Back To Normal

Back To Normal

A sense of normalcy returned to markets Tuesday, assuming you accept that “normal” entails inexorably rising benchmarks, bolstered by the prospect of more stimulus for Americans who can’t survive without it.

While true bipartisanship may still be a pipe dream in D.C., a meeting between 10 GOP Senators and Joe Biden was described as “excellent” and “very productive,” which, if nothing else, at least suggests that a handful of nominally sane people in Washington can still sit in a room together without the conversation devolving into a juvenile shouting match (or the president spitting at someone at having to be carried, shouting, out of the room.)

Even so, Nancy Pelosi and Chuck Schumer are moving down the road towards a Democrat-only process for passing Biden’s stimulus plan. In a testament to how different the tone really is inside this White House (or at least according to participants in Monday evening’s chat), Bill Cassidy offered this:

‘I was the first person to speak about a specific issue. I said, ‘Mr. President, I don’t want to seem rude.’ He said, ‘Listen, I’ve been in all these negotiations. We’re going to have a difference of viewpoints on some things. We’re going to agree on some things. And when we disagree, we’re not being rude.'”

Of course, the GOP will be wary of suggesting that Biden’s approach marks a complete sea change from Trump’s, but we all know it does.

The market seems to think stimulus will come together, one way or another. Monday’s meeting suggested Republicans are willing to talk. Even their relatively meager package ($618 billion) included another round of $1,000 checks. Ideally, Biden could somehow secure enough GOP support for a modified larger plan, avoiding the need to resort to reconciliation. But that still seems unlikely.

In any event, cordial is something America hasn’t seen in years, so in that respect, the White House and the participating Republicans set a “bold” new precedent.

Meanwhile, the US is finally catching the virus. And in this case, “catching” doesn’t mean “contracting.” Rather, it means catching up. As of Monday evening, 26.5 million Americans had received one or both doses of the vaccines. Total US cases were 26.3 million. So, more people have been at least partially vaccinated than there are cases. The UK (which began its vaccination push early), the UAE, and Israel are the only three countries to achieve the milestone earlier than the US.

Behold: We’re starting to “win again.” (Don’t get “tired” of it. There might be more.)

As for the Reddit saga, silver fell after CME hiked margins and, apparently, some retail traders are asking their compatriots to get out of the trade. There’s still some confusion about who suggested it in the first place. Volume in GameStop was just a third of the recent average on Monday.

“So John (and Jack2343 and Jane1928273) went long, and silver went up, and physical silver split from paper – because if you are going to nail yourself to a cross of precious metal then do it properly, right?,” Rabobank’s Michael Every joked. “At least it made a change from the social media meme of Fry from Futurama holding out (paper) money and saying: ‘Shut up and tell me which stocks to buy to punish rich people.'”

This is one rare case when the jokes are not only not getting old, they’re getting funnier by the session.

“The short squeeze momentum met its inevitable end,” one professional trader told Bloomberg. “It seems reasonably clear that as the cheerleading and rage against the machine dies down, the man on the street is left holding the bag again.”

Imagine that — “sticking it to the man” ended up meaning “the man” down the street. Who just lost a month’s worth of wages after buying GameStop at the top. Who knows, maybe he even works at GameStop as a second job. Because “middle” class people in America can’t survive on one job anymore. And yet the GOP pushes back against a $15 minimum wage.

But Reddit shouldn’t feel too bad. After all, that archetypal neighbor down the street would have lost the money anyway. If not on GameStop, then buying QQQ 24 hours before a 15% drawdown. Or maybe on a combination of scratch-off tickets and Percocet. (Things getting back to “normal” and such.)

SocGen’s Kit Juckes summed it up best on Tuesday. “To say the underlying market themes aren’t moving very fast would be an understatement,” he wrote, adding that,

Higher equity prices, low rates but steepening curves, tight credit spreads and a weaker dollar are all a function of three things: The Fed’s assurance of easy money through 2023 (and similar pledges around the world), the promise that fiscal policy will remain accommodative and won’t be tightened too soon, and the hope that vaccine roll-out, while faster in some places and slower in others, will gradually allow life to return to normal. Perhaps it’s no surprise then, that as the underlying story evolves at a glacial pace, attention drift to other stories.


 

5 thoughts on “Back To Normal

  1. On the GME front, I remember a week ago I saw a guy who was posting about how his 10k some odd dollar investment had grown into 32M. I think to myself, “sell you fool, sell!” but I don’t think he did…

    Looking at share stats for GME we see 27% of shares are held by insiders, 122% held by institutions, and 226% short of float. If you can can keep leveraging shares that don’t actually exist for seemingly ever, the whole notion that retail can somehow ever take on the big trading firms is a pipe dream. As far as the SEC being worried about collusion, obviously that concern only comes into play when regular Joe’s join a reddit thread and start buying. Not when multiple VC’s start shorting with their large cash positions which is where this whole thing started.

    It’s difficult to argue that the system isn’t rigged in favor of the rich at this point.

    1. And look, I mean… clearly, some people (maybe a lot of people) made a lot of money on this.

      But you should be wary about the notion that thousands upon thousands of Americans on Reddit suddenly became millionaires.

      I have serious reservations about the veracity of some of those claims.

      And to the extent they’re true, I’m not sure why these people would brag, boast, and otherwise post actual screengrabs from their accounts.

      They should be quiet as mice. And they should also be spending a day with an accountant and probably hiring a decent lawyer on retainer.

      That’s not (not, not, not) to suggest that anyone did anything wrong. But if you really made $30 million in the space of a week trading what amount to penny stocks, you need to have all (and I mean all) of the “right” answers, when the IRS comes asking. Which they probably will.

      So that’s my advice to anyone who really did become an overnight millionaire: Get an accountant. Today. Get off of Reddit and get an accountant. Then, tomorrow, get a lawyer. And a good one, too.

      That way, when the questions start coming in, you’re prepared and all set to ride off into the sunset with your newfound fortune. (I can recommend an island, btw).

      1. To clarify, this individual had been long GME for years, so it wasn’t an overnight millionaire situation. However, he was posting screengrabs of his account which, I agree, is just not smart at all. The same way that not selling when you have a small fortune sitting in front of you isn’t. But emotion is the enemy of every investor and greed definitely can make you do stupid things.

    1. Back in the mid-eighties, two of our top traders were in our Singapore office. Whenever I spoke with one of them he would regale me with tales of how he had gotten his face ripped off on a Swiss Franc trade or something. Based on what he told you, you’d think he was a bumbling fool!

      Until you saw his monthly P&L.

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