JPMorgan is offering big clients a tool to help navigate meme-stock volatility, report says

Reddit Wall Street Bets Retail Trading GameStop
Photo illustration by Jakub Porzycki/NurPhoto via Getty Images

  • Wall Street can now keep an eye on retail-trader activity through JPMorgan’s new tracker, Bloomberg reported. 
  • The “Through the Retail Lens” tool tracks social media activity and predicts short-squeeze opportunities.
  • About 30 institutional investors have begun using the tool, Bloomberg said.

A new tool from JPMorgan allows Wall Street firms to keep an eye on what retail traders are doing, according to a Thursday report from Bloomberg.

The bank’s “Through the Retail Lens” tool launched in September and is now being used by about 30 asset and quant fund managers, Bloomberg reported. The new tool shows retail flows, predicts the next “short-squeeze,” and combs through Reddit and Twitter to determine retail traders’ sentiment on a stock, the report said.

A bank representative did not immediately respond to Insider’s request for comment. JPMorgan told Bloomberg that without a keen eye on retail, investors may feel like they’re “driving partially blind.”

Retail traders have made their mark on Wall Street this year, starting in January when millions of invdividual investors rallied together on Reddit’s Wall Street Bets forum to drive an epic surge in shares of GameStop, AMC, and others. The rally caused some short-focused hedge funds to lose big on their bearish positions in these companies. 

Retail traders have been a driving force in the stock market broadly this year. Individual traders have been known to rush in to buy market dips, like on Black Friday this year when markets slumped on Omicron worries or in September when Chinese real-estate giant Evergrande’s debt crisis sparked a selloff

Spurred by pandemic boredom, flushed with cash from stimulus checks, and enticed by zero-commission trading, retail traders now account for about 20% of stock-market activity, Insider previously reported, citing Citadel Securities. That’s a jump from 2019 when it was about half that. 

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Legendary stock-picker Peter Lynch warns against passive investing — after ‘The Big Short’ investor Michael Burry called it a dangerous bubble

Dr. Michael Burry
Michael Burry.

  • Wall Street legend Peter Lynch said passive investors are missing out on market-beating returns.
  • Michael Burry of “The Big Short” warned the boom in index funds and ETFs is a dangerous bubble.
  • Burry said the passive-investing trend is hurting small value stocks and shareholder activism.

Fabled stock-picker Peter Lynch recently criticized the shift toward passive investing, warning buyers of index funds and exchange-traded funds that they’re losing out on superior returns. Michael Burry, the investor of “The Big Short” fame, has also complained about the trend and cautioned it could be disastrous.

“This move to passive is a mistake,” Lynch, who delivered an annualized return of 29% over 13 years as the manager of Fidelity’s Magellan fund, said in a Bloomberg Radio interview that aired this week.

“People are missing the boat,” he added, noting that he expects the best active managers to consistently trounce the market.

Meanwhile, Burry called the passive-investing boom a “bubble” in a Bloomberg interview in 2019. The Scion Asset Management boss observed that the trend was sapping interest in smaller, undervalued securities around the world.

“There is all this opportunity, but so few active managers looking to take advantage,” he said.

Burry also suggested the dearth of active managers was stifling shareholder activism. Passive managers tend to be less confrontational with company executives, whereas Burry wrote several letters to GameStop’s directors in 2019. He called for a board overhaul and criticized its executives’ compensation, acquisitions, and lack of share repurchases.

The Scion chief revisited the subject of passive investing in a September tweet. He warned the flood of millennial money into index funds and ETFs was fueling unsustainable valuations and putting the stock market in a precarious position. “Parabolas don’t resolve sideways,” he said.

Burry shot to fame for calling the mid-2000s housing bubble and making a fortune by betting on a crash. The contrarian investor also took short positions against Elon Musk’s Tesla and Cathie Wood’s Ark Innovation ETF earlier this year. Moreover, he invested in GameStop back in 2019, laying the groundwork for the short squeeze on the stock at the start of this year.

