken on a life of its own. Politicians and pundits are shoehorning it into their own agendas. Faux-populist billionaires are pretending to be your friend by earning clout on Reddit and Twitter. And everyone's getting a crash course in things like clearing and options mechanics.
But here's the one thing I really love about the story: it started as a value trade. On the latest Odd Lots, Tracy Alloway and I talked to Rod Alzmann, who is one of the organizers of GMEDD.com (DD stands for Due Diligence) which collects the fundamental bull case on GameStop shares. Rod has been in the stock since 2017 when it was in the mid-teens, and he kept an unwavering optimism even as it fell into the single digits. He believed that Wall Street, and in particular the hedge funds who shorted it into "oblivion" in his view, fundamentally misunderstood the stock. Alzmann, along with other investors like the now-famous "Roaring Kitty", genuinely dug into the business in a way that others were not doing so in order to form a fundamental, contrarian take on the opportunity. Listen to Rod or go watch The Roaring Kitty's YouTube from August, and you'll see that when you strip away the funny screen name, and casual style, it's as good or better than a typical hedge-fund presentation you might hear about at some conference.
In addition to other fundamental analysis on the stock, Alzmann describes on the podcast other things he did, such as reverse engineer things he discovered on GameStop's website to get a sense of the growth of its e-commerce. 
Of course eventually, thanks to the short squeeze and everything else, GameStop really hit the WallStreetBets flywheel, sending the shares to the proverbial moon, getting us to where we are today where everyone has a take. But it's great to see, at a time when everyone talks about the death of value investing, this being a story that started off with a handful of folks online taking a fundamental view of the business -- concluding that Wall Street was getting it wrong and winning big.
Check out the episode here on Spotify or wherever else you listen to them.
Joe Weisenthal is an editor at Bloomberg. Like Bloomberg's Five Things? Subscribe for unlimited access to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. | 
Post a Comment