The rotation from bitcoin into ether could point to a 2017-style correction in the crypto market, research firm says

  • The surge in prices for cryptocurrencies this year “has a whiff of deja vu”, reminiscent of bitcoin’s rally in 2017, said Vanda Research on Monday.
  • Bitcoin’s rally four years ago was followed by a correction and a jump in interest in then-lesser known cryptocurrencies like Ether.
  • Bitcoin and Dogecoin have slumped after hitting all-time highs this year.
  • See more stories on Insider’s business page.

Prices for Bitcoin and other cryptocurrencies have boomed this year, in part on growing acceptance of digital assets by Wall Street and corporate America, but a broader correction in the market appears to be brewing and it’s reminiscent of bitcoin’s slide in 2017, one research firm said Monday.

Bitcoin so far in 2021 pushed above $1 trillion in market capitalization and hit an all-time high of $64,804.72 on April 14, the same day that Coinbase, the largest cryptocurrency exchange in the US, began trading as a public company. Dogecoin last week surged to a record high of over $0.73, according to CoinGecko, and ether, the token tied to the Ethereum blockchain, on Monday notched a record high of $4,221.20. Bitcoin and ether are the two largest cryptocurrencies by market capitalization.

“The meteoric rise in cryptocurrencies has a whiff of deja vu,” to bitcoin’s move in 2017 when a months-long rally catapulted it to become the best-performing crypto asset, said Vanda Research, which tracks retail investing activity, in a note Monday.

“When the rally started to look tired in November [2017], investors rotated to lesser-known altcoins like Ripple and Ethereum, which quickly became household names, too,” wrote Ben Onatibia, head of markets at Vanda Research. Ripple then peaked in early January 2018 while Ethereum held to its gains until mid-to-late January of that year, he said.

“In the months that followed, cryptocurrencies cratered as retail investors rushed to the exit,” he said.

Now, the crypto market is in the midst of “precisely the same hot potato game,” that took place four years ago.

“Under the pretext of institutional support, retail investors started rotating out of speculative retail stocks and pouring their money into Bitcoin,” Vanda Research said in its note. Following the most recent peak, retail buyers have flocked to dogecoin and ether, echoing what transpired in 2017.

Read more: A 29-year-old crypto billionaire who’s made millions from digital-currency arbitrage shares 2 tips for investors looking to get started in trading- and explains why ether is unlikely to surpass bitcoin

Bitcoin’s jump this year has been supported as more big firms have stepped up their activity into the crypto market. Electric vehicle maker Tesla in February said it invested $1.5 billion in bitcoin and CEO Elon Musk said it would start accepting bitcoin as payment for its cars. Meanwhile, Goldman Sachs has formed a new cryptocurrency trading desk and PayPal started allowing US consumers to use their cryptocurrency holdings to pay at millions of its online merchants.

But Bitcoin has dropped 13% since its all-time high less than one month ago, trading below $57,000 on Monday. Dogecoin has tumbled 34% since last week’s high, slumping below $0.50 on Monday after dogecoin enthusiast Musk talked about the meme token during his gig hosting “Saturday Night Live” over the weekend.

“Despite Elon Musks’ attempt to boost Dogecoin this weekend … it has failed to climb back to year-to-date highs. If and when Ethereum suffers the same fate, the cryptocurrencies will likely face a wave of redemptions,” said Onatibia. He noted that Musk’s SpaceX satellite company has said it will accept the meme cryptocurrency as payment for the company’s mission to the moon in 2022.

“Indeed, open interest data from different crypto exchanges shows that there has been a rotation from Bitcoin to Ethereum since the Coinbase IPO. We think a correction in crypto would push retail investors back into equities, where some of their favorite stocks are now trading at a significant discount vis a vis the February highs,” said Vanda Research.

Read the original article on Business Insider

New rules could tackle the ‘gamification’ of trading on popular apps following GameStop, SEC chief Gary Gensler says

AP333575799267
Gary Gensler is the new head of the Securities and Exchange Commission.

New rules may be needed to tackle the “gamification” of trading on popular apps, which can prompt users to make bad investing decisions, according to the new head of the Securities and Exchange Commission.

Gary Gensler said in written testimony to Congress on Wednesday that many of the US’s regulations on trading were created before fast and commission-free apps started to dominate the retail investing landscape.

