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My stock meme failed

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I love money like no one else, and I’m not too pure to chase quick money, if the opportunity seems reasonable. So in 2021, I decided to take part in the stock meme craze that was turning Wall Street upside down and making some daring traders rich.

Games retailer GameStop (GME) It was First stock memewith trader Keith Gill first demonstrating why the stock soared in August 2020, at Reddit channel WallStreetBets. Almost no one noticed Jill’s tone until the stock actually exploded five months later. Part of Gill’s strategy was to look for volatile stocks with high levels of short interest and bet on “Short pressIt can lead to an exponential rise in the share price.

It happened. Prior to Gill’s presentation, GME was trading at about $1. It slowly drifted toward the end of 2020 and then went insane, culminating at a closing price of $87 on January 27, 2021. What’s cool about the gain is the fact that it appears to have nothing to do with GME’s financial performance, which has been dismal. Instead, ordinary retail investors who organize on social media seem to have pushed the price higher simply by rushing into the stock and creating a surge in demand.

AMC film series (AMC) came next. Around the time GME peaked, AMC stock was starting to reverse its four-year decline and get foamy. The stock jumped from a closing low of $1.98 in early January of 2021 to nearly $20 just three weeks later. It fluctuated for a while, then exploded, peaking at $64 on June 2, 2021. Perhaps the gradual end of the COVID pandemic was bullish for the stock, as people started going to the movies again. But that doesn’t explain the 31-fold increase in the share price. AMC was still a big money loser, with no near-term prospects for turning a profit. Once again, a horde of crowd-sourcing buyers seemed to have been pushed higher.

The Reddit logo appears on a smartphone in front of the Wall Street Bets logo shown in this illustration taken January 28, 2021. REUTERS / Dado Ruvic / Illustration

[Did you lose money on meme stocks? We’d love to hear your story.]

That’s when I was interested. I’m not as dumb as I may seem, and I was acutely aware that meme stocks can go down as fast as they go up. In fact, I expected that. But people were also making real money on these bubble stocks, if they knew when to sell. Unlike some Bahamian cryptocurrencies, the exorbitant rates for GME and AMC were real prices that someone was willing to pay you with real dollars that you could put in the bank and spend.

I was ready to experiment and see what happened. One of the things I’ve discovered as an investor is that it’s psychologically easier to buy stocks than to sell them. Once a stock drops 20% or 30%, your primal impulse to hunt for bargains kicks in, making you feel comfortable buying. Stocks usually go up over the long term, so odds are that one day the market will justify your buying decision, if only by hypothesis. But if the value of the shares you own goes up, it can be difficult to sell them and take a profit if you stand to lose out on more dividends in the future. If you’ve lost money in a stock, it may be more difficult to sell it, because pinning those losses is an admission of failure.

I didn’t want to buy GME or AMC, as those stocks are likely already mentioned. What could be the next meme stock? I’ve looked at WallStreetBets and everyone seems to be talking about the old cell phone company, Blackberry (BB). I studied stock history. From 2003 to 2008, when the ticker symbol was RIM, Blackberry was more popular, and for good reason. The Blackberry phone was a phenomenon in the early days of smartphones, a real money-making product. Then the iPhone and Android devices effectively killed the Blackberry. The stock has fallen from a peak of $148 in 2008 to a low of barely $3 in 2020.

There was a wave of excitement in January 2021, when GME and AMC were taking off. BB rose to $25 in one day, and then fell back to the $10 range. By the time I was looking at it, the shares were about $14.

Was BB the next meme stock? Or spent? Its gain from bottom to top was 633%, based on a $3 low and $25 high. But that was only for one day. GME is up 8,600% from trough to peak. AMC’s gain from bottom to top was 3,000%. Both were down from their highs but well above pre-M levels. BlackBerry’s gain of 633%, for just one day, was paltry, by comparison. It will probably go up a lot more, once the hordes of WallStreetBets stack up. This was my big chance.

I was willing to commit $2,500. If BB becomes the next GME, and I sell at the top, I stand to make over $200,000. If AMC is next and I sell at the top, my gain will be a nice $75,000. If I saved and sold it in the middle instead of the top, I’d still have enough money to buy a new sports car—though it’s probably used, not new. And if BB turns out to be a failure, well, at least I’ll be able to write a story about it.

Since you are now reading that very story, you know what happened. In June of 2021, I bought 171 shares of Blackberry at $14.60 a share, with a total investment of $2,496.60. BlackBerry never got stuck once I bought it. That short-term gain of 633% was probably all the meme about it. You bought high, as it turns out, and the only way to make money by buying high is to sell higher.

I didn’t get a chance to sell at a higher price. A month after I bought the BB, it was 27% less. One year after I bought it, my BB was down 58%. As 2022 draws to a close I have decided that BB will never become a meme and I must admit my foolishness and cut my losses. I sold all 171 shares at $4.31 apiece, 70% less than I paid. My loss totaled $1,760.

