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THE MORNING LINE.
How Gamestop’s Nuttiness Will Change the Coming Bear Market.
The news media went all-in over the weekend trying to explain the significance of the Gamestop saga, but because few traders were asked about it, there was little in this torrent of analysis to enlighten. Most of the reporters, talking heads and pundits focused on the obvious, sensationalizing a story about how the little guys have drawn first blood and are about to stick it to giant hedge funds by targeting their short positions. This kind of claptrap makes for salacious reading, but there’s a much bigger story that has so far gone untouched. Before I explain, here’s some point-and-counterpoint to get you past the disingenuous swill being dished out in the blogosphere and by the mainstream media:
Popular Narrative : The Reddit/Robinhood mob (RRM) has declared war on hedge fund biggies, and so far the smart money has been getting its butt kicked. Reality : The damage so far is just a mosquito bite on the behind of hedge fund elephants like Steven A. Cohen, and the Reddit mob a five-year-old who has discovered where Daddy keep the matches.
PopularNarrative : “We’re going after Citadel next!” Reality : Nice try, kids, but this kind of hubris is going to boomerang on you. As a rallying cry, it makes good headline fodder, since the name вЂCitadel’ conjures up the financial establishment’s most impregnable fortress. In the end, though, you can bet on Citadel & Friends to change the game so that the edge you pishers currently enjoy evaporates quickly, assuming it hasn’t already.
Popular Narrative : “After Citadel, we’re going to squeeze shorts in silver.” Reality : We’re actually rooting for you on this one, since precious-metals markets are manipulated by unmitigated scumbags. And, yes, your merely having announced last week that silver is in your cross hairs seems to have provided a little added boost to silver quotes on Thursday and Friday. But before you take on the commodity markets, better read up on Nelson вЂBunky’ Hunt, a billionaire when that was real money, but also a trader smarter than all of you put together. He got crushed trying to corner silver even though he’d done everything right. Hunt would have succeeded if Comex had not raised margin requirements to such heights that only two players were left in the game: Hunt and Eastman Kodak. This killed speculative demand, and eventually Hunt himself.
Popular Narrative : The Reddit/Robbinhood mob (RRM) has been making money hand-over-fist. Reality : The number of big winners is probably far smaller than imagined by the blogosphere and news media, and the sums are smaller. Don’t assume that all of the greedy little guys got out at the top, or that they will. Some will predictably become such believers in their omnipotence that they may actually buy the top, as occurred at the end of Bitcoin’s first mania.
Popular Narrative : The little guys have outfoxed the smart money. Reality : For a nanosecond, maybe. But how smart are they, really? Probably not one of them in 500 understands that certain option strategies they love to use, such as covered-writing exploding stocks, can backfire lethally. In fact, out-of-the-money options they’ve sold can be exercised, and this can happen well before the options expire. The unavoidable result is a stock-settlement mismatch that can turn seemingly winning bets into unanticipated disasters overnight. We may be hearing more about this soon.
Popular Narrative : Regulators will soon put a stop to this nonsense. Reality : No, they won’t. For one, the kids haven’t actually broken any laws; targeting shorts is nothing new, and it is only the ease of doing it in the blogosphere that is causing regulators to gnash their teeth and tug at their hair. For two, the ability of institutions and other players to short stocks with little hindrance is essential to keeping the markets running smoothly.
The Power of Desperate Buying.
Now to my salient point, and it is this: A mere week’s worth of short-targeting shenanigans has permanently altered the game in ways that will have deep and lasting consequences. To be clear, let me say again that SAC, Citadel and the Comex do not fear the mob on social media; rather, they understand that the would-be giant-slayers eventually will self-destruct because of their ignorance, inflated self-importance and reckless boldness. However, the Smart Guys do recognize that the war is asymmetrical , since the little guys don’t need to put any skin in the game to trigger off a massively costly short squeeze. All the little guys need do is mention in a chat room that a particular stock has short interest greater than, say, 25% of the float, and the squeeze is on. This kind of war is so very asymmetrical that Big Money cannot possibly fight it.
What this implies is that over time, short interest will eventually diminish to the point of insignificance. The bottom line for the stock market is that bull markets will become less bullish, and bear markets more bearish. Why? Consider that short covering is the most powerful propellant of bull markets. That’s because it is the only source of demand sufficiently urgent to push stocks through otherwise impenetrable layers of supply and daunting prior peaks. I say вЂurgent’, but вЂdesperate’ is probably more accurate, since short covering is driven by margin calls from brokers frantically worried about a customer’s solvency. When we talk about buying the dips, the main buyers on market weakness, even moreso than bargain hunters, are short-covering bears.