In particular, Gensler expressed concern about the “gamification” of retail trading. Apps are increasingly using features like points, rewards, leaderboards, bonuses and competitions to boost user engagement, he said.

Gensler is set to appear before the House Committee on Financial Services on Thursday, as part of its investigation into January’s GameStop saga, which saw retail traders unite to pump up the video game store’s stock.

Some lawmakers have become concerned about the influence of Robinhood, the commission-free trading app that has boomed in popularity and was at the centre of January’s volatility.

The new boss of the SEC – the powerful regulator that oversees US financial markets – said the gamification of trading could be costly to users.

“If we watch a movie that a streaming app recommends and don’t like it, we might lose a couple of hours of our evening,” he said.

“Following the wrong prompt on a trading app, however, could have a substantial effect on a saver’s financial position. A big loss could have immediate implications for the app user’s ability to afford their rent or pay other important bills. A small loss now could compound into a significant loss at retirement.

“Many of these features encourage investors to trade more. Some academic studies suggest more active trading or even day trading results in lower returns for the average trader.”

Gensler said these issues may require new rules. “Many of our regulations were largely written before these recent technologies and communication practices became prevalent. I think we need to evaluate our rules, and we may find that we need to freshen up our rule set.”

The House will begin the third of its hearings into the GameStop saga on Thursday. It is particularly focused on the impact of modern trading apps and the power they can have, after many of them suspended trading and shut out users during January’s market volatility.

Apps like Robinhood argue their popular and easy-to-use platforms have broken down barriers to investing.

Speaking before the House during an earlier part of the hearing in February, Robinhood CEO Vlad Tenev said: “The mobile app provides the intuitive experience customers want, while also providing them with tools and information to learn about investing and keep tabs on their finances.”

Read the original article on Business Insider

Warren Buffett will discuss stocks, deals, and the pandemic at Berkshire Hathaway’s annual meeting on Saturday. Here are 18 questions he might answer.

warren buffett
Warren Buffett.

  • Warren Buffett will answer questions at Berkshire Hathaway’s annual meeting on Saturday.
  • The famed investor is expected to discuss stocks, deals, the pandemic, and the economy.
  • Here are 18 questions he might answer on the day.
  • See more stories on Insider’s business page.

Warren Buffett will be quizzed for several hours at Berkshire Hathaway’s annual shareholder meeting on Saturday.

The billionaire investor and Berkshire CEO has kept an extremely low profile over the past year. Investors, commentators, and other market-watchers will be especially eager to hear from him as a result.

Buffett will be joined by Charlie Munger – Berkshire’s vice-chairman and his right-hand man – as well as Ajit Jain and Greg Abel, who head up the conglomerate’s insurance and non-insurance divisions respectively. Insider will be liveblogging the meeting from 1:30 p.m. ET.

Here are 18 questions Buffett might answer:

1. Is he still bearish on the airline industry? Berkshire exited its positions in the “big four” US carriers in April 2020, as Buffett was concerned about fewer passengers, debt repayments, buyback restrictions, and other issues.

2. What does he think about the US government modeling its airline bailouts on his financial-crisis deals? Sen. Jack Reed told Insider he got the idea to demand stock warrants from Buffett’s Goldman Sachs rescue.

3. Does he regret being so cautious when markets crashed last year? Buffett was widely expected to deploy a chunk of Berkshire’s cash reserves, but instead he focused on protecting his shareholders’ money.

4. Has Berkshire closed any of its businesses? Buffett’s right-hand man, Charlie Munger, said last year Berkshire has a “a few bad businesses” that “won’t reopen when this is over.”

5. Is he worried about the boom in day trading, meme stocks, SPACs, and cryptocurrencies? Buffett has warned against speculation and derided crypto in the past, and flagged the dangers of promoters in his latest annual letter. Munger has slammed Robinhood and bemoaned the “speculative frenzy” in markets.

6. What does he think about President Biden’s tax and infrastructure plans? Buffett and Biden, who spoke before the election last year, have both called for higher taxes on the wealthy, criticized short-termism in corporate America, and trumpeted the nation’s bright future.

7. Does he think Apple is overvalued? Berkshire’s Apple stake has tripled in value since 2018 and now accounts for over 40% of its US stock portfolio.

