In this video, we’re going to talk about the difference between buying a call and selling a put. You’ll understand this quickly because we will go into details that will be a real eye-opener for you. You’re going to see in which scenarios you’re going to make money. Also, I’ll show you when you need
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This week’s video covers two companies where management has made key decisions for the future of their respective companies; Johnson & Johnson (JNJ), and International Paper (IP). Johnson & Johnson: https://www.zacks.com/stock/quote/JNJ?cid=CS-YOUTUBE-FT-VID International Paper: https://www.zacks.com/stock/quote/IP?cid=CS-YOUTUBE-FT-VID Follow us on StockTwits: stocktwits.com/ZacksResearch Follow us on Twitter: twitter.com/ZacksResearch Like us on Facebook: www.facebook.com/ZacksInvestmentResearch
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Facebook posted record quarterly revenues as the company’s push into ecommerce during coronavirus lockdowns bore fruit, although chief executive Mark Zuckerberg warned of a growing competitive threat from Apple. Fourth-quarter revenues at the social media group rose 33 per cent to $28.1bn, surpassing analyst expectations of an increase to $26.4bn. Net income jumped 53 per cent to $11.2bn, or $3.88 a share. In a statement, Facebook’s chief financial officer David Wehner said the business had been boosted by “the ongoing shift towards online commerce” and “the shift in consumer demand towards products and away from services”.  But the company also outlined a range of challenges causing uncertainty in the year ahead. Among them, Mr Zuckerberg took repeated swipes at Apple, citing its forthcoming privacy changes to the iOS 14 operating system, which requires applications on iPhones to obtain users’ permission to harvest advertisement targeting and tracking data. Facebook has previously warned Apple’s restrictions, due to come into force later this year, will hurt its ad business as well as that of its small business clients. “Apple may say that they’re doing this to help people. But the moves clearly track their competitive interest,” Mr Zuckerberg said on Wednesday on a call with analysts. “Apple has every incentive to use their dominant platform position to interfere with how our app and other apps work, which they regularly do to preference their own,” he said, adding the company was increasingly becoming “one of our biggest competitors”. In another barb, Mr Zuckerberg said his group’s WhatsApp messaging platform was “clearly superior” to Apple’s iMessage in the privacy protections it afforded users. Jessica Liu, senior analyst at Forrester, said: “The hyper-targeting that makes Facebook’s properties so attractive for advertisers won’t disappear overnight but will grow increasingly more difficult — forcing Facebook, Inc to rethink its ad model.” Monthly active users grew 12 per cent year-on-year to 2.8bn, Facebook said. The company bet big on “social commerce” across all its apps last year as people retreated indoors under shelter-in-place restrictions. It launched Facebook Shops, which allows businesses to set up digital storefronts, as well as payments tools in several markets.  Still, the company’s efforts to merge the messaging functions of its trio of apps — Facebook, WhatsApp and Instagram — for the purposes of facilitating more shopping have not been seamless. WhatsApp this month was compelled to delay the rollout of an updated policy allowing it to share more transaction data with Facebook after the changes sparked privacy concerns and sent users flocking to lesser-known rival apps. Facebook is also facing significant legal and regulatory challenges. The US Federal Trade Commission and 46 US states last month filed antitrust lawsuits against the company, accusing it of wielding its dominance to crush competition. Its content moderation policies and processes have come under scrutiny after the Capitol riots earlier this month, and it has also attracted criticism over its decision to suspend former US president Donald Trump’s account “indefinitely”. Mr Zuckerberg said on Wednesday that Facebook was exploring ways “to turn down the temperature and discourage divisive conversation”, particularly in users’ news feeds. As part of this, the company would stop recommending political and civic groups to users, he said. In October Facebook had temporarily switched off making such recommendations to US users specifically ahead of the election; that move is now permanent and affects users globally.
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Tesla is still struggling to generate consistent profit margins from selling its electric cars, leaving it reliant on sales of regulatory credits to lift its profits, according to figures released late on Wednesday. The US electric car maker reported results that topped Wall Street’s expectations for revenue growth in the final quarter of last year but failed to hit forecasts for earnings, sending its shares lower in after-hours trading. The shortfall followed a shift in sales towards Tesla’s lower-priced Model 3 and Y. The company also blamed “supply chain instability and pandemic inefficiencies”, and said it faced higher costs from starting production of a new version of its Model S — a car that Elon Musk, chief executive, claimed would be “the fastest accelerating car that has ever been allowed to go on a road in history” when it starts shipping next month. Tesla’s profit margins in the latest quarter were also held down by $267m in stock-based compensation paid to Mr Musk, tied to the giant pay package that was approved by shareholders three years ago. The weaker margins highlight the urgency for Tesla of lifting global sales before a new wave of competition hits the electric car market, said Nicholas Hyett, an analyst at Hargreaves Lansdown. Profits from sales of regulatory credits are also likely to fall, adding to the pressure, he added. In the latest period Tesla generated $401m from sales of credits, accounting for the bulk of its $575m of operating profits.  Meanwhile, Mr Musk told analysts that he believed the massive run-up in Tesla’s share price over the past year was justified by the company’s autonomous vehicle software — and that, if anything, both stock market investors and car buyers were underestimating the importance of the technology. Tesla’s shares have risen tenfold since March last year to value the company at $816bn. The strong rally was underpinned by its success at maintaining its production and sales growth last year, at a time when other carmakers were struggling — though the latest earnings news trimmed 5 per cent from its share price late on Wednesday. According to Mr Musk, even a conservative estimate suggested self-driving capability would make Tesla cars “twice as useful”, as they become robotaxis and generate income for their owners. That meant that, based on car sales of “$50bn or $60bn”, the software could double Tesla’s revenues, with all the extra money showing through as profit, the Tesla chief said. “I think there is a way to justify the valuation of the company where it is with just the cars and nothing else,” he added. Mr Musk also claimed Tesla would perfect its self-driving software this year, and that it had had “preliminary discussions” about licensing the technology to other carmakers once it has been proven to work. The company has failed to hit deadlines in previous years when Mr Musk has made similar promises. The carmaker had already reported a solid fourth quarter for new vehicle deliveries, contributing to a strong share price rally at the start of the year that has extended the gains from 2020. It posted better than forecast revenues of $10.74bn for the quarter, up 46 per cent year on year. However, pro forma earnings per share rose 95 per cent, to 80 cents, short of the $1.01 Wall Street had been expecting. Its operating profit margin of 5.4 per cent was up from 4.9 per cent a year ago, but down from the 9.2 per cent of the third quarter of 2020. Tesla’s quarterly net income rose to $270m from $105m the year before. Based on formal accounting rules, including stock-based compensation, earnings rose 118 per cent to 24 cents a share.
