Gamestop  stock market investing 2021

What is going on??? - Gamestop

  A relatively small public company called Gamestop, grabbed a lot of headline news this last week. It’s a very interesting situation and I want to provide an overview of what has happened and my brief thoughts. What happened? Gamestop (ticker symbol GME), who is generally viewed as a struggling retailer selling video game consoles and games, had their stock go from around $20/share in mid-January to over $300/share (hitting almost $400 at one point) at the end of the month. This amazing price jump is credited to an online forum on the website Reddit, called r/wallstreetbets. Many people, largely assumed to be a bunch of small retail investors (though institutional investors likely jumped in) collectively started buying GME thinking they could move the stock price higher, which they did. A major reason this stock was selected is because it had a lot of short positions on it. By buying this stock with many short positions, they knew those positions would have to be covered at some point, so it was also viewed as a way to stick it to Wall Street and hedge funds and beat them at their own game. What does it mean to short a stock?To short a stock means you are betting the price will go down. Essentially it works by borrowing the stock and selling it, with the assumption you can buy it back in the future at a lower price and return the borrowed shares. A simplified example would be if you borrow stock and sell it at $20, then buy it back down the road at $10 and return the borrowed shares and pocket the price difference. Obviously, this is a risky strategy because at some point you have to return the borrowed shares, so if the price goes up you can lose when you are forced to return the stock, called a short squeeze. Hedge funds are known for using these types of strategies, and several were known to have some large short positions in GME. For instance, Citron Research said they shorted the stock at $40 and covered that position by buying it back at $90 for more than a 100% loss. It is said that about $20B has been lost from short positions in GME.  This, on a company that was valued in total at just over $1B in mid-January, but recently over $20B. What is the impact?For most people, essentially nothing. GME was a small company, not widely owned or popular. For those who jumped in early enough they may have seemingly won the lottery, for others, losses are very likely. The bigger issue to me is that this has grabbed the attention of all major brokerage firms and the Securities and Exchange Commission. The SEC is responsible for protecting investors and ensuring markets are fair and honest. There is almost no doubt they will be investigating this situation (and other similar ones that have popped up, such as with AMC stock). This situation seems to have brought to light a new challenge with regulating consumers in this age of rapid information and trading tools at our fingertips. Many brokerage firms, including Charles Schwab, TD Ameritrade, Robinhood (the trading app that many of these GME buyers are often said to use), and others took matters into their own hands, limiting certain types of trades in these stocks. Will anyone get in trouble or be held accountable for what has happened? I don’t know, but I do believe we are likely to see further oversite and regulation at some point. What are my thoughts?I believe GME is a house of cards, some will profit handsomely but many more will end up losing money. This open letter on MarketWatch is a wise warning. I do not believe this presents a systemic issue to the overall markets at this point. This manipulation of a stock was able to be done on a small company, again, worth just over $1B in mid-January, compared to a US market worth over $50T. The situation has been very interesting to watch and seems to have revealed a chink in the armor. Overall, I believe markets remain generally efficient, though never perfectly efficient. This was brought on by human behavior and is gambling, not rational investing (there is no way you can justify the current value of GME from a fundamental standpoint). Markets, or certain areas of markets, can function irrationally at times (look at the internet bubble in 2000-01), but the long-term trend is much more rational.  Advisory services offered through Arbor Point Advisors. Securities offered through Securities America Inc., Member FINRA/SIPC. Arbor Point and Securities America are separate companies. CA Insurance #0E88557

Stocks, Bonds, Investing

Q4 and 2020 Market Review

In Q4 the stock market continued its strong recovery and the positive momentum carried stocks into record territory. US stocks were up 14.68%, international stocks up 15.85% and emerging markets up 19.7%. Bonds gains also continued with the US bond market up 0.67% and global bonds up 0.94%. Though international stocks and global bonds outperformed domestic markets in the quarter, they significantly lagged the US market as you’ll see in the yearly summary below. 2020 was a roller coaster for the stock market (and just about everything else) with a drop of over 30% in 30 days in February-March due to Covid-19. However, by August the US market had recovered to previous levels and the positive momentum carried through the remainder of the year. Overall, the US stock market was up 20.89%, international markets were up 7.59% and emerging markets were up 18.31%. The US bond market also had a very strong year up 7.51% with global bonds up 3.94%. For a detailed market overview covering Q4 and all of 2020, click here. Advisory services offered through Arbor Point Advisors. Securities offered through Securities America Inc., Member FINRA/SIPC. Arbor Point and Securities America are separate companies. CA Insurance #0E88557

Investing 2020 Interest Rates Stock Market

crazy 2020!!!

