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On the 25th (local time), the New York stock market showed considerable volatility and fluctuated. In the end, the Dow fell 0.12%, but the S&P 500 closed 0.36% and the Nasdaq rose 0.69%.
This week, △ Apple, Tesla, Microsoft and other key companies’ performance announcements (4Q) △ The Federal Open Market Committee (FOMC) in January of the U.S. Central Bank (Fed) △ A big event is ahead of the U.S. GDP announcement in the fourth quarter. In the middle, Apple surged again, following Morgan Stanley last week, with Weather Bush and Evercore ISI raising target prices.
Wedbush raised the target price from $160 to $175, saying, “Apple will announce sales of the iPhone 12 that will stand out.” In the case of Evercore, raising the target price to $160, it has revealed that Apple will be able to disrupt the automotive industry with Apple cars just as Apple innovated the mobile phone industry with the iPhone.
The same goes for Tesla. Investment bank Baird raised the target price by 50% from $488 to $728, saying Tesla is entering a new phase with factories in Germany and Texas, USA following Shanghai, China. In particular, Elon Musk also raised the possibility of joining Tesla with SpaceX and Boring Company as holding companies. Last month, when an investor tweeted,’How about setting up a holding company and putting startups underneath it,’ Musk replied with a “good idea.”
In addition, there was news that the husband of House Speaker Nancy Pelosi bought Tesla options in December last year. According to Barrance, Pelosi’s report of her husband Paul Pelosi’s December stock transactions revealed that on the 22nd of last month, he bought a call option from Apple, Tesla and Walt Disney and bought alliance Burnsteen shares.
![[김현석의 월스트리트나우] Stocks invested by the husband of the House Speaker Pelosi](https://i0.wp.com/img.hankyung.com/photo/202101/01.25150736.1.jpg?w=900&ssl=1)
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Paul bought 25 Tesla call options (2500 shares) with a strike price of $500 and an expiration date of March 18, 2022. At the time, Tesla surged ahead of the incorporation of the S&P 500 index, closing the market at $640.34. The market estimates that Paul bought the same day at $300-330 per contract. I thought it would be at least 800 dollars by March next year.
At the time, it was also two weeks before the final vote of the Georgia Senate (January 5) after the Democratic Party won the presidential election. To some extent, it was a time when Democratic candidates were winning. As soon as President Joe Biden takes office, he is strongly pursuing eco-friendly policies, including plans for crude oil pipelines and stopping new drilling of crude oil in public areas for six days. There are also observations that the expansion of electric vehicles will increase the subsidy scale.
Moreover, Paul is a businessman, venture capitalist and investor. He is a man who earns tens of millions of dollars by investing in business as well as Apple Disney Facebook. It was estimated that this kind of pole is what Tesla saw in the future.
Paul also bought 100 contracts for Apple stock call options (exercise $100, expiration date January 21, 2022) and 100 Walt Disney call options contracts (strike $100, expiration date January 21, 2022). It also bought 20,000 shares of the financial company Alliance Bernstein.
As a result, Tesla shares soared more than 6% during the day and ended with a 2.85% increase.
![[김현석의 월스트리트나우] Stocks invested by the husband of the House Speaker Pelosi](https://i0.wp.com/img.hankyung.com/photo/202101/01.25150738.1.jpg?w=900&ssl=1)
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On this day, as Apple and Tesla led the technology, technologists showed off again.
On the other hand, financial stocks such as Goldman Sachs, JP Morgan, etc., fell for several days and pulled the market down. This is because the Biden administration appointed Wall Street’s dislike regulator Gary Gensler as chairman of the Securities and Exchange Commission (SEC) and Rohit Chopra as director of the Financial Consumer Protection Authority (CFPB) last week. This is why the NASDAQ rose but the Dow index fell.
Pharmaceutical company Modena announced that in the case of the corona strain discovered in South Africa, only about a sixth of the antibody was formed due to the vaccine, and Goldman Sachs issued a warning that the economic recovery could be delayed to next year due to the effects of the strain. It was also negative for the market. There was also news that Merck, a large pharmaceutical company in the United States, has decided to abandon the development of two vaccines.