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One of the most popular privacy-centric messaging applications Signal has seen explosive growth during the last two months over things like the Whatsapp acquisition and the recent Big Tech censorship. According to a number of reports, the company has been experimenting with monetization and more recently Signal has been reportedly testing the crypto network Stellar. The mobile company called App Annie detailed at the end of 2020, Signal had around 20 million active users a month. Following the announcement that Facebook was acquiring Whatsapp and changing its privacy terms, there’s been a mass exodus toward privacy-centric messaging apps like Telegram and Signal. News.Bitcoin.com reported on Telegram’s colossal growth recently surpassing 500 million active users. Data from Sensor Tower details that alongside Telegram’s swelling, Signal saw the privacy messaging app downloaded 7.5 million times in four days between January 6 and January 10. A few reports this week have disclosed that Signal is experimenting with cryptocurrencies and may even introduce its own coin. The tech newsletter called Platformer said that Signal was toying with a Stellar derivative called Mobilecoin, which is a token built using the Stellar blockchain. Moxie Marlinspike the CEO of Signal, was once an advisor for the Mobilecoin project. However, according to the recent Platform report, Signal employees are leery of adding a cryptocurrency and have said that it could cause unwanted regulatory scrutiny. For instance, Telegram had regulatory issues with the U.S. SEC after creating its own cryptocurrency and Facebook’s digital asset was also scrutinized heavily. Other messaging apps like China’s Wechat already leverages crypto asset payments. Still, a few employees and former Signal staff members are not impressed by the move. “The world needs products like Signal but they also need Signal to be thoughtful,” Gregg Bernstein, a former Signal researcher explained to the Platformer. At press time, stellar (XLM) is the 12th largest blockchain in terms of market cap, and is swapping for $0.24 per unit on Wednesday. Data from Coingecko shows that mobilecoin (MOB) token is exchanging hands for $3.55 per unit, and is up 12% today while most coins are down. There’s currently $1.3 million in 24-hour MOB global trade volume today with FTX Exchange’s MOB/USDT and MOB/USD markets dominating. What do you think about Signal possibly adding a cryptocurrency and experimenting with the Stellar blockchain? Let us know what you think about this subject in the comments section below. Tags in this story App Annie, Cryptocurrency, Facebook, FTX Exchange, MOB, Mobilecoin, Moxie Marlinspike, Platformer, Sensor Tower, Signal, Signal Messenger, Stellar, Stellar Blockchain, Stellar XLM, Telegram, trading, WeChat, WhatsApp, XLM Image Credits: Shutterstock, Pixabay, Wiki Commons Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article. Read disclaimer
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A “short squeeze” that started on Wall Street swept across the globe on Wednesday, triggering another day of frenetic upward moves in the share prices of previously-unloved companies, followed by a dramatic plunge in after-hours trading when a popular Reddit message board went dark. The dramatic moves highlight the growing influence of retail traders, who have organised on Reddit. Their success in pushing up stocks that are the subject of large short bets by hedge funds has led them to target a growing number of companies on both sides of the Atlantic. Jen Psaki, the White House press secretary, said the Biden administration was “monitoring the situation” as shares of companies including the retailer GameStop, the hard-hit cinema owner AMC and tech pioneer BlackBerry whipsawed. Moderators of the Wallstreetbets subreddit, which has now amassed more than 3.6m subscribers, temporarily restricted access late on Wednesday after becoming overwhelmed by new posts. The decision — flashed in red headlines on financial terminals across Wall Street — sent GameStop and other shares careening lower in after-hours trading before the moderators of the page reopened the site to viewers. In a post on the page, they complained that their own software was unable to handle the flood of comments quickly enough. “We’re suffering from success,” the moderators said, adding that they were also being impersonated on Twitter. Separately on Wednesday, Discord, a live chat platform popular among gamers, shut down its own wallstreetbets discussion channel altogether — though it said this was “for continuing to allow hateful and discriminatory content after repeated warnings [rather than] due to financial fraud related to GameStop or other stocks”. GameStop shares tumbled as much as 38 per cent before the Wallstreetbets subreddit reopened to non-members, more than halving those losses when it reopened, as traders in Asia began their day. The company remains more than 1,400 per cent higher for the year. As day-traders on Reddit have found success, they have moved en masse to a growing number of securities. Stocks such as US home goods retailer Bed Bath & Beyond, Finnish telecoms group Nokia, German pharmaceuticals company Evotec, former Financial Times owner Pearson and Polish games developer CD Projekt climbed sharply in intraday trading on Wednesday. The gains stood in stark contrast to a broad market decline triggered by concerns about the rollout of vaccines and pandemic risks to the global economy. The US S&P 500 index and tech-heavy Nasdaq Composite both slid 2.6 per cent. “It’s like a wolf pack seeking out the weakest member of the herd,” said Steve Sosnick, chief strategist for Interactive Brokers. The flash rallies prompted TD Ameritrade to put trading restrictions in place for several securities, including GameStop and AMC. The company said the limits could include restricting short sales or requiring 100 per cent margin for certain trades, moves it said would mitigate risks for itself and its clients. The Securities and Exchange Commission on Wednesday said it was aware of the volatility across equity and options markets and it was “working with our fellow regulators to assess the situation and review the activities of regulated entities, financial intermediaries, and other market participants”. Some of the companies whose shares surged were targets of Melvin Capital, a hedge fund that has been singled out by day traders. Those included Evotec, which was up 9.6 per cent; CD Projekt, which rose 5.3 per cent; and the German battery manufacturer Varta, which rose 12 per cent before trimming its gains to trade up 6.2 per cent. Melvin on Wednesday revealed it had closed its GameStop position, having sustained a multibillion-dollar loss on its shorts since the start of this year. Retail investors were using “a tried-and-true hedge fund strategy of swarming crowded trades held by weak-handed investors”, said Andrew Beer, managing member at fund firm Dynamic Beta Investments. In contrast to the US, which has limited disclosure on short bets, hedge funds and other investors have to disclose when they have shorted more than 0.5 per cent of a company’s stock in the EU and the UK, making it easier to target a fund’s positions. Melvin’s latest disclosure shows it has bet against more than 6 per cent of Evotec’s shares, making it the largest single wager against a European company by percentage of shares shorted, according to the data provider Breakout Point. The US hedge fund’s bet against Varta is the fifth largest. The “short squeeze phenomenon fuelled by retail investors’ discussions is spilling over to Europe”, said Ivan Cosovic, founder of Breakout Point. “We are recently detecting some European stocks being touted as ‘the next GameStop’ among retail investors.” One European hedge fund manager who specialises in short selling described the recent stock market rallies as “insane”, but said the elevated share prices of troubled companies would “make a great opportunity” for short sellers that survived the week’s mayhem. Additional reporting by Patrick Temple-West
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Apple reported its highest-ever net profit in the holiday quarter as revenues swelled way beyond forecasts to $111.4bn on the back of a 57 per cent rise in sales in Greater China. Apple’s net profits rose 29 per cent to $28.8bn, against forecasts it would rise 6.3 per cent, while earnings per share jumped 35 per cent to $1.68. Forecasters expected revenues of about $102bn. All five of the $2.4tn company’s product categories grew at double-digit percentages, led by a 41 per gain in iPad sales and a 30 per cent climb in wearables, which include AirPods and the Apple Watch. The iPhone, by far its biggest category, generated sales of $65.6bn, a 17 per cent gain that far outpaced analyst expectations of a 6 per cent rise. iPhone sales accounted for 59 per cent of total revenues, an unexpectedly high figure after the company experienced supply constraints and a delayed launch for the 5G-enabled iPhone 12. Revenues from “everything-but-the-iPhone” rose 28 per cent, a new record that underscores the success of the Mac, AirPods, and Apple Watches, as well as how relatively small fees for its services — such as the $9.99 monthly cost for Apple Music — add up when marketed to 1bn iPhone users. “We couldn’t be happier with the December quarter and we couldn’t be more optimistic about the future,” Luca Maestri, Apple finance chief, told the Financial Times. One disappointment for investors is that Apple declined to offer any guidance for the March quarter, citing uncertainties around the pandemic. “It becomes very easy for things to get really difficult, really quickly,” Mr Maestri said, adding that many Apple stores remain closed in the Americas and Europe. Nor did Apple release a new forecast for how its services division will grow in next few years, having attained its previous goal of doubling service revenues between 2016 and 2020 six months ahead of schedule. In Greater China, revenues surged 57 per cent to $21.3bn. “There was probably some level of pent up demand for 5G iPhones in China and so we’ve seen phenomenal results there,” Mr Maestri said. All other geographic segments set record highs, too, with revenues in the Americas up 12 per cent per cent to $46.3bn, European revenues up 17 per cent to $27.3bn, Japan revenue up 33 per cent to $8.3bn, and the rest of Asia up 11 per cent to $8.3bn.