I would guess the word “crazy” is the most used word of 2020, and I can’t think of one that sums it up better. Nobody could have guessed what was in store for the year, we have all experienced challenges, and yet we’ve persevered. I thought I would share a few industry related thoughts and takeaways from this crazy year! The Market – It was a reminder of what can move markets. When the pandemic started to spread rapidly in New York, kids were sent home from school, church was closed and life changed in many ways overnight, and the market fell over 30% in record time. As more information was discovered and the Federal Reserve and Congress made it clear they were willing to step-in in a large way, markets started to foresee an eventual economic recovery and rebounded sharply, ending the year (to this point at least) well in positive territory. The market moves were way ahead of changes in actual economic data and it was a reminder that markets are both forward looking and influenced by emotion. The most consistent and reliable investment strategy is to make sure your investments are properly allocated and to stay invested, strategically rebalancing when the opportunity arises. Businesses – This is a tale of two sides. There are many businesses, both public and private, that are doing very well and have even benefited from the pandemic (think Amazon, Zoom and the local Postal Annex I recently visited). In fact, many more companies are prospering than hurting. Of course, for those on the opposite side, it has been very painful. Any business related to hospitality and entertainment such as restaurants, hotels and airlines are having a tough time to say the least, and many have gone under. I truly feel for those who work in these industries. I encourage individuals who know people suffering due to circumstances out of their control other than the fact that they happen to work in a hard-hit industry, to be sympathetic and supportive where you see the opportunity to be. Interest Rates – At the end of last year Barron’s published the forecasts of 10 Wall Street strategists on where the 10-year treasury yield would be at the end of 2020. The range was 1.5% to 2.2%. Currently, the 10-treasury yield is under 1%. This low interest rate environment makes it difficult to earn meaningful interest on conservative investments, but the flipside is money has become even cheaper for borrowers. If you have a mortgage and haven’t looked into refinancing it, I suggest you consider it, but be sure to do something constructive with the savings, don’t just reset your loan! These low rates have also helped fuel a strong real estate market. The topics above don’t even scratch the surface of how life has changed in this unprecedented (maybe this is the most used word of the year?) year. Obviously there has been pain from loss of life, challenges of distance learning, a polarizing political environment and many other difficulties. There have also been positives such as more time together with family, less time commuting, and a chance to evaluate priorities and get some home projects completed. In this holiday season, I encourage you to take stock of the blessings of 2020, and learn from the challenges, as I am sure we’ve all experienced both. I am so grateful for my family, friends, clients and my faith, as much in this year as any. Merry Christmas and may you experience God’s blessings in 2021.   Advisory services offered through Arbor Point Advisors. Securities offered through Securities America Inc., Member FINRA/SIPC. Arbor Point and Securities America are separate companies. CA Insurance #0E88557

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Retirement Planner in San Diego

 

Advisory services offered through Arbor Point Advisors. Securities offered through Securities America, Inc., Member FINRA/SIPC. Arbor Point Advisors and Securities America are separate companies. This site is published for residents of the United States and is for informational purposes only and does not constitute an offer to sell or solicitation of an offer to buy any security or product that may be referenced herein. Persons mentioned on this website may only offer services and transact business and/or respond to inquiries in states or jurisdictions in which they have been properly registered or are exempt from registration. Not all products and services referenced on this site are available in every state, jurisdiction or from every person listed. CA Insurance #0E88557

Advisory services offered through Arbor Point Advisors. Securities offered through Securities America, Inc., Member FINRA/SIPC. Arbor Point Advisors and Securities America are separate companies. This site is published for residents of the United States and is for informational purposes only and does not constitute an offer to sell or solicitation of an offer to buy any security or product that may be referenced herein. Persons mentioned on this website may only offer services and transact business and/or respond to inquiries in states or jurisdictions in which they have been properly registered or are exempt from registration. Not all products and services referenced on this site are available in every state, jurisdiction or from every person listed. CA Insurance #0E88557​

Rancho Bernardo Financial Planner