Wolfpack Research founder Dan David discusses regulations on short selling and market transparency.
Reddit brokers who have taken the investment world by storm may inflict more pain on hedge funds before the tightening is over, according to Goldman Sachs.
A basket of 50 Russell 3000 shares with market capitalizations above $ 1 billion and the highest overdraft interest as a float portion skyrocketed 98%, surpassing two separate 72% highs seen during the 1999-2000 dot com bubble. according to the company. The basket returns in 5, 10 and 21 days are the highest ever recorded.
Last week showed that “unsustainable excess in a small part of the market has the potential to become a row of dominoes and create wider turbulence,” wrote David Kostin, chief US equity strategist at Goldman Sachs.
STOCK INCREASE IN GAMESTOP FED BY STIMULUS CHECKS: BILLIONAIRE GUNDLACH
| Ticker | Safety | Last | change | Change % |
|---|---|---|---|---|
| GME | GAMESTOP CORP | 227.46 | -100.04 | -30.55% |
| AMC | AMC ENTERTAINMENT HOLDINGS INC | 13.37 | +0.03 | + 0.22% |
GameStop Corp., which has been the focus of Reddit’s WallStreetBets group, increased 400% last week. Another group target, AMC Entertainment Group, rose 278%.
The restrictions that have occurred have been limited to a series of low-capitalization stocks, but have still forced hedge funds to hedge their short bets to reduce risk. The funds also cut long positions to reduce their exposure to the market.
The sale was the biggest breakdown of hedge funds, or closing open trades, since February 2009, during the height of the Great Financial Crisis, according to Goldman Sachs Prime Services.
BIDEN CLIMATE ORDERS PUT WYOMING ON CROSSHAIRS
The sale resulted in other market participants reducing their stakes, resulting in a 3.31% drop in the S&P 500 benchmark last week, its biggest weekly drop since October. The sale culminated in a 1.93% drop on Friday, which pushed all 10 sectors of the S&P 500 into negative territory.
“Despite this active deleveraging, the net and gross exposures of hedge funds based on mark-to-market remain close to the highest levels ever recorded, indicating the continuing risk of sales driven by positioning,” wrote Kostin.
Concerns about a stock market bubble have become more prevalent on Wall Street in recent days, as valuations have reached high levels.
PROVING GAMESTOP HANDLING WILL BE DIFFICULT FOR MON, OTHERS
Bank of America’s sell-side indicator is less than two percentage points from “euphoria”. The 12-month return was -11% the last time the indicator reached that level in 2007.
Many on Wall Street, however, are not intimidated and think that the Federal Reserve’s quantitative easing program will boost the stock market.
“It seems like an exaggeration to think that this issue is the sting that empties a series of bubbles exploded by quantitative easing programs,” wrote JPMorgan strategists led by Jon Normand.
| Ticker | Safety | Last | change | Change % |
|---|---|---|---|---|
| SP500 | S&P 500 | 3773.86 | +59.62 | + 1.61% |
Goldman Sachs strategists agreed, noting that profits, valuations when compared to low interest rates and a strong economy will help the S&P 500 rise 16% this year to 4,300.
DISCOVER FOX BUSINESS ON THE MOVE BY CLICKING HERE
“If growth continues to be the main driver for stock prices, investors will have reason to be optimistic,” wrote Kostin.