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The American Cancer Society has set up a fund for crypto donations so the nonprofit can raise at least $1 million by early 2021. Together with The Giving Block, the U.S.-based voluntary health organization expects to collect funds via several cryptocurrencies. Donations to Fund Cancer-Related Research Plummeted 50% in 2020 According to the announcement, the […]
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Uniswap’s decentralized exchange has emerged as one of the critical pieces in the decentralized finance sector, with the DEX benefiting from the first-mover advantage after it became the go-to exchange for new projects and traders in 2020.  In late 2020, 400 UNI tokens were distributed to all wallet addresses that previously provided liquidity on the platform at at its peak thhe impromptu airdrop was worth north of $3,500. By late October of 2020 the DeFi market has sold-off sharply and this pinned UNI price below the $4.00 mark for weeks but since the start of 2021, UNI token has gained 335% and reached a new all-time high at $15.35 on Jan. 27. UNI/USDT 4-hour chart. Source: TradingView At the moment, the driving forces behind the rise in the price of UNI are an increase in daily volume transacted on the platform, the rise in the platform’s total value locked, and the roll-out of governance features as the Uniswap v3 launch approaches. Total value locked continues to rise Monitoring the total value locked (TVL) of a DeFi protocol is one of the primary metrics used to determine its legitimacy and how involved the community. A rising TVL indicates that users of the platform trust the platform enough to deposit their funds to earn rewards and it typically means that the liquidity pools are more competitive than other exchanges in the sector. The Uniswap platform recently established a new all-time high TVL of $3.16 billion on Jan. 24, and this was boosted by an increase in the price of many of the top cryptocurrencies as well as popular DeFi tokens. Total value locked in Uniswap. Source: Defi Pulse Uniswap is now the top-ranked DEX in terms of TVL, and when it comes to lending the platform ranks fourth as Maker (MKR), AAVE and Compound (COMP) lead in this area. Uniswap's trading volume competes with the top centralized exchanges A second driver of UNI’s recent surge is the sharp rise in trading volume on the exchange. Data from Uniswap shows the DEX’s daily volume is consistently above $400 million since the beginning of 2021 and the metric surged to a new high at $1.3 billion on Jan. 11. This level of volume now places Uniswap in competition with some of the top centralized exchanges in cryptocurrency. Uniswap 24-hour volume. Source: Uniswap Transactions on Uniswap also surpass those of its direct competitors and data from Dune Analytics shows that in early 2019 the main competitors were Kyber Network and IDEX. Monthly DEX volume. Source: Dune Analytics Since that time the number of DEXs has continued to expand but by March of 2020 Uniswap had established itself as the preferred choice for traders and it has remained the dominant DEX into 2021. Excitement surrounding the v3 rollout bolsters UNI price While many airdrop recipients were elated to sell their tokens shortly after receiving them, those who chose to hold on to them now have the ability to receive extra benefits with the addition of governance features. The Uniswap Treasury currently has $500 million in it and recently Uniswap founder Hayden Adams asked the community “what are some of the most impactful ways governance can allocate this UNI?” As the list of delegates for the Uniswap platform continues to grow, demand for UNI token is likely to increase as more UNI are locked on the platform for governance purposes. Excitement around the upcoming Uniswap v3.0 continues to build and in addition to new governance features, solutions for the high gas fees and improvements to the impermanent loss structure are expected. The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
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S&P Global says cryptocurrencies have become mainstream and appear to be here to stay, as more companies are offering crypto services and adoption is growing worldwide. Meanwhile, an S&P analyst believes that bitcoin’s rise is reminiscent of the U.S. gold rush. S&P Global Says Bitcoin Has Become Mainstream Financial information and analytics firm S&P Global released a special report on the current condition of cryptocurrencies last week. It states: Once considered an alternative trend, cryptocurrencies have become mainstream and appear here to stay. The report references a number of factors, such as legacy banks taking “a closer look at the asset class that could be integrated into the products and services offering” and companies like Paypal beginning to offer cryptocurrency services. Crypto adoption is also growing in countries where people “seek to protect their income against inflation and currency controls” or for faster and cheaper remittances. In addition, Jim Wiederhold, S&P Global’s associate director for commodities and real assets, authored an opinion piece about bitcoin last week. He wrote: The recent enthusiasm for bitcoin is reminiscent of the Gold Rush in the western U.S. from 1848-1860 … U.S. enthusiasm for gold exploded over this time period. The analyst explained that “Recently, the parallels between the two assets have grown.” He noted that both are scarce, “have the potential to be held outside of conventional financial markets,” and are good inflation hedges. In addition, they are “uncorrelated to other popular asset classes in portfolios.” However, he pointed out that bitcoin’s volatility over the past five years is multiple times higher than other asset classes. Pointing out the differences between gold and bitcoin, including the supply limit, he continued, “Concerns of bitcoin theft were rampant a few years ago; though as bitcoin becomes more mainstream, these worries are fading. Although lingering technology and exchange counterparty risks remain.” The analyst concluded that while gold is a more established asset, bitcoin “is in its infancy, but it is slowly becoming more easily accessible to mainstream investors.” According to the S&P Global special report: Cryptocurrency may appear to be a niche or experimental segment for these companies, but industry experts say they are treating it with increasing seriousness. Do you think bitcoin has become mainstream? Let us know in the comments section below. Tags in this story Image Credits: Shutterstock, Pixabay, Wiki Commons Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article. Read disclaimer