8. Why did he dump Goldman Sachs, JPMorgan, and Wells Fargo? Berkshire exited its Goldman position and sold its JPMorgan holdings last year, and has drastically reduced its Wells Fargo stake.

9. Why is he so bullish on Bank of America? Buffett plowed $2.1 billion into the stock over 12 days last year.

10. What was Berkshire’s reason for selling its Costco stake? The big-box retailer had been Munger’s favorite company for years.

11. Does he still see value in BYD? Shares in the Chinese electric-vehicle company have skyrocketed since Berkshire invested in 2008.

12. Were his pharmaceutical investments spurred by the pandemic? Berkshire added AbbVie, Bristol Myers Squibb, Pfizer, and Merck to its portfolio in the third quarter of 2020.

13. What does he think about Berkshire betting on Barrick Gold and Snowflake? The uncharacteristic investments in a gold miner and a loss-making technology startup’s IPO, ostensibly by one of Buffett’s deputies, surprised many Berkshire watchers last year.

14. What appeals to him about Chevron and Verizon? Berkshire built multibillion-dollar stakes in the energy group and telecommunications company in the fourth quarter of 2020.

15. Is he still a fan of the Buffett indicator? The investor’s namesake market gauge, which he lauded two decades ago, has surged to record highs in recent months.

16. Why is he betting big on natural gas? Berkshire struck a $10 billion deal to buy Dominion Energy’s natural-gas assets last summer, and has proposed an $8 billion plan to build reserve power plants in Texas to prevent another power crisis.

17. Does he have any international partnerships in the works? Buffett invested in five Japanese trading companies last year, and cited potential tie-ups as one reason for his interest.

18. Why did he decide Whole Foods wasn’t a good fit for Berkshire? Buffett turned down the chance to buy the premium grocer in 2017, its CEO revealed last year.

Read the original article on Business Insider

Despite the GameStop saga and Archegos implosion, banks and hedge funds had a blowout quarter. This is how they did it.

GettyImages 526244118
Goldman Sachs brushed off Archegos to post a huge profit increase.

It’s been a dramatic year for financial markets so far. Retail traders pumped up GameStop in January, captivating the financial world and whacking hedge funds who had been betting against the stock.

Then in March, the Archegos investment fund spectacularly imploded, wiping out a $20 billion fortune and sending banks scrambling to distance themselves from the collapse.

Yet, despite this turbulence, banks and hedge funds just had one of the best quarters in recent memory, smashing expectations and earning big bucks for their clients.

How did they do it? JPMorgan boss Jamie Dimon put it well himself when his bank’s earnings came out: “Stimulus spending, potential infrastructure spending, continued quantitative easing, strong consumer and business balance sheets and euphoria around the potential end of the pandemic.”

Hedge funds turn it around after rocky January

The year got off to a bad start for many hedge funds, when a band of online retail traders decided to pump up GameStop stock. A number of high-profile funds, who had been betting against the ailing company, were hit hard.

A narrative built up in the media and among the retail investors themselves that a day-trading army was laying siege to Wall Street. And in some places it was: Gabe Plotkin’s Melvin Capital, for instance, was left nursing a 49% loss on its investments in the first quarter, according to reports.

But the GameStop saga was only felt by a handful of firms, says Andrew Beer, managing member at Dynamic Beta Investments, an investment firm that follows some hedge-fund tactics.

Hedge funds made a gain of 4.8% in the first three months of 2021, the best first-quarter performance since the heady days before the financial crisis, according to data from Eurekahedge. North American hedge funds gained 6.8%.

“GameStop to me was a tempest in a teapot,” Beer told Insider. “Most funds actually did fine… because what was more important for them was getting the value rotation right.”

The first quarter saw volatility in stock markets as investors positioned for stronger growth, rotating out of big tech into stocks in neglected sectors such as finance and industry.

Beer says that with the market going through “regime changes,” hedge funds did well because they had the flexibility and agility “to be tech investors in 2019, but value investors and small-cap investors today.”

There were also opportunities for hedge funds who specialize in betting against, or shorting, stocks, says Mohammad Hassan, head analyst at Eurekahedge.

