Category: Risk Management

GameStop insurgency is just the latest rebellion against ‘the Big Guys’

Mary Pat Campbell

Link: https://nypost.com/2021/01/28/gamestop-insurgency-just-latest-rebellion-against-the-big-guys/

Excerpt:

Writing for The Post this week, Charles Gasparino explained why the little guys got together to buy GameStop: “Mostly, they’re out to hurt the big guys.”

The Big Guys’ problem is that nobody likes them much. From Silicon Valley to Wall Street, they’re deeply unpopular with ordinary Americans, on both the left and the right, resentment they’ve stoked with selfishness, arrogance and condescension. Their solution to this unpopularity has been to use their control over online platforms, and their influence over the government, to silence their critics.

But they can’t stop the signal. No sooner did the tech giants collude to shut down Twitter alternative Parler than a new revolt sprang up somewhere else entirely among stock traders on Reddit. What will it be next? Truck drivers refusing to deliver food to Silicon Valley? Plumbers boycotting “woke” executives? It’ll probably be something cleverer and less foreseeable than that, but it’ll be something. The more the techno-elite tightens its grip, the more Americans will slip through its fingers.

Author(s): Glenn H. Reynolds

Publication Date: 28 January 2021

Publication Site: NY Post

Building robust and ethical vaccination verification systems

Mary Pat Campbell
Building robust and ethical vaccination verification systems

Excerpt:

The rapid development of an effective COVID-19 vaccine provides hope that the pandemic might be brought to an end, but as societies roll out vaccines and begin to open up, policymakers face difficult questions about how to best verify individuals’ vaccine records. Building vaccine record verification (VRV) systems that are robust and ethical will be vital to reopening businesses, educational institutions, and travel. Historically, such systems have been the domain of governments and have relied on paper records, but, now, a variety of non-profit groups, corporations, and academic researchers are developing digital verification systems. These digital vaccine passports include the CommonPass app developed by the World Economic Forum to verify COVID-19 test results and vaccine status, as well as similar systems several major tech companies are actively exploring.

VRV systems present both opportunities and risks in tackling the COVID-19 pandemic. They offer hope of more accurate verification of vaccine status, but they also run the risk of both exacerbating existing health and economic inequalities and introducing significant security and privacy vulnerabilities. To mitigate those risks, we propose a series of principles that ought to guide the deployment of VRV systems by public health authorities, policymakers, health care providers, and software developers. In particular, we argue that VRV systems ought to align with vaccine prioritization decisions; uphold fairness and equity; and be built on trustworthy technology.

Author(s): Baobao Zhang, Laurin Weissinger, Johannes Himmelreich, Nina McMurry, Tiffany Li, Naomi Schinerman, and Sarah Kreps

Publication Date: 26 January 2021

Publication Site: Brookings

Credit Suisse Was Alerted to Private Banker’s Misconduct Years Before Criminal Charges

Mary Pat Campbell

Link: https://www.wsj.com/articles/credit-suisse-was-alerted-to-private-bankers-misconduct-years-before-criminal-charges-11612462705

Excerpt:

Credit Suisse Group AG overlooked red flags for years while a rogue private banker stole from billionaire clients, according to a report by a law firm for Switzerland’s financial regulator.

The private banker, Patrice Lescaudron, was sentenced to five years in prison in 2018 for fraud and forgery. He admitted cutting and pasting client signatures to divert money and make stock bets without their knowledge, causing more than $150 million in losses, according to the Geneva criminal court.

The regulator, Finma, publicly censured Credit Suisse in 2018 for inadequately supervising and disciplining Mr. Lescaudron as a top earner, and said he had repeatedly broken internal rules, but it revealed little else about the bank’s actions in the matter. Credit Suisse said it discovered Mr. Lescaudron’s fraud in September 2015 when a stock he had bought for clients crashed.

Author: Margot Patrick

Publication Date: 5 February 2021

Publication Site: Wall Street Journal

Inside the Reddit army that’s crushing Wall Street

Mary Pat Campbell

Link: https://edition.cnn.com/2021/01/29/investing/wallstreetbets-reddit-culture/index.html

Excerpt:

This past week has been a banner one for Reddit’s island of misfit investors.

WallStreetBets exploded into the mainstream, moving from the front page of Reddit to the front page of the New York Times and nearly every other major news site. The subreddit’s short-squeeze of GameStop helped shoot up the price of the video game retailer’s stock a mind-boggling 1,700% from the beginning of January to Wednesday (before it fell again Thursday), captivating the minds and wallets of investors — both casual and institutional — and financial regulators.

But while millions are now discovering WallStreetBets for the first time, it has been building momentum throughout the pandemic. One can trace its epic rise to a perfect storm of favorable conditions: the exponential growth of the app Robinhood and its no-fee options trading, the extreme volatility Covid-19 brought to the markets, the stimulus checks mailed to millions of Americans, the lack of televised sports for much of the year, and the unwanted free time stuck at home the pandemic has forced on many people.