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Illinois avoided the grim, early COVID-19 tax loss warnings as a recovery began quicker than expected thanks to federal stimulus and changes in consumer spending, a University of Illinois pandemic task force found. The net effect of revenue losses from the pandemic through November totaled $801 million for the state’s “big three” sources: personal and corporate income taxes and sales taxes. The number rose to $868 million when counting other general fund revenue streams with the loss across the general and all other state funds totaling $1.45 billion, according to the report from the University of Illinois System's Institute of Government and Public Affairs’ special task force on the pandemic’s impact. State coffers sunk in April and May as the state suffered big job losses, shut-downs under a stay-at-home order, and extended the income filing deadline to July from April. The report — titled “Data Indicate COVID-19 Impact on State Revenue Not as Severe as Feared” — takes a deep dive into the impact on tax revenue through November. In early April, the group warned the state could see as much as a $4.8 billion blow in fiscal 2020 to its major taxes with deep losses continuing into fiscal 2021. Recent revenue reports and forecasts from some other states — such as Michigan which trimmed anticipated losses in its forecast last week — have also shown tax collections didn't fall as dramatically as originally expected. "There was a general funds revenue loss in fiscal year 2020, but much of that was caused by the delay of the federal tax filing deadline,” said Kenneth Kriz, director of the Institute for Illinois Public Finance. The state in April released estimates that warned of a $2.7 billion tax loss in fiscal 2020. Gov. J.B. Pritzker’s budget office has since revised those figures as has the legislature’s Commission on Government Forecasting and Accountability. The state is grappling with a $3.9 billion gap this year. Half is due to the pandemic’s impact and the other due to structural budgetary strains. “There was a general funds revenue loss in fiscal year 2020, but much of that was caused by the delay of the federal tax filing deadline,” said Kenneth Kriz, the director of the university’s Institute for Illinois Public Finance and faculty lead for task force’s Economic and Fiscal Impact Group. “Well over half of that revenue loss has been recouped in fiscal year 2021, and general funds revenues are actually running above what might have been expected for fiscal year 2021.” The $868 million loss to the general fund from the start of the pandemic through November amounted to 2% of general fund revenues, much better than early economic predictions of an up to 20% hit. The task force too had warned of deeper losses in an earlier report. The economic recovery picked up speed quicker than expected, bolstered by the infusion of federal aid from the CARES Act signed on March 27 and other stimulus programs. “There was a steep fall in spending in most categories in April and May, then a recovery toward pre-COVID-19 levels. Spending has not recovered completely, but it is near what it likely would have been in the absence of COVID-19,” Kriz wrote. During May and June, people began to adapt their behavior to the changing circumstances. Once retail establishments and restaurants began curbside pickup services, sales rose. Federal relief programs pumped billions into the economy through stimulus checks and Paycheck Protection Program loans and credits, and acted as a catalyst for increased spending, the report said. The varying impact, depending on income, also influenced the data as labor market losses hit low-income households hardest but that had a lesser impact on metrics than if upper income households had been hit harder. Higher income households held steady or improved. “Aggregate incomes and consumption have continued to grow, leading to stable or increased state revenue,” Kriz wrote. The report warns of “tremendous uncertainties” that lie ahead and could dampen the recovery. “If the virus surges again and the economy must be locked down, there will be another round of revenue losses,” he said. Whether economic predictions of 2% to 2.5% growth rates this year will be achieved depend on the pandemic’s course, vaccine rollout timelines, and political risks. “Despite the good news on the revenue effects of COVID-19, the state faces other budget challenges,” the report said. Some of those pre-pandemic challenges include an ongoing structural budget gap, $141 billion pension tab, a $5 billion bill backlog, and the failed constitutional amendment question on the November ballot to move to a progressive income tax rate structure. Pritzker was banking on passage of the amendment to raise $3 billion more annually and federal relief to help close the budget gap. The state borrowed $2 billion through the Federal Reserve’s short-term lending program, which must be repaid in three years. The prospects for aid is improved under the Biden administration but that won’t deal with the state’s long-term pressures.
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Moody's Investors Service has revamped the way it rates K-12 school districts, which is likely to bring rating changes to hundreds of school districts across the country. When it announced its new rating methodology Tuesday, Moody's placed 637 of the roughly 3,400 school districts it rates on review for upgrade or downgrade, affecting $65 billion of debt. The new Moody's Investors Service rating methodology for K-12 education creates distinct rating criteria for school districts. Bloomberg News Of those, Moody's said, 304 school districts are being evaluated for possible upgrade, 236 could be downgraded and 97 are on review with the rating direction uncertain. The rating agency also upgraded 85 school districts. The remainder will be assigned issuer ratings in coming months. Moody’s doesn’t anticipate a wave of multi-notch upgrades or downgrades, but it ultimately depends on how things shake out when the rating agency analyzes individual school districts. Each school district under review will be analyzed individually based on their unique features to determine whether they will receive an upgrade, downgrade or retain their current rating, said Eva Bogaty, a Moody's vice president. It's unlikely to create many multi-notch swings, she said. “Not to say it couldn’t happen, but it would be a small minority.” The school districts were chosen for review because when Moody’s analysts ran the data on those school districts, against the newly developed scorecard developed, they were either indicating a higher or lower rating, Bogaty said. “We introduced some new analytics and those drove the outliers.” Under the new guidance, analysts will use different criteria to rate school district debt than the rating agency uses to rate local government debt. “Previously school districts fell under our general obligation bond or lease revenue methodology,” Bogaty said. “This is really carving them out to their own distinct methodology.” The new rating criteria recognizes, for instance, the impact that enrollment changes have on school districts as much of their funding is based off those numbers, which is not the case for other GO or lease revenue debt, Bogaty said. The new methodology involves creating an “issuer rating” that all the other school district debt will be arrayed around, Bogaty said. “We are assigning an issuer rating based on the fundamentals of school districts,” she said. “We would then rate the securities in a notched fashion based off the issuer rating.” The issuer rating would be based off factors including the school district’s finances, the economy, debt obligations and the institutional framework, she said. Moody’s has upgraded the general obligation unlimited tax bond ratings of 85 school districts and assigned them issuer ratings. Of these 85, eight have certificates of participation ratings that Moody’s has affirmed. Debt that has additional security features, like a lockbox feature, would receive a one-notch lift above the issuer rating. For instance, in California, Arizona and Colorado GOULT debt issued by school districts is secured by statute and has a lockbox feature protecting bond payments, she said. The ratings boost reflects that those financial instruments carry additional security features such as a lockbox insuring that money used to repay the bonds is separate from operations. So, those bonds could be viewed more favorably than the separate issuer rating assigned to the school districts, which are based on school district finances, and other factors. The affirmation of the ratings on the certificates of participation, one notch below the newly assigned issuer rating, reflects the contingent nature of the obligations, which are subject to appropriation, and the more essential nature of the financed school district facilities or assets.
