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Is It 1999 or 2007? Retail Investors Flood The Market.

Is It 1999 or 2007? Retail Investors Flood The Market.

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Is it 1999 or 2007? Retail investors flood the market as speculation grows rampant with a palpable exuberance and belief of no downside risk. What could go wrong?

Do you remember this commercial?

The Etrade commercial aired during Super Bowl XLI in 2007. The following year, the financial crisis set in, markets plunged, and investors lost 50%, or more, of their wealth.

However, this wasn’t the first time it happened.

The same thing happened in late 1999. This commercial was aired 2-months shy of the beginning of the “Dot.com” bust as investors once again believed “investing was as easy as 1-2-3.”

Why this trip down memory lane? (Other than the fact the commercials are hilarious to watch.) Because this is typical of the exuberance seen at the peaks of bull market cycles.

So, what are the signs we are seeing today.

  • Retail investors are chasing bankrupt companies like Hertz and Chesapeake Energy
  • Hertz, a company in bankruptcy, is issuing stock with a disclaimer the shares are likely worthless.
  • Investors chasing companies with extremely poor fundamentals.
  • Investing tips coming from individuals with no experience.

Investing is simple. Just pick some letters out of a Srabble bag, buy it, and it goes up.

Its so easy a “baby can do it.”

Or in this case, it like “stealing from the rich to give to the poor.” 

Retail Investors Go Robinhood

As Barron’s recently noted:

“Free trading app Robinhood has added more than three million retail accounts in 2020, and now has over 13 million. The median age of its retail customer is 31. The Covid-19 lockdowns and the plunge in markets in March persuaded millions of new investors to open accounts. Some of the action appears to be from people who would otherwise be gambling or betting on sports—both of which were shut down.”

Just like we saw in 1999 and 2008, “day trading” has had a resurgence from “message boards” on AOL to live blogs and video feeds on social media.

“The new generation tends to convene on social media. Beyond TikTok, retail investors chat on forums like Reddit and Twitter, sharing internet memes and jokes about stocks, and even posting self-deprecating charts showing their worst losses. 

A former Goldman Sachs partner, Joseph Mauro, joked on Twitter that his son’s friends are never free anymore to play videogames during the day because they’re too busy trading stocks. “He is 10,” Mauro added.”

The irony is that Robinhood really isn’t “stealing from the rich.” In reality, they are “getting rich by stealing from the poor.” As is always the case, there is no “free lunch,” as Robinhood bundles orders and then“sells” the flows to major hedge funds for profit. Those hedge funds then “front run” the “Robinhooders” taking advantage of their trading. (If this wasn’t massively profitable for hedge funds they wouldn’t pay millions for the data.)

Retail Discovers A New “Toy”

These “newbie” retail investors are not trading based on fundamentals, earnings, estimates, products or market values, but rather talking up stocks driven by pure momentum. Robinhood makes the “research” even easier buy posting the top holdings of its users.

They are then leveraging what cash they have through option contracts and margin debt to boost their buying power.

The problem with options is that when you are wrong, you can lose 100% of your investment.

The problem with margin is that when you are wrong, you can lose more than 100% of your investment.

However, given the current belief by “daytraders”  that there is no downside risk, then why not leverage up and “get rich quick?”

After all, in this “new paradigm” of “no risk” investing there are only two rules:

But this is the nature of what happens in a late-stage bull market cycle.

Still In A Bull Market

“But we had a 35% selloff in March, how can we be in a late stage bull market?”

This was a point I discussed in “Was March A Bear Market?”

“Such brings up an interesting question. After a decade-long bull market, which stretched prices to extremes above long-term trends, is the 20% measure still valid?

To answer that question, let’s clarify the premise.

  • A bull market is when the price of the market is trending higher over a long-term period.
  • A bear market is when the previous advance breaks, and prices begin to trend lower.

Fed Liquidity, Technically Speaking: Too Fast, Too Furious As Fed Liquidity Slows

This distinction is important.

  • “Corrections” generally occur over very short time frames, do not break the prevailing trend in prices, and are quickly resolved by markets reversing to new highs.
  • “Bear Markets” tend to be long-term affairs where prices grind sideways or lower over several months as valuations are reverted.

Given the trend was never broken, valuations were never reversed, and “speculative greed” wasn’t extinguished, the “bull market” remains intact.

