- Oops!Something went wrong.Please try again later.
For this options trade, we're going to take a look at a bull put spread in Docusign. This strategy allows investors to take advantage of an ever-rising stock price with just enough volatility.
For this options trade, we're going to take a look at a bull put spread in Docusign. This strategy allows investors to take advantage of an ever-rising stock price with just enough volatility.
Wall Street ended sharply higher after a volatile session on Friday, with the Nasdaq rebounding at the end of a week that saw it extend losses to about 10% from its previous record high. All three main indexes bounced back from losses earlier in the day, with investors in recent sessions spooked by rising interest rates that offset optimism about an economic rebound. Microsoft rallied 2.15%, boosting the S&P 500 more than any other stock, with gains in Alphabet, Apple and Oracle also lifting the index.
(Bloomberg) -- A hedge fund that was one of GameStop Corp.’s top shareholders gained about 60% in the first two months of the year after selling its stake during the retailer’s Reddit-fueled surge.Senvest Management LLC’s Senvest Master Fund LP returned 15.3% in February, according to a preliminary estimate published by Montreal-based Senvest Capital Inc., avoiding a big loss on GameStop, which fell 69% during the month.New York-based Senvest Management held just over 5 million shares of GameStop, making it the fourth largest holder, according to Bloomberg data and a February 13G filing. The firm told the Wall Street Journal in early February that it had exited the position in late January. The fund gained 38.5% that month.Senvest Capital, which seeded fund manager Senvest Management and shares in the revenue from it, was used by some investors as another way to play the GameStop phenomenon. Senvest Capital’s Toronto-listed stock has risen over 76% this year to about C$307, trading near a record high.Richard Mashaal and his father Victor Mashaal collectively own about 55% of Senvest Capital, according to the latest filings.Read more: GameStop Frenzy Delivers $123 Million Windfall to Canada DuoThe company’s New York-based money management unit was founded in 1997 and manages more than $3 billion in assets as of March 1, with a strategy of “contrarian, value-based” investing, according to its website. Steve Bruce, an outside spokesman for Senvest, declined to comment.Senvest has stakes in Tower Semiconductor Ltd. and DSP Group Inc., according to Bloomberg data. Meanwhile, the fund took a 1.4% position in Flagstar Bancorp Inc. during the fourth quarter, according to last month’s 13F filing.GameStop closed as high as $347.51 in late January as frenetic buying created a short squeeze, then plunged to below $41 on Feb. 18. A new wave of Reddit users has pushed the shares back up to their highest level since early February, closing at $132.35 on Thursday.Read More: Melvin Capital Dusts Off From GameStop Fiasco With 22% Gain(Adds information on revenue-sharing from Senvest entities in fourth paragraph and updated AUM number for Senvest Management in sixth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
A wave of electric vehicle related companies are flooding the public markets this year. This follows a slew of companies which went public last year.
(Bloomberg) -- Bitcoin rebounded from earlier losses amid a broader recovery in risk assets after a report showed the U.S. added more jobs than forecast last month. MicroStrategy Inc. bought more of the world’s largest cryptocurrency.The digital asset shed as much as 3.4% on Friday before trading little changed at about $48,150 as of 9:02 a.m. in New York. The Bloomberg Galaxy Crypto Index, which includes Bitcoin and four other tokens, slipped more than 4.7% before turning little changed.MicroStrategy snapped up an additional 205 Bitcoins at an average price of $48,888, according to a filing. That brings the company’s holdings of Bitcoin to about 91,064 tokens, worth over $4 billion.Bitcoin is now some $10,000 below February’s record above $58,000, stoking the debate over whether the token’s investment base will widen or peter out as happened in the 2017 boom and bust.Payrolls increased 379,000 after an upwardly revised 166,000 January increase, according to a Labor Department report Friday. Economists in a Bloomberg survey projected a 200,000 February gain. The unemployment rate dropped to 6.2%.Overall risk appetite in markets took a knock Thursday after Federal Reserve Chair Jerome Powell refrained from pushing back against the recent climb in long-term borrowing costs.Long-time proponent Michael Novogratz at Galaxy Digital Holdings Ltd. remains bullish, reiterating a prediction Thursday that Bitcoin will probably hit $100,000 before the end of the year. He argued in a Bloomberg TV interview that it and other digital currencies have become “an institutional asset class” and banks are “frantically” trying to get in on the action.Bitcoin slid 21% last week but is still up more than fivefold in the past year. On one narrative, the token can hedge inflation risk and the debasement of fiat currencies -- akin to gold -- and is set become a bigger part of institutional portfolios. A rival view depicts a stimulus-fueled bubble set to pop.“We’re still at an early stage in the institutional adoption of crypto in asset allocation,” a team led by Inigo Fraser-Jenkins, head of global quantitative strategy at Sanford C. Bernstein in London, wrote in a note Friday. But the team added that a fundamental valuation of Bitcoin is “simply impossible.