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Calming of the euphoria. Reality sets in. Fixing the world — especially covid and the economy — is hard.

This is calming of the euphoria. Suddenly, it’s become clear that getting all the wonderful stimulus and covid fix-up things done is going to be a little harder and the Republicans are not going to help. The Republicans in Congress have their hands full of their own B.S. , none of which has anything to do with getting you and I vaccinated and back to work. Sadly.

All our hot stocks did poorly this week. The “strategy” of buying them on the dip hasn’t panned out this week, as the market continued to drop. Fortunately, we’re still up on the year.

And fortunately, there are pockets of strength. Two vaccine stocks — VXRT and MRNA are doing well. But not JNJ.

Apple, which blew out its numbers earlier this week, continues to fall. Here’s the last 10 days. It hasn’t dropped to where it was 10 days ago. So, I’m happy for small mercies. I have a big position in Apple.

GameStop continues its ride

This is GameStop in the past ten days. Quite the ride.

The story remains simple: A bunch of hedge funds shorted the stock. A bunch of private investors bought the stock and options, and, bingo, a short squeeze. Value Line Research explained it all this morning:

Several stocks, most notably GameStop (GME) and Blackberry (BB), have experienced wild price swings over the past couple of weeks. This volatility is not based on the fundamentals of these issues or on the prospects of their underlying businesses. Instead, the price action stems from a battle between individual investors and hedge funds. Traditionally, such large financial institutions have had the money and influence to move the market, both up and down. Now, with the help of Twitter and social network Reddit, individual investors can collaborate and effectively pool their financial resources to do the same.

In regard to GameStop, Blackberry, and many others, there were and are serious concerns in regard to the strength of their underlying businesses. Not surprisingly, many hedge funds established short positions, betting that their stock prices would fall. These situations are commonplace and are part of our financial system. What is uncommon, is what came next. A Reddit community of about three million people banded together and started aggressively buying these equities and related options (to purchase the stocks at a later date at a set price); countless individuals spent hundreds or thousands of dollars each. As the stock prices went up, the hedge funds’ short positions became more and more unprofitable. This triggered a “short squeeze”, as the large financial institutions then bought the stocks to limit their losses, further aiding the price advances. This push and pull has now led to extreme volatility and dangerous investment conditions.

It is anyone’s guess how this will all play out. Of course, there will be winners and losers, and the stakes and risks are sky high. At Value Line, we have long recommended good-quality investments that come with risk commensurate with the underlying strengths and weaknesses of the businesses behind the stocks. We don’t encourage or endorse the frantic trading that is now engulfing the market.

The most fun piece on GameStop trading was from Matt Taibbi, who headlined his piece:

Suck It, Wall Street
In a blowout comedy for the ages, finance pirates take it up the clacker

He ends his wonderful piece:

This is where society will ultimately come down, of course, uniting to denounce $GME as financial Trumpism, even though it actually comes closer to being an updated and superior version of Occupy Wall Street. It’s likely not any evil manipulation scheme, but ordinary people acting — out of self-interest, but also out of sheer enthusiasm for one of the best reasons to do just about anything, because you can — on a few simple, powerful observations.

They’ve seen first that our markets are basically fake, set up to artificially accelerate the wealth divide, and not in their favor. Secondly they see that the stock market, like the ballot box, remains one of the only places where sheer numbers still matter more than capital or connections. And they’re piling on, and it’s delicious, not so much because they’re right, but because the people running for cover are so wrong, and still can’t admit it.

Buy the ticket, take the ride, nitwits. If you earned anything, it’s this.

You can read Taibbi’s super article here.

I own one share of GME.

Favorite recent New Yorker cartoons

Up here, the weather is gorgeous, and cold.

I went to tennis this morning. It was 1 degree Fahrenheit. That’s the coldest of our 10-month “quarantine.”

This is the view from my office. You can just see the Catskill Mountains in the distance.

This is sun pouring into our living room.

On the floor you can spy my gardening efforts. That’s $2.50 worth of basil I bought during the summer, which I harvest when I remember to buy mozzarella cheese. Heh, gardening works. Don’t knock it.

Sometimes I make phone calls, but my right ear doesn’t hold an Apple AirPod well. Hence this solution with $6 white electrical tape. Click here.

Bill Gates has been giving great interviews on climate and pandemics recently. Google them. Watch and read them. He’s smart.

See you Monday. Have a great weekend. — Harry Newton