Topping Process

The markets quick recovery from the March lows further bolstered the “speculative greed” in the market which has now manifested itself in current behaviors.

The risk, however, is the economic recession which will impair the fundamentals of the markets over the next several quarters making it harder to justify current valuations. As I noted in the chart above, the current rally could be part of a bigger “topping” process which may take young traders by surprise.

I have noted the market may be in the process of a topping pattern. The 2018 and 2020 peaks are currently forming the “left shoulder” and “head” of the topping process. Such would also suggest the “neckline” is the running bull trend from the 2009 lows. 

A market peak without setting a new high that violates the bull trend line would define a “bear market.”

What Could Cause The Market To Break?

As noted by Mish Shedlock recently, the Federal Reserve itself has noted six downside risks to the markets and the economy.

“In its semiannual monetary report to the Senate Finance Committee the Fed warns of six downside risks. The risks are not spread evenly. Low wage earners and small businesses are particularly vulnerable.

Please consider the Fed’s Monetary Policy Report to the Senate Committee on Banking, Housing, and Urban Affairs and to the House Committee on Financial Services. The report is 66 pages long and is full of interesting charts and comments. 

Let’s start with Powell’s statement on risk: ‘Despite aggressive fiscal and monetary policy actions, risks abroad are skewed to the downside.’

Six Downside Risks 

  1. The future progression of the pandemic remains highly uncertain.
  2. The collapse in demand may ultimately bankrupt many businesses.
  3. Unlike past recessions, services activity has dropped more sharply than manufacturing—with restrictions on movement severely curtailing expenditures on travel, tourism, restaurants, and recreation and social-distancing requirements and attitudes may further weigh on the recovery in these sectors. 
  4. Disruptions to global trade may result in a costly reconfiguration of global supply chains. 
  5. Persistently weak consumer and firm demand may push medium- and longer-term inflation expectations well below central bank targets.
  6. Additional expansionary fiscal policies— possibly in response to future large-scale outbreaks of COVID-19—could significantly increase government debt and add to sovereign risk.”

The biggest risk, is the 6th point where massive increases in debts and deficits retard long-term economic growth.

“Before the “Financial Crisis,” the economy had a linear growth trend of real GDP of 3.2%. Following the 2008 recession, the growth rate dropped to the exponential growth trend of roughly 2.2%. Instead of reducing the debt problems, unproductive debt, and leverage increased.”

stocks economy, #MacroView: The Great Divide Between Stocks & The Economy

 Retail “Investor” Or “Speculator?”

In today’s market the majority of investors are simply chasing performance.

But, this isn’t “investing,” it’s “speculation.”

Think about it this way.

If you were playing a hand of poker, and were dealt a “pair of deuces,” would you push all your chips to the center of the table?

Of course, not.

The reason is you intuitively understand the other factors “at play.” Even a cursory understanding of the game of poker suggests other players at the table are probably holding better hands which will lead to a rapid reduction of your wealth.

Investing, ultimately, is about managing the risks which will substantially reduce your ability to “stay in the game long enough” to “win.”

Robert Hagstrom, CFA penned a piece discussing the differences between investing and speculation:

“Philip Carret, who wrote The Art of Speculation (1930), believed “motive” was the test for determining the difference between investment and speculation. Carret connected the investor to the economics of the business and the speculator to price. ‘Speculation,’ wrote Carret, ‘may be defined as the purchase or sale of securities or commodities in expectation of profiting by fluctuations in their prices.’”

Chasing markets is the purest form of speculation. It is simply a bet on prices going higher rather than determining if the price being paid for those assets are selling at a discount to fair value.

Graham & Dodd

Benjamin Graham, along with David Dodd, attempted a precise definition of investing and speculation in their seminal work Security Analysis (1934).

An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.”

There is also very important passage in Graham’s The Intelligent Investor:

“The distinction between investment and speculation in common stocks has always been a useful one and its disappearance is a cause for concern. We have often said that Wall Street as an institution would be well advised to reinstate this distinction and to emphasize it in all its dealings with the public. Otherwise the stock exchanges may some day be blamed for heavy speculative losses, which those who suffered them had not been properly warned against.”

Surviving The Game

Regardless of whether you believe fundamentals will ever matter again is largely irrelevant. What is important is that periods of excess speculation always end the same way.