“The growth factor struggled in Q1, creating opportunities on the short side of the book for hedge fund managers as non-profitable technology stocks got a ‘speeding ticket’, so to speak,” he told Insider.

Banks smash earnings expectations as market income booms

Wall Street’s banks also escaped largely unscathed from the Archegos implosion. Morgan Stanley posted a record profit despite taking a $911 million hit tied to the fund.

Like hedge funds, the big banks also reaped rewards from highly active financial markets, helping big names like JPMorgan and Goldman Sachs wow analysts with record earnings.

Earnings at S&P 500 banks grew a staggering 248% year on year, according to FactSet. Investment banking revenue at Goldman Sachs shot up 105% as the lender’s traders cashed in on rising and volatile markets.

Even at the more consumer-focused Bank of America, sales and trading revenue rose 17% as clients played the market, helping its profit more than double.

The boom in retail trading, which lay behind the GameStop saga may also have helped, says Filippo Alloatti, senior credit analyst at Federated Hermes.

“[Retail investors] may trade with some of the bank’s platforms, but [it also] brings more inflows into equities and therefore facilitates equity capital market business,” he told Insider.

Crucially, the brightening in the economic outlook after the arrival of COVID-19 vaccines. In addition, the announcement of more major stimulus measures helped banks release $10.2 billion from the provisions set aside to cover loan losses, according to FactSet.

“There’s just no doubt that the… bear case scenarios that the banks had put into those forecasts around building their loan-loss reserves have gotten less bad,” Ken Usdin, US banking analyst at Jefferies, tells Insider.

But there are a few dangers on the horizon for banks. Although many of those involved seem to have escaped the Archegos affair unscathed, Swiss lender Credit Suisse is still struggling and similar events could yet have broader ramifications.

Meanwhile, banks’ traditional business of making loans has slowed, as stimulus money has helped people pay down their debts.

The Federal Reserve looks set to keep the party going

Underlying the very strong quarter for banks and hedge funds has been the Federal Reserve, analysts say, which has made borrowing ultra-cheap and pumped cash into the economy and markets.

William McChesney Martin, Fed chair in the 1950s, famously said the Fed’s job is to provide the punch at the party but take it away just as things start warming up.

Beer said this no longer seems to be the case, with the central bank saying it wants to see a hot jobs market and will tolerate higher inflation. “The Fed has basically said, here’s the punch bowl, have at it, and the party is going to go on well past curfew,” he said.

JPMorgan’s Dimon is bullish, despite residual concerns about lower loans and rising coronavirus cases around the world, saying: “We believe that the economy has the potential to have extremely robust, multi-year growth.”

Read the original article on Business Insider

Take a look inside Wall Street darling Ryan Cohen’s ambitious plan to ‘transform’ the retailer into the Amazon of gaming

Ryan Cohen - Chewy
Chewy cofounder and former CEO Ryan Cohen is now the head of RC Ventures, an investment firm that’s taken a 12% stake in GameStop.

  • Chewy cofounder and former CEO Ryan Cohen is the largest individual GameStop shareholder.
  • He’s also in charge of the board, and intends to turn the company into the Amazon of gaming.
  • Cohen is already making major moves at the company, and he has big plans for the future.
  • Visit the Business section of Insider for more stories.

What does Ryan Cohen want with GameStop?

That’s the big, unanswered question at the heart of his 12.9% ownership stake in the company – an investment he made well before GameStop became a meme stock.

Cohen, who cofounded Chewy and acted as CEO before it sold to PetSmart for $3.35 billion in 2017, does not have a background in the video game industry. His claim to fame is outfoxing Amazon at its own game – e-commerce – in a specific category: pets. That’s an especially meaningful claim to fame when it comes to Wall Street, which saw Cohen’s involvement in the company as a reason to buy the ailing retailer’s stock before Reddit found it.

Read more: Ryan Cohen made millions when Chewy got acquired. Now the millennial entrepreneur has a plan to turn around GameStop.

But Cohen is no casual investor in GameStop – he’s the chairman of its board, and an activist investor who has successfully lobbied the company to follow his advice several times thus far. He is clearly in this for the long term.

Though the lingering question of “Why GameStop?” remains unanswered, we know a lot about Cohen’s plans for the future of the company.

