How to influence prices
“ Suppose the government is trying to increase the price of cheese: It could buy a large quantity of cheese and let the market determine the impact of the policy on price, or it could set a price for cheese and stand ready to buy as much cheese as necessary to enforce that price. Analogously, when using quantitative easing, the central bank buys a stated quantity of securities, but does not directly determine prices and yields.”
Ben Bernanke – March 24th, 2016
Don’t cry for me, Mr Cohen
$GME short squeeze has produced some classic Twitter trolling:
Steven Cohen's fund Point72 suffers 15% loss amid GameStop frenzy: NYT. 😢 Such a sad story I want to cry 😢 https://t.co/us1a7JHHVw
— Jesse Livermore (@JesseLi48096164) January 28, 2021
It seems Occupy Wall Street had the wrong approach.
— WallStreetBets (@wallstreetbets) January 26, 2021
I know this GameStop stuff is funny, but you have to remember this is hurting real people who own multiple boats
— Kevin Farzad (@KevinFarzad) January 27, 2021
The Fed throws in trillions in liquidity & stocks fly higher it's cool.
— Sven Henrich (@NorthmanTrader) January 28, 2021
Pelosi loads up on $TSLA calls the stock flies higher it's cool.
Bunch of little retail guys load up on calls & stocks fly higher it requires White House & Treasury monitoring & servers get shut down.
Right.
Robin Hood stole from the rich and gave to the poor.
— KEEM 🍿 (@KEEMSTAR) January 27, 2021
Robin Hood stole from the rich and gave to the poor.
— KEEM 🍿 (@KEEMSTAR) January 27, 2021
— Tierra Partners (@tierrapartners) January 28, 2021
— Tierra Partners (@tierrapartners) January 28, 2021
After the $GME event, anyone who thinks that $TSLA share price over the last couple of years reflects the NPV of future cashflows to the shareholders vs. stock price manipulation is either an idiot or a bot. …
Wrap
It was (just a risk on day today):
- 10 year yield back up above 1% (1.052% at close),
- SPX rebounded strongly from yesterday’s collapse (NQ, SP & RUT each up 1%),
- Value outperformed growth: XLF (financials) up 1.9%,
- USD up against everything except NZD,
- Steepening across all currencies, basically,
- Crazy price action on Gamestop, outrage as RobinHood restricts trading.
- Silver (and miners) got a boost from WSB pumping SI.
People are pretty cross about Citadel, and Ken Griffin, and the fact that they paid Janet Yellen $810,000 for a speech or two:
Psaki was just asked about Yellen taking $810,000 from Citadel
— Jack Posobiec 🇺🇸 (@JackPosobiec) January 28, 2021
She defended it pic.twitter.com/ieDVO3vVHu
Psaki was just asked about Yellen taking $810,000 from Citadel
— Jack Posobiec 🇺🇸 (@JackPosobiec) January 28, 2021
She defended it pic.twitter.com/ieDVO3vVHu
Short selling
There is a lot of anger, and enthusiasm, about short selling. My take on it is that all trades should be viewed as going long one asset, and short another. This is easiest to understand in FX, where both assets are regarded as money, but in different countries. But FI markets are just swapping money now for money in the future (or vice versa). And equity markets are swapping cash for shares, or shares for cash. Shares are just one obligation of the company, the residual claim. They are very like bonds, except the holders swap a right to fixed dividends for a right to residual income.
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