For now, Dave Portnoy has garnered a legion of followers. However, Dave’s financial future is quite secure after he sold his company to Penn National for $450 million. So, when things go wrong in the market, he will be just fine financially. However, for the host of inexperienced, over-confident, millennials who follow him, many have the financial livelihoods on the line.

I get it. If you are one of our younger readers, who have never been through an actual “bear market,” I wouldn’t believe what I am telling you either.

However, after living through the Crash of ’87, managing money through 2000 and 2008, and navigating the “Great Crash of 2020,” I can tell you the signs are all there.

A real bear market will happen. When? I don’t have a clue. But it will be an unexpected, exogenous event that triggers the selling.

It always appears easiest at the top.

More importantly, at bottoms, retail investors will not be wanting to buy stocks.

The post Is It 1999 or 2007? Retail Investors Flood The Market. appeared first on RIA.

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Sex work is real work: Global COVID-19 recovery needs to include sex workers

Societally, we need to recognize that sex workers have agency and deserve the same respect, dignity and aid as any other person selling their labour.

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Globally, sex workers have been left to fend for themselves during the pandemic with little to no support from the government. (AP Photo/Bikas Das)

During the pandemic, business shifted from in person to work-from-home, which quickly became the new normal. However, it left many workers high and dry, especially those with less “socially acceptable” occupations.

The pandemic has adversely impacted sex workers globally and substantially increased the precariousness of their profession. And public health measures put in place made it almost impossible for sex workers to provide any in-person service.

Although many people depend on sex work for survival, its criminalization and policing stigmatizes sex workers.

Research shows that globally, sex workers have been left behind and in most cases excluded from government economic support initiatives and social policies. There needs to be an intersectional approach to global COVID-19 recovery that considers everyone’s lived realities. We propose policy recommendations that treat sex work as decent work and that centre around the lived experiences and rights of those in the profession.

Sex work and the pandemic

The United Nations Population Fund (UNFPA) recently reported that apart from income-loss, the pandemic has increased pre-existing inequalities for sex workers.

In a survey conducted in Eastern and Southern Africa, the UNFPA found that during the pandemic, 49 per cent of sex workers experienced police violence (including sexual violence) while 36 per cent reported arbitrary arrests. The same survey reported that more than 50 per cent of respondents experienced food and housing crises.

Lockdowns and border closures adversely impacted Thailand’s tourism industry which relies partially on the labour of sex workers.


Read more: Sex workers are criminalized and left without government support during the coronavirus pandemic


In the Asia Pacific, sex workers reported having limited access to contraceptives and lubricants along with reduced access to harm reduction resources. Lockdowns also disrupted STI or HIV testing services, limiting sex workers’ access to necessary healthcare.

In North America, sex workers have been excluded from the government’s recovery response. And many began offering online services to sustain themselves.

A woman stands backlit next to a dimly lit bus that reads 'Thailand' with green lighting.
Sex workers stand in a largely shut-down red light area in Bangkok, Thailand on March 26, 2020. (AP Photo/Gemunu Amarasinghe)

Government vs. community response

Globally, sex workers have been left to fend for themselves during the pandemic with little to no support from the government. But communities themselves have been rallying.

Elene Lam, founder of Butterfly, an Asian migrant sex organization in Canada, talks about the resilience of sex wokers during the pandemic.

She says organizations like the Canadian Alliance for Sex Work Law Reform are working in collaboration with Amnesty International to mobilize income support and resources to help sex workers in Canada.

Organizations in the United Kingdom, Germany, India and Spain have also set up emergency support funds. And some sex worker organizations have developed community-specific resources for providing services both in person and online during the pandemic.

Global recovery needs to include sex workers

The International Labour Organization’s “Decent Work Agenda” emphasizes productive employment and decent working conditions as being the driving force behind poverty reduction.

Sociologist Cecilia Benoit explains that sex work often becomes a “livelihood strategy” in the face of income and employment instability. She says that like other personal service workers, sex workers also should be able to practice without any interference or violence.

In order to have an inclusive COVID-19 recovery for all, governments need to work to extend social guarantees to sex workers — so far they haven’t.

As pandemic restrictions disappear, it is crucial to ensure that everyone involved in sex work is protected under the law and has access to accountability measures.