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- Airline executives and directors sold $49.9 million of stock in February, the most in three years, as industry shares posted a record rally fueled by a widening vaccination effort.The top individual sellers were at Allegiant Travel Co. and Southwest Airlines Co., two leisure-focused carriers that are among analyst picks to benefit from a rebound in vacation travel as the coronavirus pandemic eases. Executives from Delta Air Lines Inc. and Mesa Air Group Inc. also sold significant holdings, according to data from InsiderInsights.com, which analyzes such transactions.The insider sales increased as investors bet that vaccine campaigns would gain steam and improve the prospects for a travel rebound. Airlines got hammered last year by an unprecedented drop in demand for flights. Continued stock gains are far from guaranteed this year, as the industry’s recovery remains shrouded in uncertainty and the slump in lucrative corporate and international trips is expected to drag on.The February surge in stock sales came after no airline insiders sold shares the previous month. An index of nine U.S. airlines jumped 30% in February, the most on record, led by a 45% advance for SkyWest Inc. Through Thursday, the stock gauge had rallied about 140% since hitting a seven-year low in May 2020.As if to underscore the uncertainty, however, the index plunged as much as 8.3% during the Friday trading session before paring losses to close with a fall of only 0.8%.Pay LimitsMajor carriers slashed jobs and cut executive pay because of the crisis, while Congress imposed compensation limits in exchange for tens of billions of dollars in aid.Bloomberg News surveyed insider transactions for the 11 largest publicly traded U.S. carriers. The data exclude April 2020, when Warren Buffett’s Berkshire Hathaway Inc. dumped its large stakes in the four biggest U.S. airlines.Last month, Allegiant Chief Executive Officer Maury Gallagher Jr. was the industry’s top seller, shedding 101,000 shares worth $21.5 million in 13 transactions. Last year, he sold shares worth $67.9 million. Gallagher still owns more than 13% of outstanding shares in Las Vegas-based Allegiant, which he co-founded in 1997.The company’s chief operating officer and chief financial officer also sold holdings of more than $1 million apiece. Allegiant declined to comment on executives’ personal decisions to sell shares, said spokeswoman Hilarie Grey. The transactions continued this month as Allegiant President John Redmond sold shares worth $6.1 million.Southwest’s insider sales made up 19% of the February total for airlines. President Tom Nealon collected at $2.98 million, while Chief Operating Officer Mike Van de Ven got $1.82 million and Chief Financial Officer Tammy Romo had $1.74 million. Restricted stock units paid to executives that vest in February carry “significant” taxes that aren’t fully covered by shares withheld for that purpose, Southwest said in regard to last month’s sales.Delta President Glen Hauenstein sold $2.63 million, while Mesa Air President Michael Lotz shed $1.79 million. Delta declined to comment.”Our window is open infrequently and we’ve been accumulating stock for a long time and took the opportunity to diversify holdings,” said Mesa CEO Jonathan Ornstein, who also sold nearly $915,000 in shares last month.Executives and directors at American Airlines Group Inc. and United Airlines Holdings Inc. sold no shares, according to available data.(Updates Allegiant president’s sale this month in ninth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
Congress is nearing passage of the third economic stimulus check it will send out to you and other taxpayers as part of its Covid-19 relief bill.
The bill that passed the Senate makes payments harder to get. Your tax return might help.
To win Senate passage, Biden agreed to make millions ineligible for the third checks.
(Bloomberg) -- Elon Musk set records last year for one of the fastest streaks of wealth accumulation in history. The reversal is underway, and it’s steep.The Tesla Inc. chief executive officer lost $27 billion since Monday as shares of the automaker tumbled in the selloff of tech stocks. His $156.9 billion net worth still places him No. 2 on the Bloomberg Billionaires Index, but he’s now almost $20 billion behind Jeff Bezos, who he topped just last week as world’s richest person.Musk’s tumble only underscores the hard-to-fathom velocity of his ascent. Tesla shares soared 743% in 2020, boosting the value of his stake and unlocking billions of dollars in options through his historic “moonshot” compensation package.His gains accelerated into the new year. In January, he unseated Bezos as the world’s richest person. Musk’s fortune peaked later that month at $210 billion, according to the index, a ranking of the world’s 500 wealthiest people.Consistent quarterly profits, the election of President Joe Biden with his embrace of clean technologies and enthusiasm from retail investors fueled the company’s rise, but for some, its swelling valuation was emblematic of an unsustainable frothiness in tech. The Nasdaq 100 Index fell for the third straight week on Friday, its longest streak of declines since September.Bitcoin InvestmentMusk’s fortune hasn’t been solely subject to the forces buffeting the tech industry. His net worth has risen and slumped recently in tandem with the price of Bitcoin. Tesla disclosed last month it had added $1.5 billion of the cryptocurrency to its balance sheet. Musk’s fortune took a $15 billion hit two weeks later after he mused on twitter that the prices of Bitcoin and other cryptocurrencies “do seem high.”Extreme volatility has roiled many of the world’s biggest fortunes this year. Asia’s once-richest person, Chinese bottled-water tycoon Zhong Shanshan, relinquished the title to Indian billionaire Mukesh Ambani last month after losing more than $22 billion in a matter of days.Read more: Ambani Again Richest Asian as China’s Zhong Down $22 BillionQuicken Loans Inc. Chairman Dan Gilbert’s net worth surged by $25 billion on Monday after his mortgage lender Rocket Cos. was said to be the next target of Reddit day traders. His fortune has since fallen by almost $24 billion. Alphabet Inc. co-founders Sergey Brin and Larry Page are among the biggest gainers on the index this year. They’ve each added more than $13 billion to their fortunes since Jan. 1.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
