Just a quick note on the markets tonight. Most of this morning ended up as short-covering. We hit the buy point I had targeted tonight at the Weekly Expected Move low around 3769 – but the market is still going down, at least as measured by the overnight futures.
Every correction begins with a catalyst. Perhaps GameStop is it. More is being revealed every day, but the leverage and risk involved in this and other stocks shorted is starting to have pangs of the mortgage crisis in 2007. Remember all of the Credit Default swaps? Well, there are more put options on GameStop than the company has outstanding stock to purchase and cover the shorts. Some of those options expire tomorrow.
It won’t be long before investors begin to focus on Gamma risk generally. This is the risk of options leverage across the entire market. The rigged, favored, and whining hedge funds already have the SEC ready to outlaw individual investors. It is an absolutely disgusting display of oligarchy, privilege and arrogance. It is the Wall Street version of the rigged game already engulfing Washington D.C.
Friends and family, this is not going to end well. So we will stay in cash for now, nibbling here and there as we did with calls on the Energy Sector ETF (XLF) today. But even those could be taken down further if the market destabilizes. Hedge funds stand to lose about $80 billion dollars here, and that may be the tip of the iceberg. Don’t forget, the first $4 trillion in Fed funds last March went to bail out four hedge funds.
I am thinking I will start another hedge fund. I like this “heads I win, tails you lose” investment strategy. These paltry stimulus checks and PPP are nothing compared to what I could get in a hedge fund bailout. What do you think? Tempting, right?
How are we going to survive all of these arrogant, pompous crooks?
A.F. Thornton