Will Kim Hyun-seok’s Wall Street Now Eun be the second game stop?

Was the Wall Street Betz (WSB) ants flocking to the game stop flocking to silver?

On the 1st (local time), the New York stock market rebounded sharply. The Dow is up 0.76% and the S&P 500 is up 1.61%. The NASDAQ surged 2.55%. Almost everything has been recovered from over 3% last week.

Similar to last week, as GameStop shares fell, the entire market was in an atmosphere of stability. Some have been keen on the movement of the US Central Bank (Fed) due to the game stop, but Minneapolitan Federal Bank governor Neil Cassikari said, “Because of speculation on individual stocks, there is no idea to change their views on monetary policy. “No,” reassured investors. In addition, the US Congressional Budget Office (CBO) predicts that by mid-2021, US gross domestic product (GDP) could reach its pre-pandemic peak. The news that U.S. President Joe Biden will meet and discuss 10 Republican lawmakers who proposed stimulus measures worth $618 billion (an additional $1,000 per person) at 5:18 pm, and the expectation that the stimulus plan will be agreed bipartisanly at around $1 trillion. It was struck.

Gamestop stocks climbed up to 18% in the free market to $384.89, but when the regular market opened, they started at -10% and gradually increased the decline. In the end, it was pushed 30.8% to close at $225.

There are several causes.

① Significant reduction in the remaining short selling

Market intelligence company S3 announced that the remaining short selling of GameStop stocks decreased to 2.71 million shares or 88.2 billion dollars. This is 53% of the stock in circulation. Last week, the maximum of about 57 million shares and 139% of the circulating stocks decreased by 35.2 million. As such, it is analyzed that hedge funds have diligently organized short selling positions’with tears’. As a result, interest on borrowing stocks for short selling has also dropped to 10% per year.

Amazon (4.26%) Microsoft (3.32%) Apple ( 1.65%) and other large tech stocks rebounded significantly on this day. That is why the NASDAQ gains reached 2.55%.

② Gamma quiz is also greatly resolved

In the meantime, it is analyzed that the’gamma squeeze’ by the purchase of call options has also contributed significantly to the surge in GameStop stocks. Option market market makers (large financial companies) who sold out-of-the-money call options in large numbers bought stocks by’crying and eating mustard’ when the possibility of an option being executed due to a surge in stock prices increased. Of these call options, weekly stock options expired last Friday (January 29). Weekly options trade every Thursday and last 8 days until next Friday In other words, it seems that the amount of gamma squeeze has been significantly resolved.

③ Robin Hood still limits buying

Robin Hood’s trading restrictions continued. At the beginning of the market, the allowable number of purchases increased from 1 week to 4 weeks, but expanded to 20 weeks in the afternoon. Robin Hood raised an additional $2.4 billion ($3.4 billion in total, including $1 billion last week) on that day and increased the buy-out allowance. However, it still did not allow any additional purchases from investors who already have more than 20 shares of GameStop. The continued control of individual purchases appears to have contributed to the share price decline.

④ Are there any institutional supplies such as Black Rock?

Gamestop has a large number of institutional investors. Black Rock shares 8.6 million shares (12.3%), Vanguard shares 5.28 million shares (7.58%), and Susquehanna shares 4.44 million shares (6.37%). Most are estimated to be the amount of stock held through small cap-centered listed index funds (ETF). It is also heard that among ETFs, active ETFs or non-ETFs are entering the market.

⑤ Reddit investors rushed to silver.

On this day, March’s silver futures rose to $30.35 during the intraday, soaring to the highest level since February 2013. The last-minute rise slightly decreased to $2.50 (9.3%) to close to $29.418 per ounce, but this is the largest increase since July 13, 2011.

Silver and silver futures, spots, ETFs, and shares of silver mining companies all increased. ‘IShares Silver Trust’ (SLK), a leading silver-related listed index fund (ETF), rose to 11% during the intraday and then closed 7.5%. This is followed by a 6.7% jump in the two days last week. Shares of some silver miners soared more than 30%.

This is analyzed due to the mass of ants from WSB who have led the’Game Stop Incident’. Since last week, hundreds of articles have been posted in the discussion room saying, “Let’s induce a’short squeeze’ by buying silver after the game stop.”

They claim, “Historically, gold and silver prices are around 1 to 15, but it has risen to 1 to 64 due to short selling by large banks,” and argues that “buying silver can trigger a’short squeeze’.” “Silver is one of the most manipulated markets on the planet,” said one ant. “Silver price reflecting inflation should be $1,000 per ounce, not $25.”

After these articles were posted, they were posted for three consecutive days from last Thursday to this day. Also, over the weekend, purchase orders were poured out on precious metal distribution sites, leading to the out-of-stock situation.

Will silver prices soar like gamestop stocks? Wall Street is skeptical of the possibility. There are five reasons.

① The market size is much larger

Gamestop’s share price was $20 billion when it peaked this time. However, the silver market is much larger, at $1.5 trillion.

500 million ounces of silver traded per day in London, the world’s largest silver spot market. Given the annual output of 1 billion ounces, the market is huge. Trying to raise the price of silver to $100 to $1000 is “like trying to empty the sea water,” said one trader.

② Products and markets are diverse

Silver is not only spot, but there are various investment targets such as futures, ETFs, and silver mining companies. It is different from individual stock markets.

③ There are more long positions than shorts in the futures market

There were many articles on the WSB saying that there are’short positions’ for silver. However, according to data from the US Commodity Futures Trading Commission (CFTC), silver has been in a more long position (buying in anticipation of a price increase) since mid-2019. The possibility of’short squeeze’ like a game stop is less.

④ Regulation can be imposed at any time

CFTC can reduce volatility at any time through regulations, such as raising margins if the silver market fluctuates. Brother Hunt, who had pushed the price of silver from $3 per ounce to $10 per ounce in the late 1970s, bought silver through gifts. However, silver prices collapsed when the CFTC limited individual silver futures ownership to 3 million ounces. Silver prices did not recover $10 for more than 20 years until the mid-2000s.

⑤ Separation of WSB individuals

Reddit’s ants don’t stick together in one direction. In the WSB, the claim to buy silver was wrong, and there are many posts asking to refrain from buying.

In particular, the world’s largest silver ETF, SLK, is invested by Citadel, a hedge fund that ants hate, of 180 million dollars. It is argued that “increasing the price of silver only makes the citadel good.” Some have argued that “a hedge fund’s strategy to distract ants’ interest in GameStop stocks is to encourage silver purchases.” Because of these factors, the silver price surged by more than 10% at the beginning of the market, but the increase decreased with time.

What will be the overall market performance of the New York Stock Market in the future due to the GameStop crisis?

UBS said, “Market interest will return to corporate performance, economic stimulus measures, and vaccination,” and said, “We expect the stock market to continue rising in the medium to short term.” “If investors take advantage of this volatility, we expect it to be a good opportunity in the short-term.” Set a target period within 12 months and buy when there is a 5% or 10% drop.

Chris Haige, chief investment officer (CIO) of Merrill, said the market growth may be limited for the time being, as the market is noisy due to’short squeeze’, etc., but the market is normalizing and getting better than expected due to vaccine supply. Considering the company’s performance, we predicted that the bull market will continue.

Morgan Stanley is a little different. CIO Mike Wilson predicts that the bull market will continue in the medium to long term, but the correction will continue for the time being. He predicted that “the growth of the monetary volume such as M1 and M2 has reached its peak, and hedge funds will continue to degrow.” He said, “The adjustment will not end until the leverage of both individual and institutional investors is reduced to some extent.”

Reporter Kim Hyun-seok [email protected]