Never say that one person makes no difference. This past Thursday, stocks tumbled, bonds surged, and investors started taking inflationary risks seriously – all because one guy said what he thinks. Jerome Powell, chair of the Federal Reserve, held a press conference at which he gave both the good and the bad. He stated, again, his belief that the COVID vaccination program will allow a full reopening of the economy, and that we’ll see a resurgence in the job market. That’s the good news. The bad news, we’ll also likely see consumer prices go up in the short term – inflation. And when inflation starts rising, so do interest rates – and that’s when stocks typically slide. We’re not there yet, but the specter of it was enough this past week to put serious pressure on the stock markets. However, as the market retreat has pushed many stocks to rock-bottom prices, several Wall Street analysts believe that now may be the time to buy in. These analysts have identified three tickers whose current share prices land close to their 52-week lows. Noting that each is set to take back off on an upward trajectory, the analysts see an attractive entry point. Not to mention each has earned a Moderate or Strong Buy consensus rating, according to TipRanks database. Alteryx (AYX) We’ll start with Alteryx, an analytic software company based in California that takes advantage of the great changes brought by the information age. Data has become a commodity and an asset, and more than ever, companies now need the ability to collect, collate, sort, and analyze reams of raw information. This is exactly what Alteryx’s products allow, and the company has built on that need. In Q4, the company reported net income of 32 cents per share on $160.5 million in total revenues, beating consensus estimates. The company reported good news on the liquidity front, too, with $1 billion in cash available as of Dec 31, up 2.5% the prior year. In Q4, operating cash flow reached $58.5 million, crushing the year-before figure of $20.7 million. However, investors were wary of the lower-than-expected guidance. The company forecasted a range of between $104 million to $107 million in revenue, compared to $119 million analysts had expected. The stock tumbled 16% after the report. That was magnified by the general market turndown at the same time. Overall, AYX is down ~46% over the past 52 months. Yet, the recent sell-off could be an opportunity as the business remains sound amid these challenging times, according to 5-star analyst Daniel Ives, of Wedbush. “We still believe the company is well positioned to capture market share in the nearly ~$50B analytics, business intelligence, and data preparation market with its code-friendly end-to-end data prep and analytics platform once pandemic pressures subside…. The revenue beat was due to a product mix that tilted towards upfront revenue recognition, an improvement in churn rates and an improvement in customer spending trends," Ives opined. Ives’ comments back his Outperform (i.e. Buy) rating, and his $150 price target implies a one-year upside of 89% for the stock. (To watch Ives’ track record, click here) Overall, the 13 analyst recent reviews on Alteryx, breaking down to 10 Buys and 3 Holds, give the stock a Strong Buy analyst consensus rating. Shares are selling for $79.25 and have an average price target of $150.45. (See AYX stock analysis on TipRanks) Root, Inc. (ROOT) Switching over to the insurance sector, we’ll look at Root. This insurance company interacts with customers through its app, acting more like a tech company than a car insurance provider. But it works because the way customers interact with businesses is changing. Root also uses data analytics to set rates for customers, basing fees and premiums on measurable and measured metrics of how a customer actually drives. It’s a personalized version of car insurance, fit for the digital age. Root has also been expanding its model to the renters insurance market. Root has been trading publicly for just 4 months; the company IPO'd back in October, and it’s currently down 50% since it hit the markets. In its Q4 and Full-year 2020 results, Root showed solid gains in direct premiums, although the company still reports a net loss. For the quarter, the direct earnings premiums rose 30% year-over-year to $155 million. For all of 2020, that metric gained 71% to reach $605 million. The full-year net loss was $14.2 million. Truist's 5-star analyst Youssef Squali covers Root, and he sees the company maneuvering to preserve a favorable outlook this year and next. “ROOT's mgt continues to refine its growth strategy two quarters post IPO, and 4Q20 results/2021 outlook reflects such a process... They believe their stepped-up marketing investment should lead to accelerating policy count growth as the year progresses and provide a substantial tailwind heading into 2022. To us, this seems part of a deliberate strategy to marginally shift the balance