It’s hard to say whether Lynch and Burry are right about the downsides and risks of passive investing, but there is a clear shift from active to passive. The value of passively managed US assets has ballooned from $3.1 trillion at the end of 2016 to $7.5 trillion today, whereas the value of actively managed US assets has only grown from $3.7 trillion to $6.1 trillion over the same period, Bloomberg data shows. 

Read more: The creator of a Michael Burry subreddit explains why ‘The Big Short’ investor’s selling spree is a huge red flag — and lays out why it’s a major endorsement for the few stocks he has left

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Billionaire investor Chris Sacca says day traders are begging him for bailouts — and reveals he bought the dip

chris sacca
Chris Sacca.

  • Chris Sacca warned retail traders not to bet on meme stocks and crypto with borrowed funds.
  • The billionaire investor is now fielding bailout requests after the recent market slump, he said.
  • Sacca disclosed that he capitalized on the sell-off by buying discounted assets.

Chris Sacca has repeatedly warned meme-stock buyers and cryptocurrency fans against loading up on debt to supercharge their gains. Now, amateur traders who ignored his advice are begging him for help after the recent market slump, the billionaire founder of Lowercase Capital revealed in a recent tweet.

“It’s not fun to be right about it,” Sacca said, referring to a year-old tweet.

In that tweet, the former “Shark Tank” investor told retail traders that their gains during the pandemic were down to lucky timing, and suggested they pocket some of their profits.

“I have been long this market and taken my lumps with everyone else,” Sacca continued. “Just tried to help people not trade money they don’t own. Now my inbox is filling up with requests to bail strangers out of margin debt.”

While the broader stock market has only fallen slightly, retail traders who made levered bets on a handful of volatile growth stocks have been hit harder than investors with diversified portfolios, Sacca emphasized in a follow-up tweet.

The venture capitalist — an early backer of Uber, Twitter, and Instagram — also revealed that he “bought the dip,” and jokingly predicted that asset prices will continue tumbling to punish his bullishness.

“The market is going to continue to freefall,” he tweeted. “Why am I so certain of this? Because I did some buying today.”

Sacca has been underscoring the dangers of margin debt because it got him into trouble as a college student two decades ago. 

“I kited my student loans, YOLO’d them to $12m, and then, in an f’ing blink, I woke up $4m in debt,” he tweeted at the height of the GameStop short squeeze in January of this year.

He underlined the “hopelessness and depression” that comes with falling into debt, after noting a month earlier that he was “beyond worried” about people using apps to trade stocks and crypto on margin.

Since 2017, Sacca has shifted his focus from betting on technology companies to tackling issues such as climate change, voter suppression, and criminal-justice reform.

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Reddit traders are waxing nostalgic over the pre-short squeeze days of GameStop — from $13 a year ago to $200 today, many are holding on for more gains ahead

A high-street GameStop store
GameStop store.

  • Reddit day traders are reminiscing about GameStop shares in double digits a year ago. 
  • Since then, the army of retail investors have driven a more than 1,400% rally in the stock.
  • In a post, traders said the company had even further to rally. 

Reddit day traders are reminiscing about the time last year when GameStop stock was less than a tenth of what it’s worth now.

“One year ago today GME closed at $13.90. Today GME closed at $213.90,” one Redditor said of the GameStop ticker in the r/Superstonk thread. The post received more than 12,000 upvotes. 

That price represents a 1,438% rally in just one year. In that year, day traders mobilized on social media, such as Reddit’s Wall Street Bets, to buy shares of a nostalgic brick-and-mortar company they believe in and squeeze short sellers.

The trend became noticeable in January when shares started skyrocketing, eventually scoring prices beyond $300, despite Wall Street professionals advising prices at much lower levels. The mania led to a new class of assets called meme stocks and even a new Wall Street vocabulary that included words like “hodl,” “MOASS,” and “diamond hands.” 

The GameStop rally came to a screeching halt on Jan. 28 when retail trading platform Robinhood  halted buying of GameStop shares, along with other meme-stock companies like AMC and BlackBerry. The pause prompted outrage from retail traders, a Congressional hearing, and a share slump back to double digits.