1. Cohen wants GameStop to become a technology company, with a focus on ecommerce over brick-and-retail stores.

gamestop store
A GameStop Corp. store on November 5, 2013 in North Las Vegas, Nevada.

Cohen’s investment firm, RC Ventures, owns 12.9% of GameStop. That stake makes it the second-largest single shareholder of GameStop.

Those shares cost tens of millions of dollars in 2020, and they put Cohen in a position to more directly engage with the company’s leadership. But those private conversations apparently didn’t go very well.

“Given that our attempts to privately engage with you since the summer have yielded little progress, we feel compelled to send a clear message to the Board today,” Cohen wrote in an open letter aimed at GameStop’s board of directors published in November 2020.

“GameStop’s leadership should immediately conduct a strategic review of the business,” he said, “and share a credible plan for seizing the tremendous opportunities in the rapidly-growing gaming sector.”

The letter, overwhelmingly, focused on the company’s need to transition to ecommerce.

“GameStop’s challenges stem from internal intransigence and an unwillingness to rapidly embrace the digital economy,” the letter said. “GameStop needs to evolve into a technology company that delights gamers and delivers exceptional digital experiences – not remain a video game retailer that overprioritizes its brick-and-mortar footprint and stumbles around the online ecosystem.”

Throughout his letter, Cohen directly criticizes the company’s leadership – both its executive suite and its board of directors, to whom the letter is addressed.

GameStop CEO and board member George Sherman, “appears committed to a twentieth-century focus on physical stores and walk-in sales, despite the transition to an always-on digital world,” Cohen said, and the board lacks “the type of strategic vision” necessary for GameStop, “to pivot toward becoming a technology-driven business that excels in the gaming and digital experience worlds.”

That criticism appeared to have a major impact, as GameStop announced in early January that Cohen and two of his former Chewy lieutenants would become new members of the board. Soon after, Cohen was put in charge of a committee created to reshape GameStop and appointed the chairman of its board.

2. He’s swapping the company’s current leadership, both its board and c-suite, for former Amazon and Chewy leaders.

GameStop execs (April 2021)

Since Cohen joined GameStop’s board and was put in charge of the Strategic Planning and Capital Allocation Committee, the company’s entire executive suite has been cleared out.

That includes CEO George Sherman, who is stepping down in the near future, and CFO Jim Bell, who was suddenly forced out of his role at the company after the board of directors “lost faith” in him, according to a person familiar with the decision who spoke with Insider. At the same time, a gaggle of former Amazon and Chewy leaders have been elected in their place.

Similarly, the company’s board of directors is being completely flipped – at the company’s annual shareholder meeting in June, it plans to elect a small group of Cohen’s colleagues to the board. And Cohen is expected to be elected chairman of the board.

In the last six months, Cohen has completely reshaped the leadership of GameStop.

3. The potential future of GameStop: online trade-ins.

GameStop Clerk
A customer laughs with a clerk as he purchases a copy of the video game “Grand Theft Auto IV” at a GameStop store in New York

Game trade-ins, and their subsequent resale, are the lifeblood of GameStop.

In September 2020, when Cohen initially purchased a significant chunk of the company’s shares, he privately proposed a plan to the board to focus GameStop on e-commerce opportunities.

One example of those opportunities is tied to GameStop’s core business: reselling used games.

Cohen reportedly proposed an online version of the retailer’s (in)famous game trade-in program.

During those talks, he proposed a major expansion of GameStop’s online footprint, according to Bloomberg. Beyond just games, GameStop’s online store would offer “a wide range of merchandise,” the report said, and prioritize fast shipping.

Cohen has yet to publicly spell out his specific plans, and representatives repeatedly declined requests for comment.

Got a tip? Contact Insider senior correspondent Ben Gilbert via email (bgilbert@insider.com), or Twitter DM (@realbengilbert). We can keep sources anonymous. Use a non-work device to reach out. PR pitches by email only, please.

Read the original article on Business Insider

Alaska’s GameStop stake soared over 700% last quarter – and its Tesla bet has gone from $0 to $85 million in 18 months

Iditarod
Alaskan sled dogs.

  • Alaska benefited from the GameStop buying frenzy in January.
  • The state’s GameStop holding surged more than 700% to $7 million last quarter.
  • Alaska also owns over $85 million of Tesla stock, after eliminating its stake in 2019.
  • See more stories on Insider’s business page.