between topline growth and profitability slightly more in favor of the latter,” Squali noted. Squali’s rating on the stock is a Buy, and his $24 price target suggests a 95% upside in the months ahead. (To watch Squali’s track record, click here) Shares in Root are selling for $12.30 each, and the average target of $22 indicates a possible upside of ~79% by year’s end. There are 5 reviews on record, including 3 to Buy and 2 to Hold, making the analyst consensus a Moderate Buy. (See ROOT stock analysis on TipRanks) Arco Platform, Ltd. (ARCE) The shift to online and remote work hasn’t just impacted the workplace. Around the world, schools and students have also had to adapt. Arco Platform is a Brazilian educational company offering content, technology, supplemental programs, and specialized services to school clients in Brazil. The company boasts over 5,400 schools on its client list, with programs and products in classrooms from kindergarten through high school – and over 405,000 students using Arco Platform learning tools. Arco will report 4Q20 and full year 2020 results later this month – but a look at the company’s November Q3 release is instructive. The company described 2020 as a “testament to the resilience of our business.” By the numbers, Arco reported strong revenue gains in 2020 – no surprise, considering the move to remote learning. Quarterly revenue of 208.7 million Brazilian reals (US$36.66 million) was up 196% year-over-year, while the top line for the first 9 months of the year, at 705.2 million reals (US$123.85 million) was up 117% yoy. Earnings for educational companies can vary through the school year, depending on the school vacation schedule. The third quarter is typically Arco’s worst of the year, with a net loss – and 2020 was no exception. But, the Q3 net loss was only 9 US cents per share – a huge improvement from the 53-cent loss reported in 3Q19. Mr. Market chopped off 38% of the company’s stock price over the past 12 months. One analyst, however, thinks this lower stock price could offer new investors an opportunity to get into ARCE on the cheap. Credit Suisse's Daniel Federle rates ARCE an Outperform (i.e. Buy) along with a $55 price target. This figure implies a 12-month upside potential of ~67%. (To watch Federle’s track record, click here) Federle is confident that the company is positioned for the next leg of growth, noting: "[The] company is structurally solid and moving in the right direction and... any eventual weak operating data point is macro related rather than any issue related to the company. We continue with the view that growth will return to its regular trajectory once COVID effects dissipate.” Turning to expansionary plans, Federle noted, “Arco mentioned that it is within their plans to launch a product focused on the B2C market, likely already in 2021. The product will be focused on offering courses (e.g. test preps) directly to students. It is important to note that this product will not be a substitute for learning systems, rather a complement. Potential success obtained in the B2C market is an upside risk to our estimates.” There are only two reviews on record for Arco, although both of them are Buys, making the analyst consensus here a Moderate Buy. Shares are trading for $33.73 and have an average price target of $51, which suggests a 51% upside from that level. (See ARCE stock analysis on TipRanks) To find good ideas for beaten-down stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights. Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
The discussion today may get a little wonky because of the nature of cryptocurrencies. We will focus on Ethereum USD (CCC:ETH-USD) as it’s making a legit bid for the crypto limelight. It is important to make the distinction between Ethereum the open-source platform and the ETH coin. The platform uses blockchain to create and run dapps (decentralized digital applications). These enable users to digitally and directly transact without an intermediary. And then there is the coveted Ethereum the coin. Source: Shutterstock ETH prices have soared even beating out its original cousin Bitcoin (CCC:BTC-USD). I am not a perma-bull tooting the crypto horns but I definitely get it. The reactions during my debates of this concept at parties are always the same. Most people can’t believe that Bitcoin or Ethereum are real things. The instinct is to call them fake. Fake things don’t cost $48,000 per unit. Spoiler alert, my conclusion today is that Ethereum is most definitely an investable asset. If you don’t believe me just look at the scoreboard. Each cost about$1,475 and that’s 25% off the recent high. Do you remember when Bitcoin was that low? It was only four years ago. I am not suggesting that ETH will also spike to 50k now, but it does have massive upside potential.InvestorPlace - Stock Market News, Stock Advice & Trading Tips Why We Need Crypto Last year, the pandemic disrupted all businesses worldwide. We need to find more efficient decentralized ways to transact so we can be ready for the next crisis. Besides, it’s clearly the better way of doing business. In addition to that, there is the tangible value appreciation opportunity. A year ago, the stock market crashed but it quickly recovered and in a ferocious way. Even after the drubbing that stocks are taking this week, the S&P 500 is still up more than 20% in a year. But that’s not the best story to tell because Ethereum is up 540% for the same period. The concept of digital coins and blockchain puzzles most people, but they need to get over it. The government is another reason to push crypto forward. Central bank policies are too loose and the byproduct of