All in all, it didn’t totally dampen the spirits of the retail crowd. Shares picked up steam again in March and have remained in triple digits since. Now, retail traders are aiming for an even higher valuation.

In the Tuesday post, some Redditors argued GameStop could eventually reach a $1 trillion valuation — a level vastly higher than the current $16 billion market capitalization and one reached only by a handful of companies, including Apple, Tesla, and Google parent Alphabet.

“A one trillion dollar market cap means $13k shares, which I think is entirely achievable within 3-5 years on fundamentals alone, without any squeeze action,” wrote one Redditor. 

Redditors have remained bullish on the company’s prospects, citing its new chairman in Chewy cofounder Ryan Cohen and the company’s moves into the metaverse with its own platform for non-fungible tokens. To build out its push into the future internet, the company has been on a hiring spree for metaverse and NFT specialists. 

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Practices that enable short-selling could become more transparent under a new SEC rule in response to GameStop mania

GameStop NYC
Ben Gilbert/Business Insider

  • The SEC proposed a new rule that would make short selling more transparent
  • The rule requires lenders to report transactions within 15 minutes to a governing body, like FINRA.
  • Short selling came under scrutiny earlier this year after retail traders drove the price of GameStop higher.

Regulators want to make the practices behind shorting stock more transparent under a new rule crafted in response to the GameStop short squeeze in January. 

On Thursday, the US Securities and Exchange Commission proposed a new regulation that would “provide transparency in the securities lending market,” a market that SEC Chair Gary Gensler said is currently opaque.

Short selling is a bet that a company’s shares will decline. To do it, an investor borrows shares from a counterparty willing to lend, and then sells them. If the stock falls, as hoped, the investor buys the shares back and returns the shares, pocketing the difference. 

The new rule requires firms lending securities to report the “material terms” of each loan to a governing body like the Financial Industry Regulatory Authority within 15 minutes of the transaction. That information would then be made public. 

“This proposal would bring securities lending out of the dark,” Gensler said. The public has 30 days to comment on the proposal. 

In January, short-selling came under scrutiny when hordes of retail traders loosely organized on Reddit to drive up the share price of meme stocks, GameStop included. The video-game retailer was shorted more than 100%, according to Reuters, meaning more shares were shorted than were available to trade. Retail traders noticed, and aimed to create what they called a “MOASS,” or the mother of all short squeezes, to cause short-sellers to take losses on their bets. 

In its statement, the SEC said its new rule is in line with the Dodd-Frank Act, legislation that was passed following the 2008 market crash. The SEC’s rule ensures “market participants, the public, and regulators have access to timely and comprehensive information about the market for securities lending.”

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A Federal court dismissed a class action lawsuit by retail investors claiming Citadel Securities and Robinhood conspired to halt GameStop trading

Wall Street Bets Reddit Retail Traders GameStop
In this photo illustration the WallStreetBets page seen in the background of a silhouette hand holding a mobile phone with Reddit logo.

  • A Miami district court dismissed the retail-investor lawsuit against Robinhood and Citadel Securities.
  • The lawsuit claimed the two firms conspired to halt meme-stock trading on January 28.
  • The district court judge said the conversations were “suspicious” but not enough to prove wrongdoing.

A federal court in Miami dismissed a lawsuit Wednesday brought by retail investors alleging Citadel Securities and Robinhood conspired to halt meme-stock trading in January. 

The court said the evidence of a conspiracy between market-maker Citadel Securities, trading app Robinhood, and others, to cause shares of meme stocks like GameStop to decline on January 28 was not sufficient. 

In September, the retail investors suing the companies submitted new evidence in their complaint that revealed conversations between Citadel Securities and Robinhood in the days leading up to the trading halt.

“High level employees of Citadel Securities and Robinhood had numerous communications with each other that indicate that Citadel applied pressure on Robinhood,” the lawsuit said.