How Bear Markets Work.
Short-covering is also the force behind the breathtaking rallies that occur in bear markets. From a psychological standpoint, the “purpose” of these rallies is to convince investors that stocks have turned the corner and are in a sustainable rebound. Short-squeeze spikes are a routine feature of bear markets, and they recur until an exhaustion spike going in the other direction destroys the last vestige of hopefulness.
But because short-interest numbers are about to decrease in the aggregate, it is predictable that, henceforth, short-covering will have less and less power in bull markets and bear markets. In the coming bear market (which my technical runes suggest may already have begun), we are likely to see downtrends that are more relentless than in the past, and sucker rallies that are not quite powerful or persuasive enough to keep hopeful losers in the game.
For now, though, as the big players attempt to shrink their short positions, their efforts will remain fully exposed and vulnerable to raids by the mob. The result will be wack-a-mole rallies in overly-shorted stocks for the foreseeable future. This will continue even as the stock market moves deeply into bear-market territory. However, the rallies will be isolated and add little boost to the broad averages. They may even act as a psychological depressant, a nagging reminder that global securities markets were never more than a giant casino game to begin with.
How Gamestop’s Nuttiness Will Change the Coming Bear Market.
The news media went all-in over the weekend trying to explain the significance of the Gamestop saga, but because few traders were asked about it, there was little in this torrent of analysis to enlighten. Most of the reporters, talking heads and pundits focused on the obvious, sensationalizing a story about how the little guys have drawn first blood and are about to stick it to giant hedge funds by targeting their short positions. This kind of claptrap makes for salacious reading, but there’s a much bigger story that has so far gone untouched. Before I explain, here’s some point-and-counterpoint to get you past the disingenuous swill being dished out in the blogosphere and by the mainstream media:
Popular Narrative : The Reddit/Robinhood mob (RRM) has declared war on hedge fund biggies, and so far the smart money has been getting its butt kicked. Reality : The damage so far is just a mosquito bite on the behind of hedge fund elephants like Steven A. Cohen, and the Reddit mob a five-year-old who has discovered where Daddy keep the matches.
PopularNarrative : “We’re going after Citadel next!” Reality : Nice try, kids, but this kind of hubris is going to boomerang on you. As a rallying cry, it makes good headline fodder, since the name вЂCitadel’ conjures up the financial establishment’s most impregnable fortress. In the end, though, you can bet on Citadel & Friends to change the game so that the edge you pishers currently enjoy evaporates quickly, assuming it hasn’t already.
Popular Narrative : “After Citadel, we’re going to squeeze shorts in silver.” Reality : We’re actually rooting for you on this one, since precious-metals markets are manipulated by unmitigated scumbags. And, yes, your merely having announced last week that silver is in your cross hairs seems to have provided a little added boost to silver quotes on Thursday and Friday. But before you take on the commodity markets, better read up on Nelson вЂBunky’ Hunt, a billionaire when that was real money, but also a trader smarter than all of you put together. He got crushed trying to corner silver even though he’d done everything right. Hunt would have succeeded if Comex had not raised margin requirements to such heights that only two players were left in the game: Hunt and Eastman Kodak. This killed speculative demand, and eventually Hunt himself.
Popular Narrative : The Reddit/Robbinhood mob (RRM) has been making money hand-over-fist. Reality : The number of big winners is probably far smaller than imagined by the blogosphere and news media, and the sums are smaller. Don’t assume that all of the greedy little guys got out at the top, or that they will. Some will predictably become such believers in their omnipotence that they may actually buy the top, as occurred at the end of Bitcoin’s first mania.
Popular Narrative : The little guys have outfoxed the smart money. Reality : For a nanosecond, maybe. But how smart are they, really? Probably not one of them in 500 understands that certain option strategies they love to use, such as covered-writing exploding stocks, can backfire lethally. In fact, out-of-the-money options they’ve sold can be exercised, and this can happen well before the options expire. The unavoidable result is a stock-settlement mismatch that can turn seemingly winning bets into unanticipated disasters overnight. We may be hearing more about this soon.
