Market Briefing For Monday, June 7

Social velocity has become a very dominant momentum factor in markets, at least at the moment. Short-sellers have bet against conventional investors for years of course; and notably do some good analysis and go after flawed companies. But nothing going on now is normal; not even for prior bubbles.

I might add that this is not really a bubble in valuation; except for those run-up with over-concentration; or poor companies that had big short positions which of course made them vulnerable to what you're selectively seeing and it's like a narcotic almost; because now the crowds look for new candidates daily and we have suggestions haha.

However, shifting the genesis of analysis to the 'chat room' from 'board rooms' is not simply tracking momentum; but harnessing the power of not just 'mobs', but 'leverage', to attack the short-sellers and get a 'squeeze' going. Whether we like it or not, this is the primary feature of day-to-day markets just now.

Such trading maneuvers aren't simply pointing-out flawed companies; but also might just be stimulated by a few hedge fund guys who get this, and are 'drag traders' if you will; pretending to serve 'the group' but primarily their 'book'. It's a battle of course and sooner or later they get around to a few companies with depressed share price, actual growth prospects; but a high short interest.

Protecting corporate America from more pervasive cyber-attacks are big time of course; and the dark web is littered with evidence of hackers and of stolen information. What affects the market more, and might spur regulatory action, would be not just requirements of companies reporting; but totally askance; a requirement to register or seek permission before creating a low-priced stock that somehow trades.. on the dark web. This is creating synthetic shares and is likely illegal as it constitutes a pool exchange. So again I'm thrilled to see a number of people making money (they did in the 1920's too...); but forewarn it may reflect the times if 'synthetic share trading on unregulated exchanges' is a direct violation of securities laws.

I'm not an attorney to opine on this, but if (say the AMC frenzy) was based on creating synthetic shares to move the stock up, so they could do a secondary, and then who cares... Well.. What it would say is that the traders aren't 'crazy', as popular culture dismisses it; but perhaps astute manipulators. Presuming such stocks are of reduced interest once the insiders (or funds) profited thusly on a run; we'd rather focus on stocks that have lots of shorts 'trappable' but have yet to be seriously run. And have actually promising business models.

In sum: on the so-called crazy trading; we think it's mostly people in the biz as well as concentrated 'pools' gathered in various chat rooms. Buyer beware 'if' one cares whether the proponents created synthetic dark web (illegal) shares. I am referring to allegations about essentially criminality in the dark web.

This has nothing to do with legit companies with lots of short interest overall. It is a separate matter trying to tame the coordinated raids that run stocks up as result of high short-interest. It may not be tamed as quickly as Wall St wants.

Goldman Sachs, Citigroup & Bank of America  ALL refused comment after following Jefferies and Raymond James in suspending short-sales where no shares are available to 'borrow'. Doing so even when possible created a high cost to borrow; and during dormant times (not now) some firms or holders did loan shares for income. Also big firms greatly increasing margin requirements in AMC and GME. One step at a time but slowly changes have to be made.

This is an excerpt from Gene Inger's Daily Briefing, which is distributed nightly and typically includes one or two videos as well as charts and analysis. You can subscribe more

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