The smoke is back! Wall Street takes revenge on retail investors, surpasses Buffy's “stock god” and goes to the bottom

Wall Street's “revenge” for shorting agencies?

The two stocks most loved by retail investors in the US have once again been heavily shorted by Wall Street institutions. According to the latest data from financial data company S3 Partners, $GameStop (GME.US)$ game station, $AMC Entertainment (AMC.US)$ The share of AMC cinema net short positions in stock circulation reached 24% and 22% respectively, close to the highest level in a year. A year ago, retail investors in the US bought these two stocks and once “blew up” the shorting agency, causing the total loss of the institution to exceed 10 billion US dollars (about RMB 66.7 billion). Citron Capital even “surrendered” and claimed that it would no longer go short.

Meanwhile, the Pelosi family, known as America's “Capitol Hill Stock Gods,” is also making new moves. On June 6, local time, a regular transaction report disclosed on the US House of Representatives website showed that Paul Pelosi, the husband of US House Speaker and veteran Democrat Nancy Pelosi, bought more than 1 million US dollars in May $Apple (AAPL.US)$ apple, $Microsoft (MSFT.US)$ Microsoft's call options.

Although Pelosi has publicly stated many times that he has never participated in stock trading, this does not prevent Paul Pelosi from making a lot of money in the capital market. According to statistics from US agencies, the Pelosi family's return on investment in 2021 was as high as 56.15%, surpassing the top US hedge fund managers, and even the “stock god” Buffett was beyond reach.

The resurgence of Wall Street's “smoke”

Wall Street's “War of Evil,” which once stirred the global capital community, seems to have ushered in a sequel.

Agencies that were once “blown up” by US retail groups have made a comeback, focusing on concept stocks organized by retail investors. According to the latest data from financial data company S3 Partners, up to now, the share of net short positions in Game Station (GME) and AMC Cinemas has reached 24% and 22% of stock circulation, respectively, which is close to the highest level in a year.

Wall Street analysts pointed out that currently, hedge funds are suddenly shorting, probably due to a wave of widespread sell-offs in US stocks. Individual investors in the US are seriously losing money, so the attitude of shorting has become more aggressive.

Since 2022, the Nasdaq Composite Index has a cumulative decline of 22.2%, falling into a bear market. The S&P 500 index also fell 12.7% during the year, while GameStop and AMC Cinemas, which were heavily shorted by Wall Street institutions, once exceeded 47% and 64%.

According to Wall Street investment bankers, the short selling agency's target price for the AMC cinema line is only 4 US dollars/share, which is a potential drop of 66.5% from the current stock price ($11.95).

However, short selling agencies seem to have underestimated the purchasing power of US retail investors, and US retail investors seem to have bottomed out of the market. pursuant $JPMorgan (JPM.US)$ According to J.P. Morgan's statistics, US retail investors are willing to enter the market when the market falls sharply and buy stocks at low prices. They injected 2.8 billion US dollars (about RMB 18.7 billion) into the market in the week ending June 1.

On June 7, local time, after the opening of the US stock market, the stock prices of GameStop and AMC Cinemas soared sharply. By the close of the day, the two stocks had risen by 14.4% and 9.4% respectively.

In response, Charles Lemonides, head of hedge fund ValueWorks LLC, said that the recent actions of the US retail army may cause fund managers to stop drastically shorting.

With such a high percentage of short selling by Wall Street shorting agencies, it seems that they have decided that the operation of Game Station and AMC Cinemas will completely fail.

However, judging from the performance, GameStation's operations were not bad. The quarterly results announced on June 1 showed that the revenue scale clearly exceeded market expectations, but losses were expanding. The loss per share was 2.08 US dollars, compared to a loss of 1.01 US dollars/share for the same period last year.

Meanwhile, another listed company that has been shorted, AMC Cinemas, released its quarterly report in May, showing that revenue and profit performance all exceeded expectations, but it is also in a state of loss.

It is worth mentioning that as a leading company in the US cinema line, it is benefiting from the recovery of the US film and television industry. Its new film “Top Gun 2: The Lone Ranger” was released in less than 2 weeks in North America, and box office revenue reached 291 million US dollars. Analysts predict that the film's final total box office revenue may exceed 1 billion US dollars, and will help bring American consumers back to theaters.

In response, investment bank Wedbush Securities analyst Alicia Reese said that at this point in time, it doesn't seem like a good time to short it. Short selling agencies' short bets are mainly based on pessimism among US retail investors.

Looking back at the Wall Street “empty war” a year ago, American retail investors formed a group to “face off” Wall Street hedge funds. According to data from financial analysis company S3 Partners, in the first five months of 2021, institutional investors heavily bet on shorting the two stocks of Game Station and AMC Cinemas, with cumulative losses of more than 10 billion US dollars (about 66.7 billion yuan).