A woman stands wearing a mask with a safety vest on in front of a collage of scantily clad women and a sign that reads 'nude women non stop'
A volunteer helps out at Zanzibar strip club during a low-barrier vaccination clinic for sex workers in Toronto in June 2021. THE CANADIAN PRESS/Frank Gunn

Recommendations

As feminist researchers, we propose that sex work be brought under the broader agenda of decent work so that the people offering services are protected.

  1. Governments need to have a legal mandate for preventing sexual exploitation.

  2. Law enforcement staff need to be trained in better responding to the needs of sex workers. To intervene in and address situations of abuse or violence is critical to ensure workplace safety and harm reduction.

  3. Awareness and educational campaigns need to focus on destigmatizing sex work.

  4. Policy-makers need to incorporate intersectionality as a working principle in identifying and responding to the different axes of oppression and marginalization impacting LGBTQ+ and racialized sex workers.

  5. Engagement with sex workers and human rights organizations need to happen when designing aid support to ensure that an inclusive pathway for recovery is created.

  6. Globally, there needs to be a steady commitment towards destigmatizing sex workers and their services.

Despite the gradual waning of pandemic restrictions, sex workers continue to face the dual insecurity of social discrimination and loss of income support. Many are still finding it difficult to stay afloat and sustain themselves.

Societally, we need to recognize that sex workers have agency and deserve the same respect, dignity and aid as any other person selling their labour.

The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.

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OU researchers award two NSF pandemic prediction and prevention projects

Two groups of researchers at the University of Oklahoma have each received nearly $1 million grants from the National Science Foundation as part of its…

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Two groups of researchers at the University of Oklahoma have each received nearly $1 million grants from the National Science Foundation as part of its Predictive Intelligence for Pandemic Prevention initiative, which focuses on fundamental research and capabilities needed to tackle grand challenges in infectious disease pandemics through prediction and prevention.

Credit: Photo provided by the University of Oklahoma.

Two groups of researchers at the University of Oklahoma have each received nearly $1 million grants from the National Science Foundation as part of its Predictive Intelligence for Pandemic Prevention initiative, which focuses on fundamental research and capabilities needed to tackle grand challenges in infectious disease pandemics through prediction and prevention.

To date, researchers from 20 institutions nationwide were selected to receive an NSF PIPP Award. OU is the only university to receive two grants to the same institution.

“The next pandemic isn’t a question of ‘if,’ but ‘when,’” said OU Vice President for Research and Partnerships Tomás Díaz de la Rubia. “Research at the University of Oklahoma is going to help society be better prepared and responsive to future health challenges.”

Next-Generation Surveillance

David Ebert, Ph.D., professor of computer science and electrical and computer engineering in the Gallogly College of Engineering, is the principal investigator on one of the projects, which explores new ways of sharing, integrating and analyzing data using new and traditional data sources. Ebert is also the director of the Data Institute for Societal Challenges at OU, which applies OU expertise in data science, artificial intelligence, machine learning and data-enabled research to solving societal challenges.

While emerging pathogens can circulate among wild or domestic animals before crossing over to humans, the delayed response to the COVID-19 pandemic has highlighted the need for new early detection methods, more effective data management, and integration and information sharing between officials in both public and animal health.

Ebert’s team, composed of experts in data science, computer engineering, public health, veterinary sciences, microbiology and other areas, will look to examine data from multiple sources, such as veterinarians, agriculture, wastewater, health departments, and outpatient and inpatient clinics, to potentially build algorithms to detect the spread of signals from one source to another. The team will develop a comprehensive animal and public health surveillance, planning and response roadmap that can be tailored to the unique needs of communities.

“Integrating and developing new sources of data with existing data sources combined with new tools for detection, localization and response planning using a One Health approach could enable local and state public health partners to respond more quickly and effectively to reduce illness and death,” Ebert said. “This planning grant will develop proof-of-concept techniques and systems in partnership with local, state and regional public health officials and create a multistate partner network and design for a center to prevent the next pandemic.”

The Centers for Disease Control and Prevention describes One Health as an approach that bridges the interconnections between people, animals, plants and their shared environment to achieve optimal health outcomes.

Co-principal investigators on the project include Michael Wimberly, Ph.D., professor in the College of Atmospheric and Geographic Sciences; Jason Vogel, Ph.D., director of the Oklahoma Water Survey and professor in the Gallogly College of Engineering School of Civil Engineering and Environmental Science; Thirumalai Venkatesan, director of the Center for Quantum Research and Technology in the Dodge Family College of Arts and Sciences; and Aaron Wendelboe, Ph.D., professor in the Hudson College of Public Health at the OU Health Sciences Center.