Although Apple’s Tesla soared to an all-time high, the stock that caught the market’s greatest interest on that day was GameStop.
![[김현석의 월스트리트나우] Stocks invested by the husband of the House Speaker Pelosi](https://i0.wp.com/img.hankyung.com/photo/202101/01.25150740.1.jpg?w=900&ssl=1)
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Gamestop, a video game retailer, has been a forgotten stock for some time. On the 13th, Chey’s co-founder, activist investor, and former CEO of GameStop, Ryan Cohen, began to surge on the news of joining the board. After Cohen bought a stake through his RC Ventures, three new people, including himself, decided to participate in the management. He has argued since August last year that if GameStop sells all its stores and transforms into an online retailer, profitability will improve significantly.
Individuals called’Robin Hood Investors’ added to this argument. They started pouring money into the online community Reddit by creating a forum called’Wall Streetbets’. They bought not only stocks, but also stock call options. Reddit even talks about investing $53,000 in options and making $11 million in a few days. On the 22nd, the price of the $60 GameStop call option jumped from 2 cents to $16.7 during the day.
The stock price of GameStop, which was in the $19 range on the 12th, ended at $65.01 on the 22nd. On this day, it jumped 144% to $159.19 at the beginning of the market. The trading volume also reached 170 million shares on that day, significantly exceeding the 30 million shares, the average of 30 days.
As GameStop’s stock price soared regardless of fundamentals from the 13th, several hedge funds such as Citron and Melvin began mass short selling. However, as individuals continued to flock and stock prices rose endlessly, short-selling funds were struck by a’short squeeze’ in which they had to buy and repay stocks, and institutions that sold call options also had a’gamma squeeze’ to buy stocks. This is why the stock price has risen to the sky.
Bloomberg reported today that the short-selling force lost $6 billion. Melvin Capital, a hedge fund that went on short selling, was in bankruptcy crisis with a loss of 30% of its capital this year alone. As a result, another hedge fund, Citadel and Point 72, had to receive $2.75 billion worth of capital.
On this day, GameStop plunged to negative compared to the day before during the intraday, but eventually ended at $76.79, up 18.12%.
![[김현석의 월스트리트나우] Stocks invested by the husband of the House Speaker Pelosi](https://i0.wp.com/img.hankyung.com/photo/202101/01.25150741.1.jpg?w=900&ssl=1)
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These speculative individual investors don’t know how to stop. These were transferred to Blackberry, Express, etc. Blackberry, which rose 28.42% that day, released a press release saying that it does not know why its stock price is soaring. On the 22nd, the intraday stock price of the BlackBerry rose more than 100%, and on that day, the BlackBerry also surged 47%. These are the most frequently mentioned sports on Reddit.
As the market continues to record all-time highs, call options trading and stock credit loans surged, and as stocks such as Bitcoin and Gamestop rallied, concerns about the bubble are growing.
The question that Wall Street financial companies hear the most from customers in recent years is ① Do you think there is a bubble ② When will it burst? ③ What should I do now? Most financial companies, including Goldman Sachs, Bank of America, and Morgan Stanley, have recently released relevant data.
Their logic is similar. There may be bubbles in some of the markets, but it’s still okay overall.
There are two main reasons. The first is that the interest rate is so low that the current stock price is high, but it can be justified. In addition, the second is to see that the valuation will be justified as the economy will revive due to vaccines and corporate profits will increase to 40% this year.
According to the data released by Goldman Sachs, all indicators related to the stock market are at their extremes, but their relative valuation compared to interest rates is still low.
However, they advise, “Avoid industries, stocks, and assets whose valuation has increased to the extreme.” In the case of Goldman Sachs, avoid super high-value stocks with a share price ratio (PSR) of more than 20 times, such as Zoom (31x) Shopify (28x) Snowflake (71x) Crowdstrike (40x) Palantir (25x). If you are really concerned about the bubble, short selling these stocks is recommended.
![[김현석의 월스트리트나우] Stocks invested by the husband of the House Speaker Pelosi](https://i0.wp.com/img.hankyung.com/photo/202101/01.25150743.1.jpg?w=900&ssl=1)
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