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A worker wearing a protective face mask operates a forklift to move boxes of face shields ready for shipment at the Cartamundi-owned Hasbro manufacturing facility in East Longmeadow, Massachusetts, April 29, 2020. Adam Glanzman | Bloomberg | Getty Images The economy continued to chug along in the fourth quarter, boosted by a surge in business spending while consumers held back. Fourth-quarter gross domestic product is reported at 8:30 a.m. ET Thursday. It's expected to show the economy grew at a 4.3% pace from the prior quarter on an annualized basis, according to Dow Jones. Year-over-year, the economy is expected to have contracted 3.5% in 2020, according to the CNBC/Moody Analytics Rapid Update survey of economists. It was a year that saw a record pandemic-induced plunge in activity and a sharp snapback. The economy grew by 33.4% in the third quarter, after the second quarter's sharp contraction of 31.4% The first quarter was also hit by the pandemic, contracting by 5%. Economists are watching the fourth quarter report for clues on how the economy entered the first quarter, and how hard the pandemic shutdowns impacted activity at the end of the fourth quarter. "There might be enough in it to assure people that it's not going negative in the first quarter," said Chris Rupkey, chief financial economist at MUFG Union Bank." Consumer spending was negative three months in a row." "A lot of what we're seeing is inventory build up," he added. "Inventory build up could be responsible for two or three percentage points. It's still growth, but it's not sustainable growth. It was at a low level and now it's rebuilt." Rupkey expects the economy grew by 5% in the fourth quarter, and he forecasts the first quarter could grow by 3.5%. "It's a little more in the rearview mirror because we're wondering what's going on in the first quarter, and we're wondering whether the stimulus is going to lift the economy enough to avoid a negative quarter," Rupkey said. He said the $600 stimulus checks sent to individuals should help first-quarter consumption. Barclays economists said the durable goods report Wednesday shows that business spending was strong in the fourth quarter. "These estimates bode well for continued strength in business investment in the current quarter and in Q4," the economists wrote. They now estimate a 27.4% increase in the fourth quarter over the third quarter in business equipment spending, up from 21.4% before the latest durable goods report. "December's core capital goods numbers put equipment investment on track for another robust gain in Q4 2020, and imply solid carryover effects for the rate of increase in the first quarter," the economists noted.
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Florida's First District Court of Appeal will hear oral arguments on Feb. 9 in the lawsuit over the state's attempt to abolish the Miami-Dade County Expressway Authority. The court will hear arguments via video teleconferencing, according to a court filing. "The argument is scheduled before Judges B. Thomas, Osterhaus, and M. K. Thomas, but the panel is subject to change," the court said in its posting. "The court has allotted 20 minutes per side. Multiple appellants or appellees must share the allotted time and must notify the court at the beginning of oral argument how their side’s time will be divided." The SR 826 Dolphin Expressway is part of a toll road system operated by MDX. Bloomberg News The state Department of Transportation and House of Representatives have been appealing a 2019 decision by Leon County Circuit Judge John Cooper that said the state overstepped its authority in trying to abolish the agency, also known as MDX, and replace it with a newly created Greater Miami Expressway Agency, or GMX. Cooper ruled the bill passed by the House and signed by Gov. Ron DeSantis to dissolve MDX violated the state constitution because it preempted Miami-Dade County's home rule power. FDOT and the Florida House have filed an appeal asking the appellate justices to overturn Cooper's ruling. The appeal stayed Cooper's ruling and prevented the MDX board of directors from meeting or overseeing the authority’s work programs. MDX operates a 33.6-mile expressway system. It includes the 15-mile-long Dolphin Expressway, which links the western parts of Dade County and the Miami International Airport to downtown Miami and Miami Beach. The authority also operates four other toll roads in the county. According to the agency's latest financial report, MDX had $1.5 billion of toll revenue bonds outstanding as of June 30, 2020.
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Facebook's logo displayed on a phone screen and keyboard. Jakub Porzycki | NurPhoto via Getty Images Check out the companies making headlines after the bell: Facebook — Shares of the social media giant was down more than 4% in after hours trading on Wednesday following its quarterly results. Earnings came in at $3.88 per share, 66 cents above estimates, according to Refintiv. Facebook made $28.07 billion in revenue, higher than the forecast $26.44 billion. The company said that it benefited in 2020 by a shift toward online commerce but warned that these trends may moderate or reverse and "could serve as a headwind to our advertising revenue growth." Facebook also warned about the looming changes in Apple's iOS 14. Tesla —  Shares of the electric vehicle maker slid 2% after Tesla missed fourth quarter earnings expectations. The company reported earnings per share of 80 cents on an adjusted basis, compared to the $1.03 per share expected by the Street. Revenue did, however, top expectations, coming it at $10.74 billion versus the consensus estimate of $10.4 billion. GameStop, AMC Entertainment — Shares of GameStop and AMC Entertainment dipped 5% and 15%, respectively in extended trading after major rallies during the session fueled by retail investors. Shares of GameStop closed up 134.8% and shares of AMC Entertainment gained 301.2% on Wednesday. Levi Strauss — Shares of the jeans maker rose more than 1.5% in extended trading after beating on the top and bottom lines of its quarterly earnings. Levi reported earnings of 20 cents per share on revenue of $1.39 billion. Analysts forecast earnings of 15 cents per share on revenue of $1.34 billion, according to Refinitiv. Las Vegas Sands — Shares of the casino operator gained more than 1% in after hours trading following its earnings report. Las Vegas Sands posted a loss of 37 cents per share, compared to the loss of 32 cents per share expected on Wall Street, according to Refintiv. Revenue also missed estimates. — With reporting from CNBC's Pippa Stevens.
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Helium is a decentralized blockchain-powered network designed to allow low-powered wireless devices to communicate with each other and send data across its network of nodes. Since July 2020, Helium’s native token, HNT, has increased 550% in value from $0.35 to a 2021 high of $2.25 on Jan. 25 as fundamentals for the network continue to improve. Three reasons why HNT is poised for continued growth are the increasing size and coverage of its node network, the ease of running a node for passive income, and the growing number of partnerships Helium has brokered. HNT/USDT 4-hour chart. Source: TradingView A growing network of nodes Helium was founded in 2013 by Amir Haleem, Shawn Fanning and Sean Carey with the goal of creating a “People’s Network” specifically designed to improve the communication capabilities of wireless Internet of Things (IoT) devices. Since launching its mainnet in July 2019, the network has seen steady growth in the number of active nodes and companies utilizing the Helium blockchain for IoT data transfers. Data from Helium’s website shows there were 3,271 active hotspots at the end of April 2020. As of Jan. 26, there are 17,178 active