Our charts for you today explore:
It's hard to ignore what is going on right now with GameStop's (GME) share price. In the last 2 weeks the shares of GME have gone up almost tenfold... mostly thanks to a ragtag collection of amateur traders on r/wallstreetbets — the always chaotic and often offensive forum dedicated to outlandish trading of financial derivatives on reddit.
The background
For the last few years GameStop has been a business in decline as a predominantly brick-and-mortar gaming retailer. Within the financial community the consensus view was simple: GameStop probably wasn't long for this world — and its share price had long reflected that view.
As GameStop shares really began to scrape the barrel (at around the $4-5 mark), a few investors began to see an opportunity. Among the more notable believers was Michael Burry, which is a name you might recognise from 2015 film The Big Short. Less notable investors included a reddit user who had bought $53k worth of call options back in the middle of 2019. We'll call him DFV.
Throughout 2020 a few other investors jumped on the GME bandwagon, including Ryan Cohen, and by late last year GME's share price rice had risen to the mid-teens, closing out 2020 at just under $19. That uptick in fortunes resolved more of the financial elite to bet against GME, buying put options or selling the stock short, anticipating it would eventually resume its downward trajectory. GME was among the most shorted stocks in the entire market.
The big squeeze
What those hedge funds didn't bank on was just how determined, stubborn, and reckless a group of hundreds of thousands of amateur investors could be. DFV's regular updates on his GameStop bets often revealed greater and greater profits — and reached a greater and greater audience. Inspired traders jumped on the GME train, and over the last few weeks this has coalesced into an enormous movement with 2 primary goals. The first is to make $$$. The second is to screw over the wall street elite that's betting against GME.
As traders buy call options (betting the price will go up), market makers hedge their own exposure by buying shares in the open market. If there's enough demand the price will move higher. That's good for everyone except the funds betting the other way — whose short positions begin to show huge losses. If they run out of courage, or money, they have to hedge that short exposure by... buying shares — that sends the share price even higher, triggering more short sellers to cover their position and starting a vicious feedback loop known as a short squeeze.
One hedge fund, Melvin Capital, that had been betting against GME, had to have almost $3bn of capital injected into it to shore up its finances on Monday. Reddit user DFV was up almost $23 million according to his latest update and as we write this, GameStop shares have opened trading at $308, up another 108% on the 93% they jumped yesterday. It's wall street vs. the internet and — for now — the internet is winning big.
Russian dissident Alexei Navalny is becoming a real problem for Vladimir Putin, in a way that almost no individual has been during Putin's 20+ year stewardship of the country.
A longtime critic of Putin, Navalny may have been expected to go quiet after he was arrested on January 17th upon his return to Russia. Instead, Navalny's YouTube channel posted a 2-hour exposé that alleges that a $1.3bn palace has been built by oligarchs for Putin, which almost immediately went viral racking up tens of millions of views over the next week.
A rock and a hard place
Navalny has played a genius (and brave) hand. By returning freely, knowing he would likely be arrested, he captured the media's attention and — just as it began to fade — played the ace up his sleeve by posting his exposé on the internet, which, coupled with his arrest, triggered mass rallies of thousands of protesters across Russia.
In an unusual move Putin has addressed the video directly, commenting that the palace "doesn't belong to me" and that he found the video "boring", while condemning the "illegal and dangerous" protests. More permanent options of dealing with Navalny seem unlikely to garner favour, now that his profile has become so elevated.
As Gideon Rachman from the FT points out, previous protests in Russia, such as those in 2012, didn't really have a leader. Now they do — and even behind bars Alexei's shouts of protest seem louder than ever before.
1) 2020 was officially the worst year ever for US hotels, with an occupancy rate of just 44% meaning that more than 1 billion hotel room nights went unsold last year.
2) No Time To Change Products. According to The Sun, the >12 month delay to the release of the latest James Bond film (No Time To Die) is meaning that many of the product placements within the movie are quickly getting outdated.
3) Our planet has lost 28 trillion tons of ice between 1994 and 2017, according to a new global study.
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6) The UK has passed 100,000 deaths from COVID-19. The BBC explored how the UK came to be one of the countries with the worst death tolls.
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