Popular Narrative : Regulators will soon put a stop to this nonsense. Reality : No, they won’t. For one, the kids haven’t actually broken any laws; targeting shorts is nothing new, and it is only the ease of doing it in the blogosphere that is causing regulators to gnash their teeth and tug at their hair. For two, the ability of institutions and other players to short stocks with little hindrance is essential to keeping the markets running smoothly.
The Power of Desperate Buying.
Now to my salient point, and it is this: A mere week’s worth of short-targeting shenanigans has permanently altered the game in ways that will have deep and lasting consequences. To be clear, let me say again that SAC, Citadel and the Comex do not fear the mob on social media; rather, they understand that the would-be giant-slayers eventually will self-destruct because of their ignorance, inflated self-importance and reckless boldness. However, the Smart Guys do recognize that the war is asymmetrical , since the little guys don’t need to put any skin in the game to trigger off a massively costly short squeeze. All the little guys need do is mention in a chat room that a particular stock has short interest greater than, say, 25% of the float, and the squeeze is on. This kind of war is so very asymmetrical that Big Money cannot possibly fight it.
What this implies is that over time, short interest will eventually diminish to the point of insignificance. The bottom line for the stock market is that bull markets will become less bullish, and bear markets more bearish. Why? Consider that short covering is the most powerful propellant of bull markets. That’s because it is the only source of demand sufficiently urgent to push stocks through otherwise impenetrable layers of supply and daunting prior peaks. I say вЂurgent’, but вЂdesperate’ is probably more accurate, since short covering is driven by margin calls from brokers frantically worried about a customer’s solvency. When we talk about buying the dips, the main buyers on market weakness, even moreso than bargain hunters, are short-covering bears.
How Bear Markets Work.
Short-covering is also the force behind the breathtaking rallies that occur in bear markets. From a psychological standpoint, the “purpose” of these rallies is to convince investors that stocks have turned the corner and are in a sustainable rebound. Short-squeeze spikes are a routine feature of bear markets, and they recur until an exhaustion spike going in the other direction destroys the last vestige of hopefulness.
But because short-interest numbers are about to decrease in the aggregate, it is predictable that, henceforth, short-covering will have less and less power in bull markets and bear markets. In the coming bear market (which my technical runes suggest may already have begun), we are likely to see downtrends that are more relentless than in the past, and sucker rallies that are not quite powerful or persuasive enough to keep hopeful losers in the game.
For now, though, as the big players attempt to shrink their short positions, their efforts will remain fully exposed and vulnerable to raids by the mob. The result will be wack-a-mole rallies in overly-shorted stocks for the foreseeable future. This will continue even as the stock market moves deeply into bear-market territory. However, the rallies will be isolated and add little boost to the broad averages. They may even act as a psychological depressant, a nagging reminder that global securities markets were never more than a giant casino game to begin with.
Rick Snider's Redskins Round by Round Report Card.
Read 'em and weep? Nope! You might disagree. Perhaps you agree. Rick Snider dusts off the ol' grading pen and goes to work on the first draft for Ron Rivera and Kyle Smith running the Washington Redskins.
OVERALL GRADE – B-
FIRST ROUND: A+
Ohio State edge rusher Chase Young is supposed to be the best pass rusher in a generation. Seems a little hyped, but still a big addition. Probably play two thirds of snaps given the line’s depth. If he can get eight sacks and make the difference in elevating a talented line, then the pick is worthwhile.
THIRD ROUND: B+
Look for Memphis standout Antonio Gibson (No. 66) to play more receiver than running back, but the hybrid player gives the Redskins options. Maybe he’s a modern Eric Metcalf. He’s a bang-bang player with great speed who suddenly moves the chains 15 yards. Might also return kicks, too. Certainly, out-of-the-box thinking that could pay off big.
FOURTH ROUND: B-
Liberty receiver Antonio Gandy-Golden can solve a Rubik's Cube, bowl 300, juggle, grade livestock and draw portraits. What – no piano?
As a receiver, Gandy-Golden has great hands and a 6-feet-4 body. After two 1,000-yard seasons, Gandy-Golden offers more promise and value as the second fourth-round pick at No. 142 than LSU offensive tackle Saahdiq Charles taken at No. 108. Gandy-Golden produced against a decent schedule of opponents so the stats are real.
Charles may get a chance at starting over Geron Christian, but no offseason camps may set the rookie back. Certainly, Christian has the opening edge. Charles might also be a right tackle reserve. Off-field troubles are never good, though. It’s a fair selection as a reserve.
