The Dog Days of Summer – Part 1

by JDH on June 19, 2021

I realize that it is not technically summer, yet, so this will be the first of no doubt many posts where I describe the nothingness that is the market these days.

Nothing is happening.

Even Gamestop has grown boring, with not much action this week.

Sad.

Bitcoin is in a consolidation phase.

Gold is in a consolidation phase.

The market is I don’t know what.

So, since I don’t know what’s happening, I’ll say no more, and hopefully figure it out at some point.

Thanks, and see you next week.

Gamestop Craziness

by JDH on June 12, 2021

With crypto and gold stuck in a range, and with the DOW not having made a new high since the beginning of May, today’s discussion topic: is the action in Gamestop (GME) the sign of a top?

If the government stops printing money the markets will crash (stock market, housing market, lumber market, cryptos, etc.), but whether or not Gamestop is a harbinger of that action is another story entirely.

For those who have not followed the story, Gamestop is a collection of bricks and mortar retail gaming stores, where teenagers and young people can go and buy a video game.  At the start of the year GME was trading around $17, because everything is on-line, and no-one goes to a store to buy a physical video game.  The hedge funds knew this, so they have aggressively shorted the stock, on the assumption that they will get a big payout when the company inevitably goes bankrupt.

But that’s not how the story has unfolded.

The “apes” on Reddit (a term of endearment for young daytraders) decided to mount a short squeeze, and they drove the price up to $483 on January 28, 2021, a 2700% increase in a month.  Not bad.  By February 19 GME was back to $38, and it appeared that the shorts had won, and the squeeze was over.

Except it wasn’t.

By March 10 GME was back to $345, and it dipped around and hi $345 again on June 8.  It closed the week at $233, so volatility is the watch-word, but it has been fun to watch.

To state the obvious point: I do not consider GME to be an “investment”, and I am not betting the family farm on it.  By next Tuesday GME could easily be $38 again.  Or $500.  I don’t know.

It is however interesting to observe the growing public realization that the markets are rigged, and the Big Boyz can “naked short”, selling shares they don’t own to kill a company, and there are no repercussions.

I hope the GME boys win this battle, because naked shorting is not good, but we shall see.

And if you really want to play this, here’s how I would do it, if I had money I wanted to gamble:

Buy some shares on a down day (like Friday).  Wait two days until an up day, and then either sell your shares, or do a covered write on them.  The premiums are crazy.

I suspect that on Monday you will be able to sell a call option, expiry four days later on Friday, or an option $40 out of the money, for something like $30.  That’s crazy.  With those kind of premiums, you want to be a seller of options, not a buyer.

Unless the stock crashes and you get wiped out, in which case it was a stupid strategy.

Govern yourselves accordingly.  See you next week.

Is the Economy Worse Than it Appears?

June 5, 2021

Interesting question.  The optimists will tell you that the world is getting vaccinated, the economy is re-opening, the worst is over, and all is good.  On that basis, the stock market is a screaming “buy”.  The pessimists will explain that, as of today, 6.1% of residents of Ontario are fully vaccinated, schools will remain closed […]

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The Markets are Separated from Reality

May 29, 2021

I have nothing much to say this week.    Bitcoin is 41% lower than it was 19 days ago, but the North American stock markets are at or near record highs.  Why?  Is it because the economy has re-opened and everyone is back to work? No. In Toronto, Canada’s largest city, the streets are empty, […]

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The Bitcoin Crash

May 22, 2021

That was epic. On April 14 Bitcoin hit a new all-time high at just under $65,000 USD.  On April 25 it touched $47,000, for a drop of 28% in just under 12 days. Cool. Then on May 10 Bitcoin traded at just under $60,000, before collapsing 50% to just over $30,000 less than 10 days […]

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Mid Month Update

May 15, 2021

It is May 15, 2021, so here’s what’s happening: The world has not ended.  The stock market is holding in there. Gold After a double bottom in March and April at around $1,675, gold has bounced back to $1,838, but the one-year chart continues to show a clear downtrend, and with the RSI approaching 70 […]

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Hang in, or Bail?

May 8, 2021

A lot of green on the stock screens this week.  That’s good.  Everything is up.  Gold.  Stocks.  Crypto. But we all know “sell in May and go away”, so is it time to take profits, move to cash, and wait for a correction? Probably, but the correction could happen tomorrow or six months from now.  […]

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A Bounce Back Week for the Cryptos

May 1, 2021

I assume some of you are growing bored with my continued commentary on the cryptocurrency world, as compared to comments on stocks, or gold, or some other asset class, but here’s the thing: crypto is fast becoming the most important asset class. Really? Yes.  Not the largest, of course, but it currently has a market […]

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The Crytpo Crash

April 24, 2021

Last week I asked: Has Bitcoin Topped?  In the short term the answer, apparently, was yes.  After hitting almost $65,000 on April 14, Bitcoin has “corrected”, trading as low as $47,400 last night, for a 27% drop in 9 days. Is this the end of Bitcoin?  I doubt it.  30% correction is very common, and […]

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Has Gold Bottomed? Has Bitcoin Topped?

April 17, 2021

Good questions.  I have no idea, but allow me to engage in some unfounded, uninformed speculation, because that is of course what you pay me to do. Let’s start with gold.  Gold had a great run, topping out well over $2,000 an ounce in August 2020, before starting a long slide to well under $1,700 […]

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