The saga continued yesterday with traditional Wall Street taking it to the airwaves to lob bomb after bomb at the Robinhood crowd. The plan of attack didn’t vary much from the usual assessment that those folks buying GameStop (GME) are stupid, bored gamers, and degenerate gamblers looking to fill the void.

Who knew a bunch of folks that opened accounts with less than $500 would have the financial power and collective will to face down the behemoths of Wall Street?

During yesterday’s session, the counterattack (all forms of media) was at its height. Shares of GameStop (GME) dipped into the red, but the move only attracted more buyers. The circle of names erupting higher as a part of major short squeezes expanded during the session. The list is long, but some of the more intriguing names are those that have recently faced Wall Street’s scorn.

• SmileDirectClub (SDC): dang, we took a profit too soon.
• Fubotv (FUBO): traded 278,000 calls to 46,000 puts.
• Palantir (PLTR), which has seen three downgrades within as many weeks.

Sending in Reinforcements

More often than not, short-sellers have done a lot of homework and have solid presentations. The problem has been their need to see stocks and the companies they represent destroyed. It’s not enough to make 20, 30, or even 50% on a short bet. They want total carnage -with nothing left in their wake.

In this area, Caesar always has his thumb pointing down.

Another intriguing thing with the shorts is they always have more dry powder. No matter how much they are being destroyed. The borrowing fee for GameStop is 23.6% - no problem.

Melvin Capital Management is down 30% this year on its short bets – no problem. Two of the wealthiest men to ever walk the planet are pitching in to help Melvin reload. Citadel and Point72 Asset Management are pouring in $2.75 billion. 

Amazingly, the richest folks in the country are banding together to crush small investors for having the temerity to play in their sandbox. How many billionaires will it take to crush the rebellion? 

Sadly, we may soon find out.

Message of the Market

Seven of the eleven sectors in the S&P 500 finished higher in a topsy turvy session that saw solid starts dissolve into fast declines. A subscriber asked if it was a “flash crash” and the answer is no. But it was fast and abrupt collateral damage to the war on Robinhood traders.

S&P 500 Index	+0.36%
Communication Services XLC	+0.58%
Consumer Discretionary XLY	+0.37%
Consumer Staples XLP	+1.00%
Energy XLE		-1.02%
Financials XLF		-0.73%
Health Care XLV	+0.65%
Industrials XLI		-0.68%
Materials XLB		-0.52%
Real Estate XLRE	+0.90%
Technology XLK	+0.84%
Utilities XLU	+2.01%

When Wall Street starts complaining about valuations and the market getting ahead of itself, it can be used against their holdings as well. The big boys and girls are still chasing mega-growth stocks, which is fine as their underlying value propositions continue to evolve. But in historical context, some say there were only a few bubbles in history as large.

Portfolio Review

We took profits in a Consumer Discretionary name yesterday.

Today’s Session

Industrial names are looking to join electric vehicles to provide early leadership out the gate.  The stock of the day is General Electric (GE) which I own in my personal account and I think everyone should own now (see long idea).

Look at homebuilders, continue to move higher as DR Horton (DHI) posted a monster quarter. 

November number in the FHFA home pricing index came in at consensus.

Comments

Bulls make money, Bears make money, And pigs get slaughtered Charles Case on 1/26/2021 10:44:45 AM

Just trying to keep up Charles. Makes my head spin. Lorin K on 1/26/2021 11:33:04 AM

intersting weblink fron CNN showing companies suspending contributions to "Objectors" in Congress https://www.cnn.com/interactive/2021/01/business/corporate-pac-suspensions/ Reuben Patrick Jones on 1/26/2021 1:04:22 PM

Researched Reddit following your show... watched GME shot through the roof today. Intriguing "counter-attack" to the big guys. Also: GE has always held a warm spot in my heart and portfolio. Glad to see it back in healthy territory! Barbara on 1/26/2021 4:05:04 PM

The matter is whether the Old Guard considers as "bad money" this aggregation of newbie retail fractional buyers. If they do they will leave the market causing it to seek a bare valuation bottom. This shorts out the longs, good or bad, leaving the Old Guard to return with dry powder and then buy back in. Gresham's Law. This won't work if the new disruptors such as the "Robin Hoods" are a good thing. If they have pleanty of dry powder as well, then it is these newbie's who will create a new segment. They will monetize their trades with quants offering them the liquidity the Old Guard tried to withdraw. Josh D on 1/26/2021 6:18:25 PM

Very intriguing.  I have to ponder this - might even ask some smart folks tomorrow on Making Money.  CP Charles Payne on 1/26/2021 7:29:37 PM

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