Short Selling Hasn't Been Working for Months

Every trade I've made in my play money account has earned a profit except one -- selling tech stocks short.  And overall, stock market indices have continued marching toward new highs even as we've endured a terrible Holiday Wave of COVID-19 with nearly a million layoffs per week and falling retail sales.

Short selling has been in the financial news the past few days, because of some popular mischief spreading from a Reddit forum into the stock market.  On this Reddit forum, people have identified and targeted stocks with a high percentage of short sales for something called a "short squeeze".  The resulting squeezes have cost hedge funds billions of dollars, and have sent certain stocks shooting far beyond their fundamental value (see GameStop for an example).  I share your pain, hedge funds, my own attempts at selling stocks short have resulted in losses also.  This stock market is in a bubble that keeps blowing bigger no matter what happens in the real world.

Short selling works this way -- your broker borrows stock you don't own from somebody else's account.  Then you sell that stock into the market, hoping to buy it back later at a lower price.  You get to pocket the difference if the stock price does fall.  But if the stock price rises, you have to buy it back at a higher price, which means you lost money.

A short squeeze works this way -- there's been a high volume of short sales for a particular stock, so a group of manipulators come into the market and buy as much of the stock as they can, to push the price up in an artificial way, to the point where the short sellers have lost so much on their trades they are forced by their brokers to cover their losses before their accounts go negative.  The only way they can cover their losses is by buying back the shares they'd borrowed, which further pushes up the price, which forces even more short sellers to cover their losses.

Last year my SQQQ trade (shorting QQQ) lost me so much money, eventually I gave up and closed it (I made a profit overall, because of my other trades).  Not because I had to close it, but because I was tired of a losing bet.  I wasn't squeezed out, per se.  But some big hedge funds have been publicly squeezed out of their short positions, after losing billions of dollars.  A couple months ago, one famous Tesla short was forced to close his position and gave a sort of public confession, converting to a Tesla booster so his investors would stop fleeing his hedge fund.

Now we're seeing mobs of small investors openly banding together to squeeze shorts on several low-quality stocks.  This is creating some crazy price moves.  GameStop, for example, has seen its price go up by more than 100x.  Not 100%, 100x.  Even though it is losing money and its sales are way down.  It's as though the BitCoin hypervaluation paradigm is spreading to more and more individual stocks.

Tesla had been my prime example of the current hypervaluation wave.  I learned that even Nancy Pelosi has purchased a large stake in Tesla (perhaps $1 million at today's price).  But the phenomenon is spreading via Reddit forums now.

Some of the news coverage has taken a populist We the People vs. the Hedge Funds approach, as small investors have profited by torching the pros.  But the pros were selling these stocks for a reason -- the stocks were already overvalued.  Now all these small investors have crowded into stocks that were already overvalued, sending them far far higher than before.  Somebody is gonna be left holding the bag when these stocks crash back toward reality.

Before I'd been warning people that the stock market was historically overvalued, so be careful with your stock investments.  Now the stock market is moving into dangerous territory.  A lot of small investors buying individual stocks are going to get hurt.  As for me, yes, I put some "play money" at risk just for fun.  Currently, I'm playing with less than $400.  If I lost all that $400, I'd be OK.  But some people have put their life savings into GameStop in the hopes of tripling their wealth in one day.  That's great if it works, but it's just a gamble that somebody even more stupid than you will pay even more than you for a stock that is truly worth perhaps 5% of what you just paid for it.

Yes, when the bubble pops, there will be individual stocks that fall >90%.  This has happened before, and it will happen again.  Back in 1929, RCA was the most heavily traded stock, having climbed over 100x during the Roaring Twenties.  After the bubble popped it dropped by over 90%.  RCA -- Radio Corporation of America -- was booming because, of course everybody would be buying a radio and listening to the radio, radio was the newly emerging technology and RCA was the leading company in the industry.

Just like everybody will be buying an electric car and driving electric cars, and Tesla is the leading company in the industry.

But even a growing company in a leading industry can be overvalued during a bubble.

Remember Netscape?  The company that was going to win the Internet browser wars?  Anybody using Netscape on their computers today?  Netscape was purchased by AOL.  Anybody using AOL anymore?  The same fate will probably meet Tesla.  Twenty years from now, Tesla will have become the Netscape of the 2020s.