that is the demolition of the currency. That is why the U.S. dollar can’t find footing for so long. Money is no longer a good place to store wealth. Hiding wealth in cryptocurrencies is smart because it is out of the reach of the government. However, the line is getting finer based on this central bank digital currencies (CBDCs) news from CoinDesk about Ripple. Critics are also eager to point out that crypto is too volatile to be a currency. It doesn’t have to be. Technology is getting to where I can carry my digital wallet and make a purchase from it in any currency. For example, the transaction on the spot liquidates a bit of Ethereum to pay in U.S. dollars. The Ethereum Market Cap Carrot The upside in Ethereum prices is huge. It has a lot to catch up to its Bitcoin cousin. This is a theory that is helping Bitcoin catch up to gold. Market cap matters to Wall Street experts and it’s almost like a self-fulfilling prophecy. Ethereum’s path is easier because Bitcoin forged it. Tesla (NASDAQ:TSLA) did the same thing for EVs and now the rest are trying to get in. Not all coins will succeed but Ethereum has momentum and is second only to BTC. Ethereum is not yet as popular as Bitcoin when in fact it has outperformed it by wide margin. They now even have a futures contract to trade it. Ethereum is more than a coin because there is a process around it (dapps). This is taking the blockchain concept and expanding its uses. A lot of people still consider it a joke when somebody invests in something like Ethereum. The joke’s on them because they missed out on 540% of upside in just one year. I don’t argue with results regardless of my personal opinion. Once investors can get over to hurdle of digital coins being fake, they can start trading them for profit. Top cryptocurrencies have been the best performing asset class by far for years. Where There Is Reward, There Are Risks Source: Charts by TradingView This is not to say that I should jump in will full size positions. Much like any other investment, I look for openings perhaps on bad days, and I take starter positions. This is high-tech stuff so it will change on a dime. Ethereum needs to avoid falling out of the limelight. These are fast-moving assets so there is no way of avoiding the volatility. It is risky, and that’s why it yields a lot of reward. Everybody needs a little bit of cryptocurrencies in their portfolio. If not that then gold is the next best substitute. We don’t need to be experts on them to invest in them. The proof is in the pudding and I’m willing to keep an open mind about them. Jaw-Dropping Statement In reality, crypto is nothing new. The concept is very similar to gold. The only reason gold has value is because we say it does. To an alien, a yellow rock is no different than a black one. People cherish gold and it’s rare, therefore it has a high price. The harder it is to get, the higher the price. That’s why Bitcoin and ETH retain values that boggle many minds. There is a finite number of these doo-hickeys and millions of people are chasing after them. The concept is that simple. It has value because enough people say it does. So next time you want to get a rise out of someone, do what I do. Tell them that Bitcoin and Ethereum are same as gold. That’s where people’s jaws drop. What’s more exciting about the digital coins are the processes that exist around them. Blockchain is one and it will shape our future. Credit card companies are embracing the change. That’s why Square (NYSE:SQ) and Paypal (NYSE:PYPL) are now the leaders and Visa (NYSE:V) and MasterCard (NYSE:MA) are the laggards. Cryptocurrencies are extremely popular but they have very hardcore opponents. Even heads of banks have been overtly against it even mocking them at times. They have since changed their tone and are warming up to the concept. Goldman Sachs reopened its Bitcoin trading desk recently. They can’t ignore something that has gotten this big this fast. On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. Nicolas Chahine is the managing director of SellSpreads.com. More From InvestorPlace Why Everyone Is Investing in 5G All WRONG It doesn’t matter if you have $500 in savings or $5 million. Do this now. Top Stock Picker Reveals His Next Potential 500% Winner Stock Prodigy Who Found NIO at $2… Says Buy THIS Now The post Ethereum Is Chasing Stardom and It’s Worth Consideration appeared first on InvestorPlace.
Some households are collecting a big pile of federal money in 2021.
(Bloomberg) -- It’s in the air again, on Reddit, in Congress, in the C-suite: Hedge funds that get rich off short-selling are the enemy. The odd thing is, the biggest players in the game are getting a pass.Those would be the asset managers, pension plans and sovereign wealth funds that provide the vast majority of securities used to take bearish positions. Without the likes of BlackRock Inc. and State Street Corp., the California Public Employees’ Retirement System and the Kuwait Investment Authority filling such an elemental role, investors such as Gabe Plotkin, whose Melvin Capital Management became a piñata for day traders in the GameStop Corp. saga, wouldn’t have shares to sell short.