nodes, a 525% increase over the last 9 months. Helium network coverage map. Source: Helium Demand for hotspots was so great that Helium sold out of units in North America and Europe, prompting several companies to create compatible devices, like the RAK Hotspot Miner or the Bobcat Miner from EasyLinkIn. The emergence of multiple companies offering hardware that is compatible with the Helium network bodes well for the continued expansion offered by the company. Easy node operation for passive income Setting up a cryptocurrency mining rig or operation is no easy task. The technical know-how is high, and the funds required to develop new mining equipment that is energy efficient is quickly pricing out the average miner. HNT miners only need an internet connection, a smartphone and a hotspot miner. The hotspots are a combination of a wireless gateway and a blockchain mining device that allow users to mine and earn rewards in the form of the native HNT token. The ease of mining HNT is likely one of the driving forces behind the network’s adoption. New partners join the network Aside from price action, engagement with the actual project and its blockchain is fundamental to the success of any blockchain network. The cryptocurrency sector is full of "ghost chains" that have little to no activity on them to justify the value of their tokens, and aside from bot-driven trading, many of the projects are illiquid. A quick glance through Helium’s Twitter feed indicates that the engagement on the network is seeing steady growth as new partners are added to the network on a weekly basis. Some of the recent partnerships include Nobel Systems, a company that hosts a parking app that monitors parking spot availability, and Airly, a company that operates a system that monitors global air quality. Helium also formed a partnership with NOWi, a company that operates a network of sensors that alert property owners when leaks and abnormal water use is detected. The use of IoT and smart devices is likely to increase in 2021, and Helium’s numerous new partnerships and the strong performance of HNT indicate that the project is well positioned to take advantage of this trend. The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
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As more jurisdictions explore the potential utility of blockchain technology and cryptocurrency, one American mayor suggested that she backs Chainlink — the most widely used oracle network for powering connected smart contracts.  When Miami Mayor Francis Suarez announced that his municipality’s website would host Satoshi Nakamoto’s Bitcoin (BTC) white paper, Mayor Hillary Schieve of Reno, Nevada asked her colleague when he would become a LINK Marine — a popular term to describe supporters of Chainlink's oracle network. “The City of Miami believes in Bitcoin,” Suarez said, adding that he’s “working day and night to turn Miami into a hub for crypto innovation.” Part of Schieve’s response includes: “When are you going to become a LINK marine?” Nice work my friend. We should explore a city coin with @usmayors.My next question is when are you going to become a $LINK marine? — Mayor Hillary Schieve (@MayorSchieve) January 27, 2021 Chainlink's LINK asset has emerged as an influential altcoin in recent months. Ranked seventh by total market capitalization, LINK is positioning itself as a major catalyst for digital-asset innovation and adoption. Schieve, who isn’t affiliated with any political party, has held the post of Reno mayor since 2014. She also appears to be a long-term supporter of cryptocurrency, going as far as making plans to accept crypto donations during her 2018 reelection campaign: Can i make a campaign contribution in #cryptocurrency ? — Coingorilla (@Coingorilla1) May 16, 2018 Her Twitter bio includes: “Passionate about tech, government, and anything entrepreneurial.” Miami Mayor Suarez has become one of the most vocal proponents of digital assets. As Cointelegraph reported last month, Suarez has been learning more about Bitcoin through influential figures like Tyler Winklevoss and Anthony Pompliano. He called Bitcoin a “stable investment during an incredibly unstable year.”
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The Federal Reserve will keep rates low and continue purchasing securities “until the recovery is complete,” Board Chair Jerome Powell said Wednesday. He later added, “we’re a long way from a full recovery,” suggesting the low rates and asset purchase levels won’t change in the near term. The municipal market was little fazed by the Fed news and firmed by another two basis points Wednesday. The FOMC will shrug off inflation readings it considers “transitory,” and won’t change monetary policy until inflation meets its 2% goal on an average, he said. “There has been growing concern over the prospect of tapering asset purchases, which we think is premature,” said Marvin Loh, senior global macro strategist at State Street Global Markets. State Street projects the Fed won’t taper before the middle of 2022, and the Fed will let markets know well in advance. Federal Reserve Board Chair Jerome Powell Bloomberg News Powell reiterated the Fed will be “transparent” and communicate any changes well in advance, but discussing “an exit” now is “premature.” After growth in the summer, Powell said “prices have leveled out recently” and the “economy has been more resilient than expected." Also, vaccines and fiscal policy suggest “an improved outlook for later this year.” The Fed will ignore short-term spikes in inflation, Powell said in his post-meeting press conference, noting he expects “transient” jumps in March and April, based on low readings in those months in 2020 and a “burst of spending” once the pandemic is over, which will not cause the Fed to act since those gains are “likely to be transient and not large.” He said, “troubling inflation” levels appear “unlikely.” While inflation may “surge” in the spring, with big jumps in April and May, inflation on a sustained basis should not reach 2%, the Fed’s target, before next year, Frances Donald, global chief economist of Manulife Investment Management, said earlier Wednesday. The Federal Open Market Committee at its meeting, which ended Wednesday, decided to hold rates near zero and committed to continue purchasing at least $120 billion of securities a month, as the economy and employment “has moderated” recently. The panel noted “weakness concentrated in the sectors most adversely affected by the pandemic” in its post-meeting statement, and again said it is prepared to use all of its tools, as needed. Employment is a concern for the Fed. “In his press conference Powell pointed out that nine million remain unemployed from the pandemic, which is more than the total number of lost jobs in the great financial crisis,” said Steve Skancke, chief economic advisor at Keel Point. “He added that when we include those who left the labor force as a result of the pandemic, the U.S. unemployment is 10%.” But inflation is not yet a worry, as “weaker demand and earlier declines in oil prices have been holding down consumer price inflation," the FOMC post-meeting statement noted. But in the press conference, Powell wouldn't suggest "a formula" to determine "an acceptable level of inflation," Skancke said, and "the FOMC would use its judgment," and "the Fed knows how to constrain inflation should it get ahead of where they’d like it to be." The statement was also tweaked to note that not only “the course of the virus,” but progress on vaccinating Americans will determine how the economy grows. “The Fed’s biggest concern is keeping the economy afloat until we reach a point of broad vaccinations, increased mobility and the return of broad based economic activity,” said State Street’s Loh. “Until then, the Fed will keep policy supportive and judge the pace of growth as it occurs in the second half of 2021.” Adding