Among them, the famous bear agency Citron Capital “surrendered”, and the hedge fund Melvin Capital (Melvin) was “blown up” and suffered huge losses. In 2022, it was once again hit by a wave of technology stock sell-offs. The losses further intensified, and eventually had no choice but to liquidate and leave the market, which is staggering.

The US “Capitol Hill Stock God” takes another shot

Faced with the continued sharp decline in US technology stocks, the Pelosi family, which has the title of “Capitol Hill Stock God” in the US, has also begun to enter the market at the bottom.

On June 6, local time, a regular trading report disclosed on the US House of Representatives website showed that US House Speaker and senior Democrat Nancy Pelosi (Paul Pelosi), her husband and financier Paul Pelosi (Paul Pelosi) bought Apple call options worth 500,000 US dollars to 1 million US dollars on May 13.

The report also showed that Paul Pelosi continued to buy more Apple call options worth between $25-500,000 on May 24. On the same day, he also bought up to $600,000 in Microsoft call options.

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According to the relevant provisions of the US “Stop Using Congressional News Trading Act”, US congressmen are not allowed to use private information obtained from their positions to trade stocks for personal gain, and lawmakers should disclose relevant information within 45 days of participating in financial transactions.

Some analysts pointed out that Pelosi's husband's series of operations meant that the US “Capitol Hill stock god” had a bullish attitude towards large US technology stocks and may have smelled some signs of an inflection point in the market. Prior to its purchase, US technology stocks all experienced a wave of sell-off. Among them, the cumulative decline in Apple and Microsoft stock prices in 2022 was 17.5% and 19.8%, respectively.

It is worth mentioning that as the third-highest heir to the US president, Pelosi served as Speaker of the House of Representatives for 19 years. She is almost the “No. 1 woman” in current US politics, and is also one of the core figures. According to the “Washington Post” estimate, Pelosi is also one of the richest members of the US Congress, with an estimated net worth of over 106 million US dollars.

“Pelosi Stock Exchange” explodes

Although Pelosi has publicly stated many times that she has never participated in stock trading, this did not prevent her husband Paul Pelosi from making a lot of money in the capital market.

According to statistics from the US political donation database OpenSecrets, the Pelosi family's return on investment in 2021 was as high as 56.15%, outperforming the Standard & Poor Index (growth rate of about 13.6%), surpassing the top US hedge fund managers, and even the “stock god” Buffett was out of reach.

According to several actions taken by Paul Pelosi in 2021 as sorted out by the Global Times, the buying and selling points were all extremely accurate:

In January 2021, on the eve of the Biden administration's announcement of electric vehicle subsidies, Paul Pelosi bought over $1 million $Tesla (TSLA.US)$ Tesla shares;

In March 2021, Paul purchased Microsoft's bullish option and exercised the power to buy 25,000 Microsoft shares twice. Subsequently, Microsoft received a $22 billion AR combat helmet order from the US Department of Defense. The stock price then skyrocketed, and conservatively estimated that the profit could reach 2.4 million US dollars;

In July 2021, Paul went long in reverse while major US tech companies were being investigated for antitrust $Alphabet-C (GOOG.US)$ Google, unscathed, Google's stock price soared 20%, and Paul was once again full of profits.

Such accurate operation once set off a wave of “studying Pelosi family stock market transactions” on major social networking platforms in the US. In January 2022, the number of searches for “Pelosi Stock Exchange” on Google once reached a record high.

Up to now, Pelosi has submitted 6 transaction reports since 2022. Apart from a few deals with Apple, $Disney (DIS.US)$ Disney, Tesla, $PayPal (PYPL.US)$ PayPal Holdings and a number of other stocks are also among its transactions.

According to a report on the US “Business Insider” website, some members of the US Congress profiteed from the Russian-Ukrainian conflict. At least 20 lawmakers and their spouses traded stocks before the release of 40 billion yuan of military aid to buy arms dealers -- $Raytheon (RTN.US)$ Shares of Thor and Lockheed Martin.

In addition, statistics from the US “Business Insider” website show that throughout 2021, US congressmen and their immediate families traded a total of 631 million US dollars worth of stocks and financial assets, of which they bought 267 million US dollars and sold 364 million US dollars; 60% of these were stocks, and the rest were funds, bonds, and other assets. Furthermore, an investigation found that 49 members of the National Assembly and 182 relevant senior staff members violated the Stock Act and did not promptly disclose transaction information in accordance with regulations.

The US congressman's stock trading boom once sparked intense public criticism. In January of this year, US Senator Jon Osoff and Mark Kelly jointly proposed the “Congressional Stock Trading Prohibition Act.” The Act prohibits members of Congress, their spouses, and dependent children from trading stocks during their tenure. Osoff said that members of the National Assembly have special powers to obtain confidential information and formulate federal policies, should not participate in the stock market at the same time, and must end “corrupt insider trading.”