FIFTH ROUND: D.
San Diego State center Keith Ismael (No. 156) is a little surprising. No tight end yet? Do the Redskins have a pending trade with the Bears for one of their 10 tight ends? Ismael is a better run than pass blocker and moving to the pros means facing bigger foes. This one’s a project. That it’s the first part of the Trent Williams trade compensation makes it underwhelming.
Michigan outside linebacker Khaleke Hudson (No. 162) has good speed, but needs to bulk up at 224 pounds and has a small frame. Frankly, this is a yawner pick.
SEVENTH ROUND: C-
Washington opened with Arkansas safety Kamren Curl (No. 216). Good banger, started 33 of 34 games with 175 tackles. Strictly for depth.
Washington’s final pick was N.C. State defensive end James Smith-Williams (No. 229). Team took another defensive lineman who surely is a practice-squad player at best given the roster?
What do you think Redskins fans? Sign up free, register and join us by voicing your opinion on our community pages and right below!
Rick Snider is an award-winning sports writer who has covered Washington sports since 1978. He first wrote about the Redskins in 1983 before becoming a beat writer in 1993. Snider currently writes for several national and international publications and is a Washington tour guide. You can buy Rick's book on Amazon right here "100 Things Redskins Fans Should Know & Do Before They Die! Follow Rick on Twitter at @Snide_Remarks.
Vikings, GM Rick Spielman agree to multiyear extension.
MINNEAPOLIS -- The Minnesota Vikings and general manager Rick Spielman have agreed to a multiyear contract extension, the team announced Monday.
Spielman's new deal is believed to run through the 2023 season, according to league sources, which would keep him in line with head coach Mike Zimmer, who recently received a three-year contract extension.
"I know every day we come to this building, and the only thing that we want to accomplish is to win a Super Bowl. There's no one that deserves that honor more than our ownership, this organization and especially our fans. I promise you that when we come in here every day, that is our ultimate goal. Very excited about the extension and look forward to the future," Spielman said.
Spielman, who has worked with Zimmer since the 2014 season, calls their shared vision "the same" going into 2020.
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"When Coach Zim came and we hired him as our head coach, we had a vision of how we wanted to build this team," Spielman said. "I know this year we have a lot of new faces that are coming into the organization, a lot of new players, a totally different challenge because the coaches haven't been able to work with these players until this time when we're technically kind of opening up training camp.
"But I think it's sticking to your principles, sticking to everything that you believe in on how you build a winning culture. He's talked about it numerous times, from the type of players that we want to bring in that are smart, very passionate, high-character guys off the field. But also I think it's not only the players, but there's gotta be that culture with the coaching staff, there's gotta be that culture with everybody under the football operations umbrella, and when you can bring all that together with the same goals, the same common vision, I think that's where you hopefully will make the breakthrough."
Like Zimmer, Spielman had one year remaining on his deal before receiving an extension.
"Rick has been outstanding in his role as Vikings general manager," Vikings co-owner and team president Mark Wilf said in a statement. "We are excited and honored to have him continue to lead our efforts to build a championship roster and first-class organization. With Rick's and Coach Zimmer's leadership in place, we are in a great position to continue to compete for a Super Bowl."
Spielman is entering his 15th season in Minnesota after joining the club as the vice president of player personnel in 2006 before moving into his role as general manager on Jan. 3, 2012. Under his leadership, Spielman has made more draft picks -- 93 -- than any other general manager over the past eight years.
The Vikings have made the postseason in four of Spielman's eight seasons as general manager and reached the NFC Championship Game during the 2017 season. Minnesota's .570 winning percentage (72-54-2) since 2012 ranks ninth in the NFL and is the fourth best in the NFC over that eight-season span.
"We appreciate Rick's work ethic, diligence and commitment to the Vikings," team co-owner and chairman Zygi Wilf said in the statement. "We continue to have the utmost confidence in him as we work to assemble championship-caliber teams to reach our ultimate goal of winning a world championship."
During the 2020 NFL draft, Spielman turned 12 picks into a seven-round NFL-record 15 selections with two additional picks gained for the 2021 NFL draft through trades. The Vikings' 2020 class is the largest since the NFL condensed its annual draft to seven rounds in 1994. It also marked Minnesota's first 15-member class since 1985, tying for the largest overall draft class since 1976, when the team added 17 players over 17 rounds.
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