vaccines and removing a note about medium-term risks to the outlook suggest a “more concentrated nature of recent pandemic related weakness,” said Brian Coulton, Fitch chief economist. “That said, we are unlikely to hear talk about tapering until well into the second half of the year.” “Market participants remain uncertain regarding how to interpret the Fed’s asset purchase intentions — and are wary of another quick move in rates — should the economy rebound strongly in the second half of this year,” said Mortgage Bankers Association SVP and Chief Economist Mike Fratantoni. “MBA does indeed forecast for faster economic growth, given the positive news in recent weeks regarding improved vaccine deployment.” It is unclear, he said if “a burst of inflation, and a quick drop in the unemployment rate [would] be sufficient enough to cause the Fed to at least begin thinking about slowing their asset purchases.” If the Fed were to consider a taper, markets would react before the Fed moved, he added. “While the economy remains challenged, Chairman Powell did indicate several developments that could lead to an improved outlook for later this year,” noted Gary Zimmerman, CEO of MaxMyInterest. “We believe that increased consumer savings rates and pent-up demand could lead to inflationary pressures in the second half of 2021, prticularly in travel, hospitality, and other industries that have been ravaged by the pandemic. It will be important to keep a close watch on measures of inflation and unemployment, as these are the key drivers that could impact the timing and path of future rate increases." The Fed also said it will end overnight repo operations in February, a signal of recovery in short-term dollar funding markets. Munis strengthen and flows hit records The municipal market shrugged at the Fed news and triple-A benchmarks firmed by another two basis points Wednesday as a few large new-issues saw immense demand and re-priced by double-digit basis points. The Investment Company Institute reported another $3 billion-plus of weekly inflows, marking the highest inflows since the summer of 2005. Muni yields in the 10- and 30-year are inching closer to the record lows of August 2020. Treasuries were lower on the day and muni ratios hovered around Tuesday's levels. Municipals as a percentage of Treasuries held at 70% in 10 years and 78% in 30 years, according to Refinitiv MMD. Ratios fell one basis point to 69% in 10 years and to 79% in 30, according to ICE Data Services data. The long end of the municipal market rallied slightly in conjunction with Treasuries, in the second day of market strength. “The market opened up firm this morning after yesterday’s rally with good follow through during the day,” Robert Roffo, a managing director and portfolio manager at SWBC Investment Company said on Wednesday. “Both the secondary and primary markets are seeing strong demand regardless of the rich or cheap valuations along the yield curve,” he said. “The municipal bid side is two to three basis points stronger today driven by the unexpected strength in the Treasury market where the 10-year Treasury has rallied about five basis points directly related to the equity sell off,” a New York trader said Wednesday. He said market technicals remain strong with a light calendar versus positive cash inflows into the market, however suggested that next week’s calendar will see the arrival of two deals of $1 billion or higher in New York, which should cater to the hearty investor appetite. Primary marketBarclays Capital Inc. priced $807 million of Los Angeles International Airport revenue refunding bonds for the Department of Airports of the City of Los Angeles (Aa3/A+/AA-/), upsizing the deal from $664.3 million and reducing yields by as much as 11 basis points in a re-pricing. Series A, $408 million of alternative-minimum tax bonds, saw bonds in 2025 with a 5% coupon yield 0.41%, seven basis points better in re-pricing, 5s of 2026 yield 0.52% (7 bps lower), 5s of 2031 at 1.19% (six lower), 5s of 2036 at 1.53% (3 lower) 5s of 2041 at 1.73% (3 lower), 5s of 2046 at 1.81% (10 bps lower), and 5s of 2051 at 1.87% (10 lower). Series B, $398 million of exempt refunding bonds saw 5s of 2025 yield 0.20% (5 bps lower), 5s of 2026 at 0.24% (10 lower), 5s of 2031 0.89% (11 lower), 5s of 2036 at 1.24 (7 lower), 5s of 2041 at 1.46% (11 lower), 5s of 2045 at 1.54% (11 lower), 5s of 2048 at 1.58% (11 lower). J.P. Morgan Securities LLC priced $560 million of unlimited tax general obligation and refunding GOs for the Board of Education of the City of Chicago (NR/BB-/BB/BBB-/). Bonds in 2021 with a 5% coupon yield 0.80%, 5s of 2022 at 0.95%, 5s of 2030 at 2.07%, 5s of 2031 at 2.16%. Bonds in 2032 with a 5% coupon yield 2.25%, 5s of 2036 at 2.41% and 5s of 2041 at 2.61%. UBS Financial Services Inc. priced an upsized $497 million of taxable general obligation refunding bonds for the Metropolitan Government of Nashville and Davidson County, Tennessee, (Aa2/AA//). Bonds were priced at par in 2021 yield 0.12%, 0.78% in 2026, at 1.486% 2031, and 1.786% in 2034. UBS also priced $131.9 million of tax-exempt general obligation refunding bonds for the issuer with 5s of 2021 yielding 0.07% and 5s of 2026 at 0.34%. Jefferies LLC priced $175 million of taxable limited tax refunding bonds for Williamson County, Texas (NR/AAA/AAA/NR). All bonds were priced at par with 2022s at 0.14%, 2026 at 0.64%, 2031 at 1.486% and 2033 at 1.656%. ICI reports $3.8 billion of inflowsLong-term municipal bond funds and exchange-traded funds saw combined inflows of $3.835 billion in the week ended Jan. 20, the Investment Company Institute reported Wednesday. In the previous week, muni funds saw a revised inflow of $4.037 billion, ICI said. Long-term muni funds alone had an inflow of $3.241 billion in the latest reporting week after an inflow of $3.341 billion in the prior week. ETF muni funds alone saw an inflow of $595 million after an inflow of $697 million in the prior week. Taxable bond funds saw combined inflows of $18.921 billion in the latest reporting week after an inflow of $19.053 billion in the prior week. ICI said the total combined estimated inflows from all long-term bond funds and ETFs were $22.756 billion after an inflow of $23.090 billion in the previous week. Secondary marketHigh-grade municipals were stronger, according to final readings on Refinitiv MMD’s AAA benchmark scale. Short yields were at 0.09% in 2022 and 0.10% in 2023. The 10-year fell two basis points to 0.69% and the 30-year fell to 1.38%. The ICE AAA municipal yield curve showed short maturities fell to land at 0.09% in 2022 and 0.10% in 2023. The 10-year fell two basis points to 0.70% while the 30-year yield fell to 1.40%. The IHS Markit municipal analytics AAA curve showed yields at 0.11% in 2022 and 0.12% in 2023 while the 10-year fell two basis points to 0.69% and the 30-year yield at 1.38%. The Bloomberg BVAL AAA curve showed yields at 0.08% in 2022 and 0.10% in 2023, down one basis point, while the 10-year fell two basis points to 0.68% and the 30-year yield at 1.40% was two basis points lower. The three-month Treasury note was yielding 0.09%, the 10-year Treasury was yielding 1.02% and the 30-year Treasury was yielding 1.79% near the close. The Dow fell 718 points, the S&P 500 fell 2.86% and the Nasdaq fell 2.89%. Economic indicatorDurable goods orders gained 0.2% in December after a 1.2% increase in November, but below the 0.9% rise predicted by economists polled by IFR Markets. Orders were pulled down by the aircraft category, with fewer airplanes ordered as the travel industry remains troubled by decreased customers during the COVID pandemic. Orders for non-defense capital goods excluding aircraft, considered a forecast of business’ equipment spending plans, rose 0.6% in the month after a 1.0% gain in November, and the category is 1.7% higher than a year ago. Christine Albano contributed to this report.
