Power of the Retail Investor

In recent weeks, and more notably recent days, shares of GameStop [GME] and AMC Entertainment Holdings [AMC] have been gobbled up hordes of retail investors. So much so that prices have gone up 320%, and 161% just since Monday, respectively. In “GameStop Mania Reveals Power Shift on Wall Street—and the Pros Are Reeling”, a recent article published in the Wall Street Journal, journalists Gunjan Banerji, Juliet Chung, and Caitlin McCabe explain how this has been happening and the culprit behind these mammoth price movements.

What started as a general conversation about the potential value of GameStop on popular platforms like Reddit, Facebook, Twitter and Discord has turned into an all-out war “between professionals losing billions and the individual investors jeering at them on social media.” So much so that regulators within the SEC are beginning to look into the potential of market manipulation.

Tuesday Thoughts

A few of my thoughts as the work day progressed. Hopefully this will, at the very least, make you google something. 

For the last year it has seemed like the equities market is over-bought, too high, due for a correction, blah blah blah. It has been on my radar, seemingly with many other people as well. As we sprint into 2018 with a vengeance the market seems higher than ever and due for a setback. But are we?

Even though the major markets RSI’s are above 80 and there seemingly hasn’t been a down day since the start, 2018 is a year poised for continued growth.

Fourth Quarter Earnings

Two schools of thought.

1. "The new tax plan is going to lower the effective corporate rate and boost companies earnings. Repatriation will be big along with share buybacks, increased dividends, and other tools to increase EPS."
This was my first idea and I clung to it with vigor. I went in on depressed companies who would greatly benefit from this tax rate. GE in particular comes to mind. The first week of 2018 made me even more confident and I preached it like Joel Osteen.

2. "Remember, the first earnings report is going to be Q4. A number of companies are going to realize their tax bill will be much lower in 2018 and thus buy and expense as much as they can for the end of 2017. The beginning of the year is going to be poor."
My good friend, my much-smarter-than-me friend, pointed this out to me. The headlines are starting to show that the first earnings of 2018, which will be Q4 of 2017, are going to show a huge expense. GE is getting slammed, a few of the big banks say they are going to owe billions. The market looks poised to continue to increase but maybe earnings season number one will be slower than originally expected.

Friday Thoughts

Yield Curve
The yield curve has started flattening. When comparing January curve to December curve you can see a significant move towards horizontal. In some circles the yield curve is very impressionable.

     Why is the yield curve important and why is it [usually] sloping upward? Think about the Expectation Theory. For starters, yield is on the y-axis and maturity on the x-axis. Short term is inherently less risky meaning the interest you receive on bonds will be lower. When you start moving out - 10 years, 20 years, 30 years - the yield will increase to account for the risk of time. Most cases you'll see a fairly significant difference between the 10 year and the 30 year. Why, besides time risk?

Bill Ackman out of VRX

     Word on the street earlier today was that Bill Ackman was selling out of Valeant Pharmaceuticals [VRX] and stepping down from the board of directors. Turns out those reports are right as it has been confirmed by many that the huge block trade made just after 4:00pm was the sale of all of Pershing Square's shares. Ackman sold 27.2 million shares for $11.00 per.

Does Apple Have What It Takes?

Apple  [AAPL]

     There comes a point in time when the greats fall. The Ottoman Empire, The Roman Empire, Yahoo, and Apple? They have a market cap of $639.51 billion dollars which makes them the largest publicly traded company. They have had mounds of success thanks to Steve Jobs development and new ideas. Since Jobs died of cancer Apple hasn't come out with any great, new ideas. Items that would blow your sock off like the iPod, or the iPhone, or even the iPad. But things seems to changing.

Rising Tide Raises All Ships

     After Trump was voted President, there was a lot of talk about what he would do to the steel industry. He had been saying that China has been taking manufacturing jobs away from the USA and how he will bring them back. The reason China can do that is because they have subsidized the steel industry. And they have done it against the rules of any trade laws that had been made. Steel is so cheap that they are just dumping it into the US market leaving no market share for domestic manufacturers to gain. The question remains... How will Trump negotiate the trade laws so that he can bring back US manufacturing, in this case steel and iron, and how will it affect domestic manufacturing as a whole?

India's Money Problem

I was tweeting about this yesterday. I have had some more time to think about it and read about it and come to realize how the situation that country is in stinks. I'll do my best to explain, be patient!

Here is what the Prime Minister of India, Narendra Modi, did to their money supply. 

Growing Asset Bubble

     In a change of pace from my past little articles, I want to go over this possibility of a future asset bubble: Student Loans.

     Let me set the scene. I was sitting in lecture for one of my economics classes at school. We have been talking about the history of the united states regarding recessions and depressions. As of late, we have been diving into the recessions since the early 1980's. In this particular instance we were talking about the asset bubbles that have popped and sent the economy down the tube. The oil price shock in 1990, the dot com/tech bubble in 2001, and then the housing bubble in 2007-08. [For those of you that don't know what an asset bubble is...it's the irrational increase in the price of an asset] Back in 2001 with the dot com bubble, the internet was finally becoming much more accessible to the public and companies were able to create websites.