There have been several surprising beneficiaries of the GameStop short squeeze in January, including the Mormon Church. The state of Alaska has also emerged as an unlikely winner.

The state’s revenue department has owned a stake in the video-games retailer since at least 2017, and held about 43,000 shares worth $802,000 at the end of December last year, regulatory filings show.

Although it trimmed its bet to 37,000 shares last quarter, the position’s value still surged more than eight-fold to over $7 million after Reddit users engineered an explosion in GameStop’s stock price.

The Alaskan agency could have scored an even bigger windfall. It held more than 69,000 GameStop shares in the third quarter of 2019, which would have been worth $34 million at the height of the short squeeze.

Separately, Alaska’s revenue department has warmed to Tesla in recent months. It eliminated its stake in Elon Musk’s electric-vehicle company in the second half of 2019, and owned only 2,000 shares at the end of September last year.

However, it bolstered its position to about 127,000 shares during the following quarter, when Tesla joined the S&P 500 index. The agency’s stake was worth more than $85 million at the end of March this year, making Tesla one of its largest holdings.

Overall, Alaska’s stock portfolio rose in value by about 5% to $9.2 billion last quarter. The state doesn’t tax personal incomes or sales, so it relies on oil taxes and royalties, federal funding, and investments to fund its budget.

Read the original article on Business Insider

GameStop stocks are soaring after its CEO announced his departure. See how the company went from retail giant to gaming dinosaur.

  • GameStop has been a key player in the video-game industry for over two decades.
  • In recent years, GameStop’s inability to adapt to online gaming and some questionable investments have brought it to the verge of collapse.
  • After a Reddit-driven rally, company shares skyrocketed in January and again in February – but will that be enough to save the brick-and-mortar giant?
  • Visit the Business section of Insider for more stories.

EDITOR’S NOTE: This video was originally published in March 2021.

Read the original article on Business Insider

GameStop shares jump 12% as the company announces CEO George Sherman will step down in 3 months or sooner

Gamestop

GameStop’s shares rose 12% on Monday after the company announced its chief executive officer George Sherman will step down on July 31 or upon the appointment of a successor.

Shares were already up before the company’s announcement, buoyed by the company’s progress in making major changes led by activist investor Ryan Cohen.

GameStop said a board committee is actively looking to find a suitable replacement for Sherman’s position.

“GameStop appreciates the valuable leadership that George has provided throughout his tenure,” board chairman Ryan Cohen said in a statement. “He took many decisive steps to stabilize the business during challenging times. The company is much stronger today than when he joined. On a personal note, I also want to thank George for forming important partnerships with the new directors and executives who have joined GameStop in recent months.”

Sherman had been with the video-game retailer for less than two years. The company’s management shake-up is part of its wide “transformation” in culture and strategy being overseen by Cohen.

Gamestop was at the heart of a battle-play of “Wall Street versus The Little Guy” in a Reddit-fueled trading frenzy this year. It was hit with a stock downgrade last week by an analyst from Ascendiant Capital, who said its online popularity will have less of a long-term impact on the stock.

Shares ended at $154.49 per share at Friday’s close, but were trading as high as $173.08 on Monday.

Read the original article on Business Insider

GameStop shares jump 6% as the company announces CEO George Sherman will step down in 3 months or sooner

Gamestop

GameStop’s shares rose 6% on Monday as the company announced its chief executive officer George Sherman will step down on July 31 or upon the appointment of a successor.

Shares were already up before the company’s announcement, buoyed by the company’s progress in making major changes led by activist investor Ryan Cohen.

GameStop said a board committee is actively looking to find a suitable replacement for Sherman’s position.

“GameStop appreciates the valuable leadership that George has provided throughout his tenure,” board chairman Ryan Cohen said in a statement. “He took many decisive steps to stabilize the business during challenging times. The company is much stronger today than when he joined. On a personal note, I also want to thank George for forming important partnerships with the new directors and executives who have joined GameStop in recent months.”

Sherman had been with the video-game retailer for less than two years. The company’s management shake-up is part of its wide “transformation” in culture and strategy being overseen by Cohen.

