This month has been very interesting to say the least. The S&P-500 is about flat year-to-date at this writing before the open on 1/29, the last trading day of January. Crazy trading in GameStop (GME) and AMC has turned the tables on Wall Street Insiders who have been illegally shorting (betting against) more shares than these companies have outstanding. This practice, although illegal, has been allowed by US regulators for years, allowing the insiders to artificially push stock prices lower and forcing the individual investors to sell out at bargain prices. Then the insiders have closed their bets at large profits.
Well … not this time. This time, some individual investors on Reddit noticed this illegal situation and ganged up on the insiders by buying GME shares hand-over-fist. Guess what? So many individual traders hopped on the bandwagon when they saw this happening, that prices went up and up, overpowering the short sellers and causing them to close out their illegal positions at ruinous losses.
Do you think the regulators laughed at the comeuppance of the Wall Street cheaters? NO! Pressure was put on Robin Hood and other brokerages used by individual traders to DISALLOW buying the stocks that were hurting the big boys! Yes, the government regulators stepped in to save the Wall Street crooks! This story is still playing out. There was a huge uproar, the regulators are backing off, and the brokerages are allowing the individual traders to buy and sell GME again. Stay tuned. Meanwhile two hedge funds have gone belly-up. Ha!
Overall, I’m still very cautious on the market. we hold a large portion of the portfolios in cash, except for the aggressive investor accounts.
Be careful out there.