But those conversations did not convince the District Court of Southern Florida.

“Admittedly, these emails may be somewhat suspicious given the participants and their timing,” Chief US District Judge Cecilia Altonaga wrote. “But are a few vague and ambiguous emails between two firms in an otherwise lawful, ongoing business relationship enough to ‘nudge [Plaintiffs’] claims across the line from conceivable to plausible[?]’ The Court thinks not.” 

In an emailed statement, a Citadel Securities spokesperson said, “We are pleased that the court agreed that there is no basis for the plaintiffs’ conspiracy theories and summarily dismissed the case.”

Several lawyers representing retail investors did not immediately respond to Insider’s request for comment. Retail investors have until December 20 to file a final amended complaint. 

When the conversations were revealed in September, the hashtag #CitadelScandal trended on Twitter amid renewed outrage from retail traders. Citadel Securities fired back on Twitter saying retail traders concocted an “absurd” story.

“Internet conspiracies and Twitter mobs try to ignore the facts, but the fact is that Citadel Securities was the pre-eminent market maker to the retail brokerage community in January 2021,” the company wrote.

In addition to lawsuits brought by aggrieved retail investors, the January trading halt prompted a report from the US Securities and Exchange Commission as well as Congressional hearings in which Robinhood Chief Executive Officer Vlad Tenev and Citadel Securities CEO Ken Griffin testified. Robinhood also made changes to its platform, adding round-the-clock phone support and nixing a popular confetti feature.

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Ryan Cohen’s Twitter is starting to look like Elon Musk’s, and GameStop’s retail traders are loving it

ryan cohen millennial activist investor 2x1
Ryan Cohen.

  • Ryan Cohen’s Twitter account is taking on a new persona that’s similar to Elon Musk’s. 
  • Cohen, GameStop chairman of the board, has 230,000 Twitter followers, while Musk has 63 million. 
  • The Chewy cofounder is working to transform GameStop into the Amazon of gaming. 

Ryan Cohen’s Twitter account is starting to look a lot like Elon Musk’s. 

The Chewy cofounder and now, more notably, the chairman of the board at GameStop has been posting tweets that are similar in tone to those from the Tesla chief. 

Take a look for yourself. On Monday, Cohen tweeted

Ryan Cohen tweet
Ryan Cohen tweet Monday Nov. 15

If you’re not sure what it means, try reading it backwards. It’s oddly reminiscent of a raunchy tweet from Musk in response to Sen. Ron Wyden, D-Oregon, on November 7. 

On the subreddit r/Superstonk, about 16,000 people liked a post about Cohen’s tweet. And on Twitter, well-known retail traders like Matt Kohrs commented with backwards text too. “Emas,” Kohrs said. 

Cohen joined Twitter a little over two years ago, and it started slow with infrequent posts mainly of articles about himself. It grew into a gif-heavy page, and in the last month, he’s sent out several tweets, like the one above, that retail traders lauded. 

Cohen’s emerging online persona is somewhat a mix of Musk’s and AMC CEO Adam Aron’s — both of whom have garnered the attention of the retail-trading crowd with crypto tweets and Twitter polls. Once, Musk even responded to one of Aron’s tweets.

Still, Cohen has just 230,000 followers, while Musk, the world’s richest man, has about 63 million. 

On Oct. 31, Cohen tweeted “MGGA,” to which many on Twitter guessed was a twist on former president Donald Trump’s slogan meaning “Make GameStop Great Again.”

A tweet from November 8 read, “Deciding between two options for my GME shares: HOLD or HODL…” “Hodl” refers to a well-known Reddit investing term that means to hold onto shares. A site called “GME DD,” which reports on GameStop for the retail crowd, guessed the tweet was poking fun at Musk, who posted a poll asking his followers whether he should sell 10% of his Tesla stake

GameStop did not immediately respond to Insider’s request for comment or clarification on Cohen’s tweets. 