I don't know when this bubble will pop.  But be careful, folks.  I expect the hedge funds will have the last laugh.  You caught them with your short squeeze, but now you're the one owning a stock that is going to fall by over 90%.  Don't wait until it is too late to sell.

brrrr

Late January should be the coldest part of winter here in Suburban Maryland, and we're having some brrrr outside with a likely moderate snow dump from Sunday-Monday.  I took Dax on a hike this morning before my work shift began, and it was below freezing the entire time, with some strong wind, brrrr.  Dax loved it.

Thursday ...

Not sure of my weekend plans yet.  Dax has his vet appointment on Saturday morning, I might head to the condo afterward if I won't have the house to myself.  For most of Quarantine the only question about the weekend was: will I spend one night or two nights at the condo.  Now there's the additional variable of maybe having the house to myself, but not knowing ahead of time.  Not that knowing ahead of time matters right now.  It will matter more when I can make plans with other people, I'll need to know whether I have Dax duty.

While Star Trek: Discovery was dropping 3rd season episodes every Thursday, T and I were having regular Thursday night dates in front of the TV, usually with pizza and wine.  Now we're back to not having a regular TV show together.  I'll probably cook dinner tonight and then he'll probably go play video games while I do something else again.

This week I did yoga, stretched, danced, ran, hiked.  Tomorrow I will probably do weight lifting.  May run again on Saturday before maybe heading to the condo, and before the snow hits.  My back has been all better, so naturally I feel less motivation for stretching, but I should probably try to keep stretching every day.

Our first few paychecks of the year always bounce around a bit as the salary increase, changes to withholding, etc., work their way through the system at varying speeds.  Once I have two paychecks in a row with the same take home pay, I'll be able to calculate my 3% charity floor in 2021 -- as I begin my 30-year sharedown.  My goal is to live on the average global per capita GDP by 2050, giving away the rest.  I'll have to reset the sharedown path when I retire, because my income will drop A LOT when that happens.

Time to do last night's dishes -- as T cooked last night.  Then lunch!

COVID variants forever

I'm gonna stop calling it COVID-19, because scientists around the world are documenting an ever-increasing number of COVID variants popping up all over the place, and then discovering the current vaccines are less effective against them (not ineffective, but less effective).

As many predicted would happen, it increasingly looks like we're entering a new normal in which several variants of COVID are simultaneously traveling around the world, just as several variants of influenza are simultaneously traveling around the world.  And these variants are constantly mutating into new variants.

I fully expect that in the future, annual COVID shots will protect against the top 3 or 4 variants each year, just as flu shots protect against the top 3 or 4 variants each year.

And each year, the effectiveness of the shots will vary.  And not everybody will bother to get them

So now what?

We cannot stay in Quarantine forever.

And we're gonna have to ramp up the vaccine production and delivery systems so that each year we're pumping out and injecting a couple hundred million updated COVID shots in the US.  Routinely.  We'll have ample stockpiles of each year's vaccine, you won't have to wait in long lines, you can just get your annual shot the next time you're at CVS or your doctor's office.

Personally I'm not going to spend the rest of my life hiding from each new COVID variant.  I'll follow the local laws and regulations, of course.  But I'm not gonna hide inside tiny social bubbles forever.  Get me the current vaccine ASAP, and then I'll return to normal.  And then I'll get the annual booster shot every year, just like I get the annual flu shot every year.  And then someday, I'll catch some variant of COVID anyway, just like I occasionally catch a variant of influenza anyway.  And I'll probably survive.

We've got to get to a point of normalization with this.  Hopefully under Biden we can do this together -- ramping up a new, permanent vaccination industry, and figuring out which rules are sustainable over the long term with respect to mass transit, work places, schools, entertainment, shopping, travel.

I can't spend the rest of my life obsessing over whether the current vaccine is only 60% effective against the South Africa variant, or whatever % effective against the Brazil variant, etc.