“Anytime we short a stock, we locate a borrow,” Plotkin said Feb. 18 at the House Financial Services Committee hearing on the GameStop short squeeze.There’s plenty to choose from. As of mid-2020, some $24 trillion of stocks and bonds were available for such borrowing, with $1.2 trillion in shares -- equal to a third of all hedge-fund assets -- actually out on loan, according to the International Securities Lending Association.It’s a situation that on the surface defies logic. Given the popular belief that short sellers create unjustified losses in some stocks, why would shareholders want to supply the ammunition for attacks against their investments? The explanation is fairly straight forward: By loaning out securities for a small fee plus interest, they can generate extra income that boosts returns. That’s key in an industry where fund managers are paid to beat benchmarks and especially valuable in a world of low yields.The trade-off is simple: For investors with large, diversified portfolios, a single stock plummeting under the weight of a short-selling campaign has little impact over the long run. And in the nearer term, the greater the number of aggregate bets against a stock -- the so-called short interest -- the higher the fee a lender can charge.In the case of GameStop, short interest was unusually high and shares on loan were generating an annualized return of 25% to 30%, Ken Griffin testified at the Feb. 18 hearing. Griffin operates a market maker, Citadel Securities, as well as Citadel, one of the world’s largest hedge funds.“Securities lending is a way for long holders to generate additional alpha,” said Nancy Allen of DataLend, which compiles data on securities financing. “Originally, it was a way to cover costs, but over the last 10 to 15 years it’s become an investment function.”Not everyone is comfortable with the inherent conflict. In December 2019, Japan’s $1.6 trillion Government Pension Investment Fund stopped lending its international stock holdings to short sellers, calling the practice inconsistent with its responsibilities as a fiduciary. At the time, the decision cost GPIF about $100 million a year in lost revenue.The U.S. Securities and Exchange Commission has regulated short-selling since the 1930s and polices the market for abuses such as naked shorting, which involves taking a short position without borrowing shares. Proponents of legal shorting argue that its use enhances liquidity, improves pricing and serves a critical role as a bulwark against fraud and hype.Chief executives, whose pay packages often depend on share performance, routinely decry short sellers as vultures. More recently, shorting has come under fire in the emotionally charged banter on Reddit’s WallStreetBets forum. Some speculators ran up the prices of GameStop, AMC Entertainment Holdings Inc. and other meme stocks in January to punish the hedge funds that bet against them, and they delighted when the rampant buying led to bruising losses at Melvin, Maplelane Capital and Citron Research.Many of the key actors in the GameStop frenzy testified at the Feb. 18 hearing. Plotkin was grilled by committee members over Melvin’s short position. Citadel’s Griffin and others faced broader questions about short-selling. Yet no one asked about the supply of borrowed shares and there were no witnesses called from the securities-lending industry.There’s a symbiotic relationship between hedge funds and the prime-brokerage units of Wall Street firms, much of it built on securities lending. Prime brokers act as intermediaries, sourcing stocks and bonds for borrowers who want to short them and facilitate the trades. According to DataLend, securities lending generated $2.9 billion of broker-to-broker revenue in 2020, almost the same as in 2019.Demand for short positions was already expected to drop as stock prices surged to all-time highs. Now, with the threat of retribution from the Reddit crowd, it may weaken even further. Griffin said he has “no doubt” there’ll be less short-selling as a consequence of the GameStop squeeze.“I think the whole industry will have to adapt,” Plotkin said at the hearing. “I don’t think investors like myself want to be susceptible to these types of dynamics.”This could not only threaten the dealers who broker stock lending but also the holders who supply the securities and share in the revenue. They reaped $7.7 billion globally in 2020, down from a record of almost $10 billion in 2018, according to DataLend. Lending fees increased by 4.2% on a year-over-year basis in February after the GameStop onslaught, DataLend says.While securities lending accounted for $652 million, or just 4%, of BlackRock’s revenue in the fourth quarter of 2020, there’s little cost involved and the risks are low because borrowers have to put up collateral that equals or exceeds the value of the loan. At both BlackRock and State Street Corp., the second-largest custody bank, the value of securities on loan as of Dec. 31 jumped at least 20% from a year earlier, to $352 billion and $441 billion, respectively.“Every little bit counts with indexes,” said John Rekenthaler, vice president of research at Morningstar. “You’re scraping nickels off the street, but there’s a whole lot of nickels.”Others could take a hit, too. Just as Robinhood Markets is able to offer zero-commission trades by selling its order flow to Citadel and other market makers, asset managers typically pass on some of their securities-lending revenue as a type of client rebate.“It’s very important to remember that institutional investors earn substantial returns from participating in the securities-lending market,” Citadel’s Griffin said at the GameStop hearing. “That accrues to the benefit of pension plans, of ETFs, of other pools of institutional lending that participate in the securities lending market.”(Adds data on lending fees after the short-interest chart.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
Personal finance guru Suze Orman said the receipt of a tax refund indicates "something's radically wrong," since the money returned to filers could otherwise have accrued value over the period it stood in the government's possession.