Being the chairman at GameStop has put Cohen in the spotlight among the army of retail traders backing the company. One September post titled “4 things to know about Ryan Cohen” received 10,000 upvotes on the r/Superstonk thread. 

Cohen has said he wants to turn the retailer into the Amazon of gaming. Since then, the company has posted jobs relating to blockchain and the metaverse, and is planning on launching a platform for nonfungible tokens, or NFTs. Retail traders on Reddit have been hyping up the prospects.

GameStop stock, which was in single digits last year, has soared more than 1,000% this year with the support of an army of retail traders mobilized on Reddit investing threads like Wall Street Bets and Superstonk. Shares traded at $207.63 at 1:28 p.m. in New York. 

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A retail trader who quadrupled her AMC holdings to half a million dollars is trolling Citadel’s Ken Griffin with plane banners and truck ads

Ken Griffin
Ken Griffin. Heidi Gutman/CNBC/NBCU Photo Bank/NBCUniversal via Getty Images

  • 40-year-old Katherine Larsen isn’t backing down on trolling Citadel Securities and Ken Griffin.
  • She’s bought plane banners and mobile truck ads to “spread awareness,” Institutional Investor reported.
  • Larsen quadrupled her AMC investment to more than half a million dollars since January, II reported.

One retail trader isn’t letting up on her trolling campaign against Citadel Securities and its founder, Ken Griffin.

The trader, 40-year-old Katherine Larsen of Oceanside, California, has bought mobile truck ads, plane banners, and Times Square digital billboards in an effort to elevate views of retail traders who feel they were harmed when Robinhood halted trading of meme stocks like GameStop and AMC, according to a profile from Institutional Investor.

One ad read “Do you believe #Ken Griffin lied?” and another read “#Citadelisnotretail,” the report said. On Monday, she tweeted a photo of a plane banner reading “#stillherekenny wewantfairmarkets.org.”

The report said Larsen, a bartender at The Kraken bar in Cardiff, California, invested in movie theater chain AMC in January and has since quadrupled her investment to $520,000. On Twitter, she’s known as @katstryker111, and her background photo features an ape with green laser eyes – a familiar icon among the retail trader crowd.

Though her investment has been profitable, she’s questioned Wall Street practices, like payment-for-order-flow, the Institutional Investor profile said, quoting Larsen as saying she wouldn’t “back down” and wants to continue to “spread awareness.” In a Twitter message, Larsen confirmed with Insider the report according to the Institutional Investor.

Insider reported in September that a class-action lawsuit alleged market maker Citadel Securities conspired with Robinhood to drive down the price of meme stocks such as GameStop and AMC on January 28 when buying was halted on the trading app.

Citadel Securities has fired back at retail traders on Twitter saying they were spreading “internet conspiracies” and an “absurd story.” Ken Griffin last week said the theories were like a bad SNL joke. Citadel Securities declined to comment for the story.

A 45-page report from the US Securities and Exchange Commission debunked some of the theories about the episode in January. Among other findings, it said Citadel Securities and others weren’t grabbing up GameStop stock to hedge against call options they were writing, Axios reported.

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‘The Big Short’ investor Michael Burry sold most of his US stocks last quarter – but added 3 new holdings

Michael Burry big short
Michael Burry.

  • Michael Burry slashed his US stock portfolio in the third quarter.
  • “The Big Short” investor has been warning of a devastating market crash for months.
  • Burry’s Scion fund bought stakes in Lockheed Martin, Now, and Scynexis.

Michael Burry took a knife to his stock portfolio in the third quarter, slashing it from more than 20 holdings to only six as of September 30, a Securities and Exchange Commission filing revealed on Monday. The sales align with his long-held expectation that the stock market is in a bubble and barreling towards a historic crash.

Burry’s Scion Asset Management revealed new stakes in aerospace-and-defense giant Lockheed Martin, oil-drilling equipment specialist Now, and Scynexis, a biotech company. It also reduced its CoreCivic bet by 68% and its Geo Group position by 54%, meaning a small stake in CVS Health was the only position left intact.

