As the saying goes, the market can remain irrational for longer than you can remain solvent. And what is happening now is that the big players are being pushed – David bullying Goliath, if you like – by legions of day traders, using services that include the Robinhood investment app to increase stocks.
This is the theory presented by Michael Batnick, director of research at Ritholtz Wealth Management and author of the blog Irrelevant Investor. “These traders are moving from stock to stock. They squeeze out all the juice until there’s nothing left and then move on to the next one, ”says Batnick.
He points to this JPMorgan chart showing the top selling companies on the Russell 300 RUA,
rising higher. “I can’t prove that digital traders are to blame, but I don’t think a titanic leap of faith is needed to make the connection,” he said.
Batnick included this viral video of a young couple sharing their investment strategy in TikTok. (If you don’t click on the link, the man says he buys stocks when they start to rise and sells when they stop. In other words, dynamic trading.)
What is different this time? The network effect. “This is a huge community now, and if we have learned anything in the past decade, it is that we should be careful with networks. There are non-monetary considerations at play here, such as belonging. And fun. Did I mention that they are having fun? ”Says Batnick. “I don’t think these people can continue to make money forever, but this idea that it ends with their departure is not something I see coming.”
The buzz
Supreme Court President John Roberts will take the oath of Joe Biden as the 46th president of the United States. The opening will be a more discreet affair due to the COVID-19 pandemic, with some 200,000 flags replacing people on the National Mall. Vice President Mike Pence will represent the outgoing administration. Biden also announced a series of executive actions he will take on the first day, including returning to the Paris climate agreement and the World Health Organization, and halting the construction of the US-Mexico border wall.
In one of his last acts in office, President Donald Trump pardoned 73 and commuted the sentences to 70, including former adviser Stephen Bannon, Republican fund-raiser Elliott Broidy and rappers Lil Wayne and Kodak Black. From the business world, Anthony Levandowski was forgiven after stealing trade secrets from Google’s tech giant GOOG,
standalone program, as well as Gregory Reyes, the former CEO of Brocade Communications, who was the first to be convicted of illegal retroactive stock options.
Notably absent from the Trump list was any member of his family. Joe Exotic, the star of Netflix’s Tiger King series, was also not forgiven after renting a limo in the hope of being released from prison.
Netflix NFLX,
The shares rose 13% in the pre-market after the streaming service registered 8.5 million new subscribers in the fourth quarter and said it would no longer need to finance debt programming. Consumer products giant Procter & Gamble PG,
surpassed earnings estimates, like Morgan Stanley MS,
ends the earnings season for Wall Street banks.
Internet giant Alibaba BABA,
9988,
has risen in Hong Kong trade after founder Jack Ma made his first public appearance at a charity event, since his meeting with Chinese officials about the cancellation of Ant Financial’s initial public offering.
Tesla TSLA,
it went up because Oppenheimer reportedly raised its target price at the electric car maker to $ 1,036.
Short sales research company Citron Research is giving a presentation on the video game retailer GameStop GME,
which doubled in price in 2021. In a tweet, Citron said GameStop buyers at this level “are suckers in this poker game”.
The markets
US stock futures ES00,
were aiming for a stronger start, with the high-tech Nasdaq-100 NQ00,
contract showing the way.
The yield of the 10-year Treasury TMUBMUSD10Y,
was 1.10%.
The graph
Ned Davis, senior investment strategist for his eponymous Ned Davis Research, says the market looks bubbly, but that the rise will continue. The percentage of shares with new weekly highs has risen, while the percentage of shares with new weekly highs has remained low, he said. Historically, new highs peaked 36.5 weeks before the market. He agrees that the market appears to be extended in relation to its long-term trend. But it is not as extensive as 1929 or 2000, he says.
Random readings
Pink seesaw on the US-Mexico border won a design award.
A stolen 500-year-old painting that may have been created by Leonardo da Vinci was returned to a museum, which did not know that the artwork was missing.
Need to Know starts early and is updated until the opening bell, but sign up here to have it delivered once to your inbox. The emailed version will be sent around 7:30 am Eastern.
Want more for the next day? Sign up for The Barron’s Daily, a morning briefing for investors, including exclusive comments from Barron’s and MarketWatch writers.