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Main vs. Wall Street traders

Updated: Mar 21, 2021

BentinPartner Weekly

Dear Reader,

The entire story of the past week was centered on an epic fight between Main and Wall Street traders and a fast-growing army of retail traders blowing up short bets held mainly by hedge funds.

“What I’ve seen happen with GameStop this week is the craziest thing I’ve seen in 27 years in the business,” said Norm Conley, chief executive officer of JAG Capital Management.

We felt a bit the same last week.

Some very public outcry came from trading restrictions being imposed by most online brokers and during a brief period towards a handful of those stocks creating havoc. This was not a question of robbing retail investors of legitimate profits and more a question of safeguarding what is left of the sanity in these markets.

We described in some details what happened in Friday’s letter but those interested will find some interest in the following reviews.

I would only add this; D. Portnoy, E. Musk, Palihapitiya, E. Wood are the four captains spearheading this movement (revolution?). They all wear bow ties (they did before last week...) and they know how to communicate to the many people left behind by the pandemic...They are mastering the codes (caps and T-shirts included) of the young generation getting very mad indeed.

Valuation does not matter (any more and for now). It is all about the number of followers you can reach and influence...and how smart and effective you are as an influencer. In other words, it is called marketing cubed leveraged to the tune of the exponential nature of the social networking effect. It is no coincidence either that the face of the Reddit Wallstreet board represents a young Trump’s stylized face. For what it worth, the Reddit Wallstreet board is now taking 2 to 3mn additional followers a day …

One last thing. Let’s be mindful that hedge funds are “sharks, carnivores, and cannibals” and that many of them will eat each other over the whole situation, starting with Citadel who is tipped milliseconds in advance of each trade that “angry” Robin Hooders are about to place. It is no coincidence either that Citadel is long quite a few of these soured shorts from other hedge funds…

No… this is the last thing…. In all fairness, part of the problem lies as a byproduct of a global monetary policy that has completely destroyed the concept of sound money and of sound investing, saving and compounding for an entire generation of youngsters by manipulating some markets down and blowing bubbles left and right elsewhere, filling so far the pockets of already multi-multi millionaires and billionaires.

Over The Past Week…

Over the past week, the S&P500 sold off by -3,3% (-1,0% YTD) while the Nasdaq100 dropped -3,3% (0,3% YTD). The US small-cap index shed -4,4% (4,8% YTD). AAPL, AMZN, NFLX, and TSLA all dropped by 5% or more over the past week with tesla concentrating this loss in Friday’s session alone.

Cboe Volatility Index rallied 51,0% (45,5% YTD, Z-score 2,0) to 33,09.

The Eurostoxx50 suffered a similar drop, shedding -3,4% (-1,6%, Z-score -2,8).

Diversified EM equities (VWO) as one of the favored trades so that this year shed by -4,3% (3,1%), underperforming the S&P500 by-1,0%.

The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies gained 0,3% (0,7%) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) dropped 0,0% (-0,1%).

10Y US Treasuries rallied -2bps (+15bps) to 1,07%. 10Y Bunds dropped -1bps (5bps) to -0,52%. 10Y Italian BTPs rallied -11bps (+10bps) to 0,64%, recouping some of their recent underperformance.

US High Yield (HY) Average Spread over Treasuries climbed 14bps (2bps) to 3,62%. US Investment Grade Average OAS climbed 2bps (3bps) to 1,05%.

In European credit markets, EUR 5Y Senior Financial Spread climbed 2bps (4bps) to 0,63%.

Gold dropped -0,4% (-2,7%) while Silver rallied 5,9% on Friday (2,2%). Major Gold Mines (GDX) shed -2,0% (-4,2%).

Goldman Sachs Commodity Index gained 0,8% (5,0%). WTI Crude dropped -0,1% (7,6%).

Have a nice week ahead and stay safe.


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Marc Bentin, BentinPartner GmbH

Founder, Chief Investment Officer

BentinPartner GmbH is a Swiss-registered independent financial adviser.

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