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The bigwigs trading stocks on Wall Street have been upset this week as billion-dollar hedge funds have been crippled by Redditors and memes. Not too long ago, the firm Gamestop’s shares were plummeting, and Wall Street veterans lined up a mountain of short bets against the company’s stock. However, members of the Reddit forum called “Wall Street Bets” discovered the short positions, and subsequently turned things around by purchasing the stock and placing long positions on Gamestop’s shares. On Tuesday, Gamestop’s stock (GME) spiked well over 148%, as GME trade volume outpaced the S&P 500 and almost every stock worldwide. Wall Street Hedge Funds and Gamestop Shorters Suffer from Mega-Short Squeeze Technological and financial decentralization has been quite a thorn to today’s central bankers and Wall Street veterans playing traditional finance games. This week, the ongoing fiasco with Gamestop’s stock (GME) is a tale that highlights how decentralized things are getting on the internet. It all started when the subreddit “Wall Street Bets” invoked a thread about the “endgame” scenario for the company Gamestop. The retail chain has been hurting financially because of Covid-19, as malls are dead and people are shopping at Gamestop far less these days. Now Wall Street veterans and billion-dollar hedge funds decided to look at Gamestop like it was Blockbuster, and further chose to short GME shares significantly. Gamestop (GME) shares on Tradingview. During the opening trading sessions on Jan. 27, 2021, exchanges like E-Trade, Robinhood, TD-Ameritrade, Fidelity Investments, and Charles Schwab suffered from website outages. At the time of publication, GME is swapping for over $350 per share. Despite the mountain of short bets, Redditors on the thread discovered the growing number of short positions, and decided to bring a “short squeeze” to the betting hedge funds and other high-net-worth Wall Street participants. The people who participated in the internet squeeze and the great number of Redditors on the “Wall Street Bets” forum pushed GME shares upwards by refusing to sell the stock for lower prices. “It’s rapidly becoming apparent that we will soon enter the GME endgame. Before you can come up with an exit strategy or, if you’re still on the fence, decide whether to jump in, you need to form an opinion about the GME bull thesis, without considering the short squeeze,” one Redditor said. "The market can remain long longer than you can remain short" – Julius Caesar — WallStreetBets (@wallstreetbets) January 27, 2021 Melvin Capital Shorts Backfire, Bookies Bet Gamestop Will Tap $420 by April One fund that took some extreme losses from this social media ‘Black Swan’ event was the multi-billion dollar hedge fund, Melvin Capital Management (MCM). The “Wall Street Bets” crew discovered that MCM had leveraged a short position worth over $55 million. Now MCM and the great number of Wall Street hedge funds have been the laughing stock on social media, as they have been ridiculed by Redditors and memes. It seems Occupy Wall Street had the wrong approach. — WallStreetBets (@wallstreetbets) January 26, 2021 Cryptocurrency supporters have also been criticizing the bigwig stock traders a great deal as well. Meanwhile, Nasdaq’s Adena Friedman told CNBC that the firm would be monitoring social media chatter and will halt stocks, if they match chatter with unusual activity in stocks. So far, Reddit’s day-trading squad has managed to squeeze an aggregate total of $80 billion from GME shorters. It’s ironic to cryptocurrency proponents, that Bitcoin can take fear, uncertainty, and doubt (FUD), but Wall Street stocks cannot. Nevertheless, the internet is calling the GME pump the “short squeeze of the century,” and according to the leading sportsbook Mybookie, the stock is likely to hit at least $420 by April 20, 2021. Additionally, reports also detail that someone even created a synthetic version of GME shares on the Ethereum blockchain. The ETH/GME token has been trading on the decentralized finance (defi) exchange Uniswap, but some people are leery of this token as possibly being a scam. The blockchain explorer Etherscan shows there are 10 million ERC20-based GME tokens and currently, there’s been 293 “Wrapped Gamestop” token transfers to-date. Moreover, a number of major stock trading platforms suffered massive outages on Wednesday morning, as exchanges like E-Trade, Robinhood, and TD-Ameritrade customers couldn’t access these platforms. Reports also said that Fidelity Investments and Charles Schwab were also being affected by the GME price surge. What do you think about the short squeeze of the century? Let us know what you think about this subject in the comments section below. Tags in this story Bitcoin, Crypto Proponents, GameStop, GameStop Bets, Gamestop Longs, Gamestop shares, Gamestop Shorts, GameStop Stocks, GME, Internet, MCM, Melvin Capital Management, Reddit, Short Squeeze, subReddit, Subreddit Wall Street Bets, Wall Street Bets Image Credits: Shutterstock, Pixabay, Wiki Commons, Tradingview, Twitter, Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article. Read disclaimer
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A customer holds a GameStop shopping bag inside a store in San Francisco. David Paul Morris | Bloomberg | Getty Images Wall Street has been watching GameStop in awe as a band of Reddit-obsessed retail investors managed to push the stock up 1,500% in two weeks, squeezing out short-selling hedge funds. A wave of at-home traders found each other on the red-hot "wallstreetbets" Reddit chat room, whose members have ballooned to over three million. By motivating each other to keep piling into shares and call options, they coordinated a monstrous short squeeze in the brick-and-mortar video game retailer. "Retail investors with the help of technology acting as a union in attacking is a new phenomenon," said Jim Paulsen, chief investment strategist at the Leuthold Group. "You combine the power of technology, which allows you through Reddit postings to magnify your individual impact, with some use of leverage and very targeted bets, they can have a significant influence, particularly on areas of vulnerability because of the short positions," Paulsen said. Many enthusiastic Reddit users have been posting screenshots of their brokerage accounts, some of which touting astronomical returns north of 1,000% in a handful of days. These passionate investors often call out short sellers in the chat room in colorful language and unpleasant internet memes. "This is gaining cult-like status," said Quincy Krosby, chief investment strategist at Prudential Financial. "It is a pack of traders and the pack is gaining momentum. The retail crowd is not just taking over the shorts and it's taking over the headlines." The intense speculative behavior among retail investors is unnerving many on Wall Street as mounting losses by hedge funds could spill over to other areas of the market. Some also believe this buying frenzy could be an ominous sign for a market at record highs. "It could potentially destabilize the overall market and the confidence in the market. Those who have not joined will be compelled to join," Krosby added. These amateur investors have started targeting other heavily shorted names including AMC Entertainment and Bed Bath & Beyond, leaving Wall Street analysts' targets in the dust. How does short-selling work? A short seller borrows shares of a stock and sells these borrowed shares to buyers willing to pay the market price. As the stock price falls, the trader would buy it back for less money, pocketing the difference. However, when the stock jumps sharply higher, it forces short sellers to buy back shares in order to limit their losses. The short covering tends to fuel the stock's rally further. The rally in GameStop was initially triggered on Jan. 11, when news broke that activist investor and Chewy co-founder and former CEO Ryan Cohen is joining GameStop's board. The stock jumped on the announcement on hopes Cohen would drive a change in strategy. GameStop continued to rocket higher as retail traders showed no signs of letting up. Amid the massive squeezes, Melvin Capital closed out its short position in GameStop on Tuesday afternoon after taking a huge loss, the hedge fund's manager told CNBC's Andrew Ross Sorkin. Short seller Andrew Left of Citron Research said Wednesday he has covered the majority of his short position in GameStop at a loss. GameStop was the single most traded name in the U.S. stock market on Tuesday, topping even megacap companies like Tesla and Apple, according to Deutsche Bank. Options supercharging the squeeze Many avid Reddit posters hyping up GameStop are buying call options, a type of derivative contracts that give the holder the right to buy the underlying security at a stated price within a specific timeframe. The call options contract values can surge by even larger magnitudes when the underlying stock is rallying by 100% a single day. Options trading has become accessible and easy to millennial investors, thanks to those new and commission-free apps such as Robinhood. "This is all a part of the democratization of the market," Krosby said. "Normally when we are talking about levering up and options, it typically is associated with investors, professional managers, and hedge funds." When retail investors looks for cheap upside calls, it leaves the sell-side or the market makers who are the middlemen in the transaction short a lot of upside calls, or short gamma. As the stock rises towards those strikes, the market makers need to buy increasingly more stock to hedge their short calls. This effectively accelerated the rally further in GameStop and other heavily shorted names. "Retail order flow in the options are essentially supercharging the short squeeze, like the tail wagging the dog," CC Lagator of Options AI said. "That gamma effect adds buyer after buyer in the stock, with no one able to short the stock because it is hard to borrow. The effect is a massive short squeeze." Subscribe to CNBC PRO for exclusive insights and analysis, and live business day programming from around the world.
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