(Bloomberg) -- It’s not just in meme stocks that the fate of short sellers is a key theme. Short bets are increasingly in vogue in the $21 trillion Treasuries market, with crucial implications across asset classes.The benchmark 10-year yield reached 1.62% Friday -- the highest since February 2020 -- before dip buying from foreign investors emerged. Stronger-than-expected job creation and Federal Reserve Chair Jerome Powell’s seeming lack of concern, for now, with leaping long-term borrowing costs have emboldened traders. In one telltale sign of which way they’re leaning, demand to borrow 10-year notes in the repurchase-agreement market is so great that rates have gone negative, likely part of a move to short the maturity.The trifecta of more fiscal stimulus ahead, ultra-easy monetary policy and an accelerating vaccination campaign is helping bring a post-pandemic reality into view. There are of course risks to the bearish bond scenario. Most prominently, yields could rise to the point that they spook stocks, and tighten financial conditions generally -- a key metric the Fed is focused on for guiding policy. Even so, Wall Street analysts can’t seem to lift year-end yield forecasts fast enough.“There’s a lot of tinder being put now on this fire for higher yields,” said Margaret Kerins, global head of fixed-income strategy at BMO Capital Markets. “The question is what is the point that higher yields are too high and really put pressure on risk assets and push Powell into action” to try and tamp them down.Share prices have already shown signs of vulnerability to increasing yields, especially tech-heavy stocks. Another area at risk is the housing market -- a bright spot for the economy -- with mortgage rates jumping.The surge in yields and growing confidence in the economic recovery prompted a slew of analysts to recalibrate expectations for 10-year rates this past week. For example, TD Securities and Societe Generale lifted their year-end forecasts to 2% from 1.45% and 1.50%, respectively.Asset managers, for their part, flipped to most net short on 10-year notes since 2016, the latest Commodity Futures Trading Commission data show.Auction PressureIn the days ahead, however, BMO is eyeing 1.75% as the next key mark, a level last seen in January 2020, weeks before the pandemic sent markets into a chaotic frenzy.A fresh dose of long-end supply next week may make short positions even more attractive, especially after record-low demand for last month’s 7-year auction served as a trigger to push 10-year yields above 1.6%. The Treasury will sell a total of $62 billion in 10- and 30-year debt.With expectations for inflation and growth taking flight, traders are signaling that they anticipate the Fed may have to respond more quickly than it’s indicated. Eurodollar futures now reflect a quarter-point hike in the first quarter of 2023, but they’re starting to suggest that it could come in late 2022. Fed officials have projected they’d keep rates near zero until at least the end of 2023.So while the market is leaning toward loftier yields, the interplay between bonds and stocks is bound to be a huge focus going forward.“There’s definitely that momentum, but the question is how well risky assets adjust to the new paradigm,” said Subadra Rajappa, head of U.S. rates strategy at Societe Generale. “We’ll be watching next week, when the dust settles after the payrolls data, how Treasuries react and how risky assets react to the rise in yields.”What to WatchThe economic calendarMarch 8: Wholesale trade sales/inventoriesMarch 9: NFIB small business optimismMarch 10: MBA mortgage applications; CPI; average weekly earnings; monthly budget statementMarch 11: Jobless claims; Langer consumer comfort; JOLTS job openings: household change in net worthMarch 12: PPI; University of Michigan sentimentThe Fed calendar is empty before the March 17 policy decisionThe auction calendar:March 8: 13-, 26-week billsMarch 9: 42-day cash-management bills; 3-year notesMarch 10: 10-year notesMarch 11: 4-, 8-week bills; 30-year bondsFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
Ark Funds CEO and Founder Cathie Wood joined Benzinga’s “Raz Report” this week and discussed the history of Ark Funds. Wood also shared some of the reasons why Ark Funds owns several positions, including in DraftKings Inc (NASDAQ: DKNG). Wood on DraftKings: Wood told Benzinga that DraftKings is becoming accepted as a platform for sports betting as the public grows more comfortable with the activity. “We do think sports betting is losing its taint,” Wood said. The fund manager sees more states turning toward legalizing sports betting, especially as many face huge deficits, Wood said. Wood used New Jersey as an example of the success states can have. The state is a mature market and DraftKings’ revenue was up 100% in the state. “New Jersey was very telling to us," she said. Ark Funds: DraftKings was added to two different Ark Funds beginning in February. Ark Next Generation Internet ETF (NYSE: ARKW) owns around 1.4 milion shares of DraftKings worth $88.1 million. Ark Fintech Innovation ETF (NYSE: ARKF) owns around 546,000 shares of DraftKings worth $33.8 million. DraftKings represents around 1.2% and 0.8% of ARKW and ARKF, respectively. Price Action: Shares of DraftKings finished the week down 6.24% at $59.52. Related Link: DraftKings And Dish Network Partner On Sports Betting, TV Integration See more from BenzingaClick here for options trades from BenzingaFuboTV Shares Pop On Caesars Partnership, Access To Additional States For Sports BettingHorizon Acquisition Corp SPAC Jumps 20% On Potential Sportradar Merger© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
An ETF that's backed in part by Dave Portnoy, self-proclaimed head of the hordes of retail investors who have upended markets in recent weeks, raises questions about market manipulation.