Gamestop was at the heart of a battle-play of “Wall Street versus The Little Guy” in a Reddit-fueled trading frenzy this year. It was hit with a stock downgrade last week by an analyst from Ascendiant Capital, who said its online popularity will have less of a long-term impact on the stock.

Shares ended at $154.49 per share at Friday’s close, but were trading as high as $164.96 in Monday’s pre-market session.

Read the original article on Business Insider

David Einhorn calls out Elon Musk and Chamath Palihapitiya, defends GameStop champion Roaring Kitty, and blasts market regulators in a new letter. Here are the 11 best quotes.

david einhorn
David Einhorn.

  • David Einhorn slammed regulators for failing to protect investors.
  • The Greenlight Capital chief defended GameStop investor Keith Gill.
  • Elon Musk and Chamath Palihapitiya supercharged the GameStop short squeeze, he said.
  • See more stories on Insider’s business page.

Elite investor David Einhorn blasted market regulators, called out Elon Musk and Chamath Palihapitiya for juicing assets, and praised GameStop champion Keith Gill in a letter to Greenlight Capital investors this week.

The Greenlight president also highlighted “The Big Short” investor Michael Burry’s Twitter exit, and pushed for greater scrutiny of Archegos Capital, the family office that blew up in March. Einhorn’s latest letter was obtained by ValueWalk.

Here are Einhorn’s 11 best quotes, lightly edited and condensed for clarity:

1. “The Fed wants to be ahead of the curve on the downside to protect the stock market and corporate bondholders the economy. Behind the curve is fine on the way up no matter how frothy the stock market the recovery is.” – suggesting the Federal Reserve cares more about stock prices and corporate profits than the economy.

2. “If we swing a little less hard, we should hit more balls.” – on his decision to short fewer individual stocks after several of Greenlight’s positions were hit during the meme-stock frenzy.

3. “Investors discussing why they think GameStop (or any other stock) should go up or down ought to be encouraged. There is no reason to drag anyone before Congress for making a stock pick.” – defending Keith Gill, who goes by Roaring Kitty on YouTube, for his “great call” on GameStop.

4. “The real jet fuel on the GameStop squeeze came from Chamath Palihapitiya and Elon Musk, whose appearances on TV and Twitter, respectively, at a critical moment further destabilized the situation.” – Einhorn suggested Palihapitiya intentionally disrupted Robinhood because it competes with one of his investments, SoFi.

5. “If regulators wanted Elon Musk to stop manipulating stocks, they should have done so with more than a light slap on the wrist when they accused him of manipulating Tesla’s shares in 2018. The laws don’t apply to him and he can do whatever he wants.”

6. “Quasi-anarchy appears to rule in markets. Sure, Dr. Michael Burry, famed for his role in ‘The Big Short,’ reportedly received a visit from the SEC after tweeting warnings about recent market trends – and decided to stop publicly speaking truth to power. But for the most part, there is no cop on the beat.” – complaining that regulators have been defanged, and corporate executives can break the rules with impunity.

7. “Hometown International owns a single deli in rural New Jersey, yet it reached a market cap of $113 million in February. The largest shareholder is also the CEO/CFO/treasurer and a director, who also happens to be the wrestling coach of the high school next door to the deli. The pastrami must be amazing.” – underscoring the number of questionable companies that regulators are overlooking.

8. “From a traditional perspective, the market is fractured and possibly in the process of breaking completely.” – highlighting a dangerous lack of regulation and the risk of casual investors getting scammed.

9. “It was as if Bernie Madoff had been told to pay a small fine and stop ripping off New Yorkers, but to go ahead and have fun with the Palm Beach crowd.” – criticizing regulators for only slapping the Tether crypto exchange with a $19 million penalty and a New York ban.

10. “If Congress wants to understand why GameStop stock did what it did, or more recently how the ‘Arch-Egos’ fund cornered the market in a handful of stocks, it would be better to call to account the absentee regulators and their philosophical backers.”

11. “‘Arch-Egos’ was able to buy up most of the float of GSX Techedu, causing the stock to soar 400% in the face of unrefuted allegations of massive fraud. The SEC has an ongoing investigation of GSX but appears to not have noticed a single fund (or a small group of funds) essentially cornering the market. A traditionalist could say this was market manipulation and transparently illegal.”

Read the original article on Business Insider