[Follow Rick Newman on Twitter, sign up for his newsletter or sound off.]

Perhaps my decision to buy a Blackberry seems like a stupid mistake. When I told Yahoo Finance stock hawk Brian Susie I was planning to write this story, he exclaimed, “Dude! Tell me you didn’t buy a BlackBerry!” Sure, feel free to laugh. But I don’t think it was wrong. For one thing, I could have wasted a lot more money, including money I needed rather than savings I could afford to lose, no matter how much I hated losing them. If I took a foolish risk, it was also a calculated risk.

Should I have paid more attention to the basics of BlackBerry? No! And if you did, it wouldn’t matter if you did. Unlike GME and AMC, Blackberry actually made a small profit in its most recent fiscal year—yet the stock has fallen back into the dungeon it came from, anyway. This has always been about trying to take advantage of a market phenomenon – the speculative bubble – not trying to pin an unappreciated value.

Is there an important lesson here? hit me. meme moment It seems to have passed, as many professionals would expect. GME is still higher than its previous price, however The curtain is falling on AMC, and a bunch of other little memes you didn’t quickly remember. If you visit WallStreetBets these days for stock advice, you’re likely to find plenty of rants about troubles at Tesla and Twitter and a gloomy Christmas caused by investment losses.

I do not regret trying to make money in a speculative bubble. I knew it was a bubble and I wasn’t buying into it long term. I’ve been buying in the short term, hoping the stock will go up and I’ll be able to offload some schlub that got in later than I did. Instead, I turned out to be the young man. Maybe next time there’s a get-rich-quick scheme, I should get in sooner. Or force myself to ignore it.

Rick Newman is a senior columnist for Yahoo Finance. Follow him on Twitter at @employee

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Stock, bond and cryptocurrency investors remain on edge after a rough year for the markets

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This version is for personal, non-commercial use only. Distribution and use of this material is subject to our Subscriber Agreement and copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.

https://www.wsj.com/articles/stock-bond-and-crypto-investors-remain-on-edge-after-brutal-year-for-markets-11672403124

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Dow Jones losses are heading towards the closing bell as US stocks approach their worst year since 2008

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US stocks were trimming losses heading towards the closing bell on Friday, but were still on track to post their worst annual loss since 2008, as the harvest of tax losses combined with concern over the outlook for US corporate and consumer earnings took its toll.

How are stock indices traded?
  • Dow Jones Industrial Average
    DJIA,
    -0.22%

    It fell about 182 points, or 0.6%, to 33,039 points.

  • S&P 500 index
    SPX,
    -0.25%

    It fell nearly 26 points, or 0.7%, to about 3,824.

  • The Nasdaq Composite Index fell 72 points, or 0.7%, to about 10,406 points.

Stocks posted their biggest gains of the month on Thursday, with the Dow Jones rising 345 points, or 1.05%, to 33,221 as major stock indexes rebounded after losses incurred earlier in the week that pushed the Nasdaq Composite to a new closing low for the year. . The S&P 500 was on track on Friday to wrap up its fourth consecutive losing week, the longest streak of weekly losses since May, according to FactSet data.

What drives the markets

US stocks traded lower on Friday afternoon, on pace to close the last trading session of 2022 with weekly and monthly losses.

Stocks and bonds have been crushed this year as the Federal Reserve raised its benchmark interest rate more aggressively than many expected, as it sought to crush the worst inflation in four decades. The S&P 500 is on track to end the year with a loss of nearly 20%, its worst annual performance since 2008.

“Investors were on edge,” Mark Heppenstahl, chief investment officer at Penn Mutual Asset Management, said in a phone interview Friday. “It seems as if being able to bring prices down might be a little easier given how bad the year has been.”

Stock indices have fallen in recent weeks as the recent rally inspired by hopes in the Fed’s policy focus faded in December after the central bank indicated it would likely wait until 2024 to cut interest rates.

On the last day of the trading year, the markets were also hit by selling to capture losses that could be written off from tax bills, a practice known as tax harvesting, according to Kim Forrest, chief investment officer at Bouquet Capital Partners. .

Forrest added that an uncertain outlook for 2023 has also weighed in, as investors worry about the strength of corporate earnings, the US economy and consumer as the fourth-quarter earnings season approaches early next year.

“I think the Fed, and then earnings in mid-January — they’ll set the tone for the next six months. Until then, it’s anyone’s guess.”

The US central bank has raised its benchmark interest rate by more than four percentage points since the start of the year, pushing borrowing costs to their highest levels since 2007.

The timing of the first Fed rate cut will likely have a significant impact on markets, according to Forrest, but the outlook remains uncertain, even as the Fed tries to signal that it plans to keep interest rates higher for longer.

On the economic data front, the Chicago PMI for December, the latest major data release for the year, Came stronger than expected. Climbing to 44.9 from 37.2 in the previous month. Readings below 50 indicate contraction.