What Happened: Annual Bitcoin volatility will drop below that of Amazon Inc. (NASDAQ: AMZN) in a few years if past patterns prevail, according to analysts from Bloomberg. In a Crypto Market Outlook report, analysts found that the Bitcoin volatility regression line is on track to dip below Amazon’s reading by 2022. The 260-day risk measure is currently at 60% for Bitcoin as compared to 40% for Amazon. “Similar to the early days of the benchmark crypto, in the first few years that Amazon traded publicly, its volatility averaged over 100%,” said the analysts. Why It Matters: Bitcoin’s supply and demand dynamics play an important role in the price discovery of the leading digital asset. It has a fixed mining schedule which sets it apart from most other assets and markets with uncertain supply and demand. The Bloomberg analysts find this to be a unique factor in determining the cryptocurrency’s future price trajectory. “Representing innovative technology made possible due to the internet, we see little to reverse Bitcoin's path toward a global digital store-of-value and its market cap to keep rising, likely surpassing Amazon,” noted the analysts. Bitcoin is known to be a historically volatile asset class. However, as research from the report suggests its rising volatility is only likely to continue until it reaches a new price threshold with greater market depth – possibly around $100,000. “Once the crypto settles in at a new threshold...volatility should drop, we believe”, said the analysts, adding, “The way we see it, something unexpected has to trip up this technical indicator.” Price Action: The market-leading cryptocurrency was trading at $48,494 at press time, down by 2.38% in the past 24-hours. Image: Ishant Mishra via Unsplash See more from BenzingaClick here for options trades from BenzingaWealth Managers Like Jim Paulsen Regret Not Having More Cryptocurrency In Portfolio: ReutersKraken CEO Says Bitcoin Hitting M In 10 Years 'Very Reasonable'© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Now might be "a golden opportunity" to own the "secular tech winners" for the next 12 to 18 months, according to Wedbush analyst Daniel Ives.
(Bloomberg) -- Trouble may be brewing in China for Bitcoin’s raucous and divisive rally as the nation pushes ahead with a world-leading effort to create a digital version of its currency.That’s because the eventual rollout of the virtual yuan could roil cryptocurrency markets if Chinese officials tighten regulations at the same time, according to Phillip Gillespie, chief executive of crypto market maker and liquidity provider B2C2 Japan, which mainly works with institutional investors.“Once a digital yuan is introduced, that’s going to be one of the biggest risks in crypto,” Gillespie, who previously worked in currency markets for Goldman Sachs Group Inc., said in an interview. “Panic selling” is possible if the new rules end up sucking liquidity from trading platforms for digital coins, he said.Central banks’ power to issue virtual money and proscribe rivals is one of the key risks for the crypto sector. Chinese citizens are already banned from converting yuan to tokens but the practice continues under the table using Tether, a digital coin that claims a stable value pegged to the dollar. The money parked in Tether then gets routed to Bitcoin and other tokens.Tokyo-based Gillespie sees potential for an outright ban on Tether, which could raise the stakes for anyone minded to continue using it.A draft People’s Bank of China law setting the stage for a virtual yuan includes a provision prohibiting individuals and entities from making and selling tokens. In recent days, China’s Inner Mongolia banned the power-hungry practice of cryptocurrency mining.Representatives of the People’s Bank of China didn’t reply to a fax seeking comment on the prospect of regulatory changes. While there’s no launch date yet, the PBOC is likely to be the first major central bank to issue a virtual currency after years of work on the project.Tether officials have downplayed the concern, saying that central bank digital currencies won’t mean the end of stablecoins.“Tether’s success has provided a blueprint for how a CBDC could work,” said Paolo Ardoino, chief technology officer for Tether and Bitfinex, an affiliated exchange. “Furthermore, CBDC’s are unlikely to be available on public blockchains such as Ethereum or Bitcoin. This last mile may be left to privately-issued stablecoins.”Still, Gillespie points out that Tether is “this massive amount of fuel for Bitcoin purchases” and few people realize the potential for disruption. A “tremendous amount of liquidity” is coming from exchanges tapping Chinese demand, he added.Tether QuestionsBitcoin surged fivefold in the past year and hit a record above $58,000 last month before dropping back about $10,000. The rally has split opinion, with some arguing a new asset class is emerging and others seeing pure gambling by retail investors and speculative pros in the Wild West of finance.Tether is an equally controversial token deep in the plumbing of the nascent cryptocurrency market. Traders use it to park money as they shift from virtual to fiat cash.More than $18 billion of Tether moved overseas from East Asian addresses over a one-year period, including spikes suggesting Chinese origin, according to an August report from Chainalysis, which analyzes the blockchain network technology underlying tokens. The report indicated citizens may be using Tether to dodge rules that limit capital transfers abroad.Questions about Tether continue to swirl. The companies behind it were banned from doing business in New York last month as part of a settlement with state officials who found that they hid losses and lied about reserves.‘Liquidity Shock’A recent report from JPMorgan Chase & Co. said there’d likely be “a severe liquidity shock to the broader cryptocurrency market” if issues arose that affected the “willingness or ability of both domestic and foreign investors to use Tether.”“All the volume goes through Tether,” said Todd Morakis, co-founder of digital-finance product and service provider JST Capital. “As regulators become more and more restrictive on stablecoins, that could be very negative for the market because that could mean less liquidity.”B2C2 Japan’s Gillespie said Tether is “such a risky asset” and a “massive liquidity shock” is possible if China does ban it. “What would happen is there’s going to be massive panic selling,” he said.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.