Scion sold all of its other holdings, including the call options it held on Alphabet and Facebook stock, and the bearish put options it owned on Tesla stock and Cathie Wood’s flagship Ark Innovation ETF at the end of June. Scion’s portfolio was worth only $42 million at the end of September – a fraction of its almost $140 million value (excluding options) three months earlier.

Scion didn’t immediately respond to a request for comment from Insider.

Burry is best known for his billion-dollar bet against the US housing bubble in the mid-2000s, which was immortalized in the book and the movie “The Big Short.” The contrarian investor also laid the groundwork for the GameStop short-squeeze this year when he invested in the video-game retailer in 2019.

The fund manager has been warning of an epic bubble in asset prices, predicting a historic market crash, and ringing the inflation alarm for several months now. He has built a devoted following thanks to his dire prognostications and habit of disguising stock tickers in his tweets.

Most recently, he accused Tesla CEO Elon Musk of selling stock not to raise cash or to pay taxes, but to capitalize on his electric-vehicle company’s 12-fold gain in valuation since the start of last year.

Read more: The founder of a Michael Burry subreddit explains ‘The Big Short’ investor’s unique appeal – and reveals the stocks hidden in his tweets

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GameStop has risen 22% in 3 days as meme-stock fans cheer rumors of an ethereum-based coin powering its NFT efforts

gamestop
GameStop.

  • GameStop stock has risen 22% so far this week amid rumors about a partnership with Loopring.
  • Loopring’s token, which is based on ethereum layer 2 protocol, has soared more than 200%.
  • GameStop has been working on plans to launch an NFT platform to get into the digital space.

GameStop stock has gained 22% in three days of trading this week as Redditors cheer rumors that the company could be partnering with an ethereum-based crypto for its NFT project.

Thousands of Redditors upvoted posts from late last week that claimed loopring, which creates a layer 2 ethereum-based token, is behind GameStop’s upcoming nonfungible token efforts.

Meanwhile, Loopring’s token price has soared alongside the Reddit rumors as well as movement to ethereum’s cheaper layer 2 protocols, Coindesk reported. The price of the token has risen 246% in the past seven days to $1.39, according to CoinMarketCap data.

The rumors were stoked when GMEdd.com, a site run by retail traders who say they’re the “OG long investors in GameStop,” said it found code on Loopring’s Github that revealed links to GameStop and an NFT feature.

“Loopring’s public GitHub repository has leaked code confirming GameStop’s highly speculated partnership with the Ethereum Layer 2 scaling protocol,” the GMEdd story read.

The Reddit crowd caught wind of the rumors too. “Loopring leaked GameStop’s NFT last night,” wrote one Redditor who got 11,000 upvotes.

GameStop and Loopring did not immediately respond to Insider’s request for comment on the rumored partnership.

For now, GameStop hasn’t revealed much about its NFT project. In May, GameStop launched a website called GameStop NFT, in which it indicated it was looking to hire a team to build out a platform for the digital-asset space.

The month prior, Matthew Finestone, who was once the head of business at Loopring, left to become the head of blockchain at GameStop, GMEdd first pointed out, citing his LinkedIn profile. Finestone did not immediately respond to Insider’s request for comment.

Then last week, GameStop posted a slew of jobs related to NFTs and what’s known as Web3.

A spattering of mysterious tweets from heads of the companies also has coincided with the partnership rumors. Loopring founder and CEO Daniel Wang tweeted a Chinese poem, which seems to be a coming trend as Tesla’s Elon Musk recently did the same. The poem, some guessed, could mean Loopring has long been waiting to reveal GameStop’s NFT project, though Loopring didn’t provide any clarity on the cryptic tweet.

And Ryan Cohen, the new board chairman at GameStop who is aiming to turn the retailer into the Amazon of gaming, has had a couple cryptic tweets himself. In one, he tweeted MGGA, possibly translating to “Make GameStop Great Again,” a twist on Donald Trump’s well-known “MAGA” slogan. He also tweeted a photo of a child pushing against a sumo wrestler.

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