Predicting and Preventing the Next Avian Influenza Pandemic

Several countries have experienced deadly outbreaks of avian influenza, commonly known as bird flu, that have resulted in the loss of billions of poultry, thousands of wild waterfowl and hundreds of humans. Researchers at the University of Oklahoma are taking a unique approach to predicting and preventing the next avian influenza pandemic.

Xiangming Xiao, Ph.D., professor in the Department of Microbiology and Plant Biology and director of the Center for Earth Observation and Modeling in the Dodge Family College of Arts and Sciences, is leading a project to assemble a multi-institutional team that will explore pathways for establishing an International Center for Avian Influenza Pandemic Prediction and Prevention.

The goal of the project is to incorporate and understand the status and major challenges of data, models and decision support tools for preventing pandemics. Researchers hope to identify future possible research and pathways that will help to strengthen and improve the capability and capacity to predict and prevent avian influenza pandemics.

“This grant is a milestone in our long-term effort for interdisciplinary and convergent research in the areas of One Health (human-animal-environment health) and big data science,” Xiao said. “This is an international project with geographical coverage from North America, Europe and Asia; thus, it will enable OU faculty and students to develop greater ability, capability, capacity and leaderships in prediction and prevention of global avian influenza pandemic.”

Other researchers on Xiao’s project include co-principal investigators A. Townsend Peterson, Ph.D., professor at the University of Kansas; Diann Prosser, Ph.D., research wildlife ecologist for the U.S. Geological Survey; and Richard Webby, Ph.D., director of the World Health Organization Collaborating Centre for Studies on the Ecology of Influenza in Animals and Birds with St. Jude Children’s Research Hospital. Wayne Marcus Getz, professor at the University of California, Berkeley, is also assisting on the project.

The National Science Foundation grant for Ebert’s research is set to end Jan. 31, 2024, while Xiao’s grant will end Dec. 31, 2023.


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GSK and IQVIA launch platform of US vaccination data, showing drop in adult rates

Throughout the Covid-19 pandemic, the issue of vaccine uptake has been a point of contention, but a new platform from GSK and IQVIA is hoping to shed more…

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Throughout the Covid-19 pandemic, the issue of vaccine uptake has been a point of contention, but a new platform from GSK and IQVIA is hoping to shed more light on vaccine data, via new transparency and general awareness.

The two companies have launched Vaccine Track, a platform intended to be used by public health officials, medical professionals and others to strengthen data transparency and display vaccination trends. According to the companies, the platform is intended to aid in increasing vaccine rates and will provide data on trends to assist public health efforts.

Judy Stewart

The platform will also allow users to identify vaccination trends for adults in the US across multiple vaccine types. Users will also be able to scan claims data nationally to track trends alongside pre-Covid metrics.

“For the first time, Vaccine Track brings quarterly data tracking and trends together in a comprehensive platform for immunization partners, decision-makers and stakeholders. Our goal for Vaccine Track is to support the return to pre-pandemic vaccination rates for adults and to go beyond by empowering the vaccine and public health community with frequently updated, actionable information to get ahead of disease together,” said Judy Stewart, GSK’s head of vaccines in a statement.

This move comes as vaccination rates in adults were already low even before the pandemic, with a CDC report stressing that vaccine coverage in adults was low across all age groups.

So far the platform’s data show a decline in adult immunizations, excluding flu vaccinations, across the country during the pandemic. The platform currently only has information from January 2019 to December 2021 on hand but will be updated every quarter.

The data itself observed that rates were especially low in minority populations, which were already showing lower rates of immunization pre-pandemic.

The platform also showed that national trends for adults aged 19 and older are still low, with an average decrease of 18% through last year in overall claims. Average monthly claims through 2021 for recommended vaccines were between 12% and 42% below 2019 rates, with nearly half of the states in the US facing greater than 30% reductions in overall claims for recommended vaccines from pre-pandemic levels.

In Medicare patients, the platform’s analysis found a more than 30% reduction in overall claims for recommended vaccines among Black and Hispanic populations between 2019 and 2021.

The information itself is sourced from medical claims data and longitudinal prescription data, the companies said.

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