7-Chart Saturday (1/30/21)

By Charlie Bilello

30 Jan 2021

This week’s post is sponsored by YCharts. Mention Compound to receive 20% off your subscription when you initially sign up for the service.

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7 charts from the past week that tell an interesting story in markets and investing…

1. How the Stock Market Became a Video Game

This week was one for the history books…

At the start of the year, GameStop had a market value of $1.2 billion.

By Thursday morning, that had moved all the way up to $35 billion, an increase of 29x. The chart doesn’t look real…

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At one point, GameStop would surpass Best Buy in market value, a remarkable feat considering GameStop (the company) has lost $1.5 billion over the last 3 years while Best Buy earned $4.3 billion.

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But this wasn’t about fundamentals. Far from it.

GameStop entered the year as the most highly shorted stock (as a % of float) in the market, and after going viral on Reddit message boards it fueled a short squeeze for the ages.

GameStop was the first and most prominent example, but other heavily shorted names were soon targeted as well, boosting their share prices in tandem. This was the best month for heavily shorted stocks that we may ever see….

2. Main Street Jumps In

The extreme gains in GameStop and other heavily shorted names fueled an absolute explosion in demand from retail investors who were enticed by the multitude of get-rich-quick stories on social media.

The fear of missing out (FOMO) is the greatest fear in markets, and we saw the evidence of that on Friday with the top 4 apps in the app store (and 6 out of the top 10) all related to trading.

With the extreme volatility, its never been easier to make a lot of money or lose a lot of money in a single trading day. That second part (losing a lot) seems to have been long forgotten (“stonks only go up”) but the market has a way of sending friendly reminders from time to time.

3. Volatility Returns

Speaking of volatility, it has started spilling over into the broader markets, with the $VIX spiking 62% on Wednesday, its 3rd largest daily increase in history.

4. A SPACtacular Month

Risk appetite from investors has rarely been higher, and the SPAC market is taking full advantage. In less than a month, more than $25 billion has been raised, on pace to surpass last year’s record today by April. Supply is coming…

5. The Stock Market is Not the Economy

US Real GDP fell 2.5% in 2020 while stocks rose 18%, showing once again that the stock market is not the economy.

The only other year that stocks finished higher with a decline in growth of this magnitude? 1938.

6. $100+ Billion Quarter

Apple reported revenues of $111 billion in the 4th quarter, its highest ever by a wide margin (previous high was $91 billion)

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Its 21% growth rate in Q4 was the highest for Apple since 2015.

7. Decline in Covid Continues

The decline in Covid-19 hospitalizations in the US continues, down over 31,000 from its peak on January 6 (post).

New cases are back to pre-Thanksgiving levels, down sharply from their peak on January 11.

A great sign: the pace of vaccinations in the US is starting to pickup, averaging 1.3 million per day over the last week. With the approval of additional vaccines expected (Johnson & Johnson and Novavax reported results this week), this should only increase in the coming months.

And that’s it for this week. Thanks for reading.

Have a great weekend everyone!


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