Author: Jon Sarlin

Publication Date: 30 January 2021

Publication Site: CNN

GameStop’s Reddit-fueled rally, explained

Mary Pat Campbell
GameStop’s Reddit-fueled rally, explained

Excerpt:

Bloomberg has a fantastic rundown:

  1. $GME was first pitched as an investment on r/WallStreetBets about 2 years ago, but the current craze built up over the past 12 months.
  2. Members on the subreddit r/WallStreetBets believed that GameStop, with 5k+ brick ‘n’ mortar locations, could turn around its fortunes by going digital.
  3. On Aug. 31, 2020, Ryan Cohen — the billionaire founder of pet company Chewy — bought up a big position in $GME (he now owns 10%+ of it) with plans to modernize the company.
  4. In the months since, a number of prominent hedge funds (Citron, Melvin Capital) revealed they were betting against (AKA short selling) $GME.
  5. Typically in short selling, you: 1) borrow a stock; 2) sell it to a buyer; and 3) if the price of the stock falls, you can buy it for a cheaper price you sold it at and return the stock to the person who lent it to you.
  6. One risk of short selling is called a “short squeeze.” Since you have to eventually return the stock you borrowed, problems can arise if there is a limited supply of the stock.
  7. In a “short squeeze,” the underlying stock will get bid up as short sellers try to get their hands on stock that they have to return.
  8. Options trading — the right, but not obligation, to buy a stock at a certain price — is also driving $GME up as institutions that sell these options are buying $GME stock to hedge their position.
  9. $GME stock is on an upward tear as these market mechanics play out and r/WallStreetBets traders coordinate their efforts.

Author: Trung T. Phan

Publication Date: 26 January 2021

Publication Site: The Hustle

Hedge fund Melvin sustains 53% loss after Reddit onslaught

Mary Pat Campbell

Link: https://arstechnica.com/gadgets/2021/01/hedge-fund-melvin-sustains-53-loss-after-reddit-onslaught/

Excerpt:

Melvin Capital, the hedge fund that was wrongfooted by retail traders who drove up shares in GameStop and other companies it had bet against, lost 53 percent in January, according to people familiar with the firm’s results.

The New York-based hedge fund sustained a $4.5 billion fall in its assets from the end of last year to $8 billion, even after a $2.75 billion cash injection from Steve Cohen’s Point72 Asset Management and Ken Griffin’s Citadel.

Authors: ORTENCA ALIAJ AND ERIC PLATT

Publication Date: 31 January 2021

Publication Site: Ars Technica

How GameStop exposed the market

Mary Pat Campbell

Link: https://www.axios.com/stock-market-gamestop-reddit-exposed-d7eb06e2-f6c7-4aa8-99d7-24a51df27fa9.html

Excerpt:

Despite looking like a run-of-the-mill short squeeze, what’s happening in GameStop is anything but that, Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, tells Axios. Short sellers overall are not being squeezed out of the trade, despite having lost more than $6 billion since Jan. 1.

“I’ve talked to several brokers, they’ve got a line of guys looking to short the stock if there’s any stock available to borrow,” even though shorting GameStop now costs a fee of 150%.

“The value shorts are getting squeezed out and being replaced by momentum shorts looking to ride the stock price down the back end of the roller coaster.”

Author: Dion Rabouin

Publication Date: 28 January 2021

Publication Site: Axios

There is almost no evidence that vaccinated individuals can transmit the virus to others

Mary Pat Campbell

Link: https://polimath.substack.com/p/in-which-i-finally-lose-my-mind

Excerpt:

Where does this idea that a vaccinated person could still be carrying COVID come from? Whenever you dig into the details of this concept, it comes from the fact that a rigorous study of asymptomatic COVID transmission among vaccinated participants was not a part of the Phase 3 study. In other words, we cannot *prove* that COVID *doesn’t* asymptomatically tag along for the ride in a vaccinated person.

When it comes to transmitting COVID to another person, a mask is only helpful for airborne transmission. That means the virus would have to be coming from your upper respiratory tract for a mask to be effective at stopping it. But if there is enough COVID virus in your upper respiratory tract for you to be transmitting it, then there is enough COVID virus for a testing swab to detect. In essence, if you had enough virus in your exhalations to infect another person, you would be testing positive for COVID… which is exactly the observed measurement that the vaccine prevents.

Author: PoliMath

Publication Date: 22 January 2021

Publication Site: Marginally Compelling

Joe Biden’s Covid-19 Vaccine Plan: How He Intends to Speed Up Distribution

Mary Pat Campbell

Link: https://www.wsj.com/articles/joe-bidens-covid-19-vaccine-plan-how-he-intends-to-speed-up-distribution-11610794800?st=b86yaopaxch9dgx&twopenpaywall

Excerpt:

President will add community vaccination sites, deploy mobile units and enlist pharmacies to achieve his pledge that 100 million doses will be administered in U.S. during his first 100 days in office

President Joe Biden has promised a more forceful U.S. government response to the coronavirus pandemic, and on his second day in office released a national strategy and signed 10 executive orders and other directives as part of the plan.

Authors: Betsy McKay and Sabrina Siddiqui

Publication Date: 21 January 2021

Publication Site: WSJ