In the coming year, Heppenstahl said, “we are likely to shift toward concerns about economic growth rather than inflation.” “I think the decline in growth will eventually lead to an even greater drop in inflation.”

Read: Stock market investors face 3 recession scenarios in 2023

Eric Sterner, chief information officer at Apollon Wealth Management, said in a phone interview on Friday that he expects the US to fall into a recession next year and that the stock market could see a new bottom as companies likely review their earnings. “I think the earnings outlook for 2023 is still very high,” he said.

The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite were all on pace Friday afternoon posting weekly losses of around 1%, according to FactSet data, at last check. For the month, the Dow was down about 5%, the S&P 500 was down about 7% and the Nasdaq was about to crash down about 10%.

Read: Value stocks are outperforming growth stocks in 2022 by a large margin historically

As for bonds, Treasury yields rose on Friday as the US sovereign debt market was set to post its worst year since at least the 1970s.

The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.879%

It rose about four basis points on Friday at 3.88%, according to FactSet data, in the latest check. Ten-year yields jumped about 2.34 percentage points this year through Thursday, on track for the biggest annual gain ever based on data going back to 1977, according to market data from Dow Jones.

Meanwhile, the yield on the two-year note
TMUBMUSD02Y,
4.423%

Up about 3.64 percentage points in 2022 through Thursday to 4.368%, 30-year return
TMUBMUSD30Y,
3.971%

It jumped 2.03 percentage points over the same period to 3.922%. That marks the largest increase in a calendar year for each based on data going back to 1973, according to market data from Dow Jones.

Outside the US, European stocks capped their biggest percentage drop in a calendar year since 2018, with the Stoxx Europe 600
xxxp,
-1.27%
And the
It is an index of euro-denominated stocks, down 12.9%, according to market data from Dow Jones.

Read: A downturn in the US stock market is trailing these international ETFs as 2022 draws to a close

Companies in focus

Steve Goldstein contributed to this article.

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Fed’s reverse repo facility reaches $2.554 trillion by Reuters

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© Reuters. FILE PHOTO: The Federal Reserve Building in Washington, US, January 26, 2022. (Reuters)/Joshua Roberts/File Photo

Written by Michael S Derby

NEW YORK (Reuters) – A key facility used by the Federal Reserve to help control short-term interest rates saw record inflows on Friday, the last trading day of the year.

The New York Fed said its reverse repo facility took in $2.554 trillion in cash from money market funds and other eligible financial firms, beating the previous high seen on Sept. 30, when inflows totaled $2.426 trillion.

The cash rally was almost certainly tipping into record territory in the usual end-of-quarter pattern that could worsen further towards the end of the year. On those dates, for a variety of reasons, many financial firms prefer to deposit money in the central bank rather than in the private markets.

The Fed’s reverse repo facility has been very active for some time. After seeing almost no absorption for a long time, money began to gravitate toward the central bank in the spring of 2021 and then grew steadily. Daily reverse repo usage has been steadily above the $2 trillion mark since June.

The reverse repo facility takes cash from qualified financial firms in what is an actual loan from the Federal Reserve. The current rate is 4.3%, a yield that is often better than rates for short-term private sector lending.

The reverse repo facility is designed to provide a soft floor for short-term rates and the federal funds target rate, and is the Fed’s primary tool for achieving its function and inflationary mandates. To mark the higher end of the range, the Fed is also pushing deposit-taking banks to deposit cash at the central bank, where the interest rate on reserve balances is now 4.4%.

The federal funds rate is currently set between 4.25% and 4.5% and is trading at 4.33% as of Friday, sandwiched between the reverse repo rate and interest on reserve balances.

There are no signs of shrinkage

Even with the heavy use of reverse repo, Fed officials have always remained unconcerned about large outflows, even as some in financial markets worried about the potential for the Fed to drain the borrowing and lending lives of private money markets.

Fed officials also expected that as the central bank continues to raise interest rates with the goal of bringing down very high levels of inflation, the use of the reverse repo facility should decrease. But that hasn’t happened yet, and some in the markets now believe that the consistently high utilization of the Fed facility will be around for some time to come.

Research by the Federal Reserve Bank of New York indicated that banking regulation issues make demand for the Fed’s reverse repo instrument high. Meanwhile, the Kansas City Fed added its view that large inflows are related to limited private market investment opportunities and policy uncertainty.

Strong cash flows to the central bank may not have alarmed central banks, but they have driven their operations to an actual loss. The Federal Reserve finances itself through interest on the bonds it owns as well as the services it provides to the financial community. It usually makes a noticeable profit and by law returns it to the treasury.

Currently, the cost of paying interest on reverse repo agreements and reserve balances outweighs income. The Fed reported Thursday that as of Dec. 28, the accounting metric it uses to track losses was $18 billion. Many observers expect that the Fed’s plans to raise interest rates further and keep them at high levels will mean fairly large losses for the central bank over time, even if these losses will not affect the action of the Fed’s monetary policy.

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