We'll figure it out.  Maybe we'll always wear masks on airplanes and buses, and while attending concerts and plays.  Maybe if you can do your job from home you do your job from home.  Maybe a lot of us test ourselves each morning with disposable test strips, and we stay home if we test positive that day.  Maybe the test strip readers connect to apps on our phones so we can display our negative statuses to the turnstiles before entering buildings.  I don't know the exact future, but you're not gonna convince me that someday we're gonna "beat" COVID.  It's here to stay.  What I cannot tell yet is how we will adapt over the long term.

Before I was born, we set up public health systems to vaccinate people for the first time, we set up public sewage systems and public water systems to reduce the spread of intestinal diseases.  We developed antibiotics, and then more recently antivirals.  People placed hand sanitizer dispensers on their desks at the office, and some of us learned to stay home when we're sick.  Somehow COVID will factor permanently into our lives and we'll set up prevention systems and we'll just deal with it.  Not via denial, and not via endless quarantine, but via permanently changed routines & expectations.

We should've set up a widespread test, trace, and isolate system from the start, like some other countries did.  We did not.  So we've got this locality-by-locality shifting set of rules about what can be open, and at what capacity, and how many people we can hang out with at the same time.  Along with locality-by-locality distribution of vaccines.  It's a deadly mess, and it will kill hundreds of thousands more people before we get the first version of the vaccine into everybody's arms.  And then we'll see that COVID hasn't fully disappeared After the Vaccine, and we'll have to work out the new rules, and our lives will mostly go on.

50/50 can't last!

The longest period the US Senate has been divided 50/50 was less than five months.  Although US Senate elections are generally held every two years, there's continued churn in between elections.  Senators occasionally die, sometimes they abruptly resign for whatever reason.  They may decide to run for a different office instead, or take a Cabinet position, or even switch parties.  Then each state has its own rules for replacing its Senators, and in some cases that replacement could be from the other party.

Sitting here on the Left in the US, I hope the next Senate churn moves in our direction instead of back to the Republicans.  We could move the center-of-gravity swing Senator from WV to MT, a very slight improvement ;-)

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Part of my retirement planning is my personal 30-year Green Communism path, also paying off all my non-mortgage debt, and eventually moving out of this house.  But another part is doing what I've been telling everybody on the Left to do -- moving to a state where my vote isn't completely wasted.  I think I've written in here before that I want to move to the swingiest state that has already legalized marijuana, because I might want to smoke occasionally in retirement and I'd like to do so legally.  The only place I've ever bought marijuana legally in my entire life was Amsterdam, on a trip with K.  Although marijuana is legal in DC, it isn't legal to buy it in DC.  I haven't bought it illegally in DC either, not recently anyway.  I think the last time I bought pot in the US was back around when 9/11 happened.

Michigan was the state, last time I checked.  And then I picked out which city I want to live in, and then I even picked out which building I want to live in, heh.  But this will probably change between now and 2027.

Of course, I might end up in a new or different relationship by then, which would require negotiations about possibly moving somewhere.  Maybe I'm stuck in the DC area for life.  Maybe my future partner wants to move to Portland like everybody else, heh.

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B's husband is back in town for the weekend (don't ask me why, I don't know), so I won't get the house to myself.  T encouraged me to go to the condo this weekend.  He said he'd take Dax to the vet on Saturday, so I might head downtown midday tomorrow, although I'd still have to work when I got there, I have an afternoon meeting.  But I could get an earlier start on my fun if I drive there midday.

I thought about waiting until Saturday and going for one night, but we're probably getting significant snow on Sunday ... do I want to be driving back to the house in a snowstorm?

If I can get my weight lifting done tomorrow morning, and can drive downtown before my afternoon meeting, I'll probably head to the condo tomorrow.  Then the snow forecast will help me to decide whether I stay one night or two.  Also, checking in with T about how he's doing.  We are still each other's primary social support during Quarantine and my life is easier when my presence helps him to avoid an emotional crash, just as my life is easier when his presence helps me in the same way.

I suspect that after we get our shots, we'll be spending a lot of time socializing with other people.  And by this time next year, I should know whether I will want to stay in this house until I retire, or whether I will want to move out during summer 2022.  And then would I live in the condo until I retire, or buy my own separate place?  It will be weird when my life starts moving again, after this extremely introverted pause, after my beloved K moved away.  Despite all the complaints I've had about T during this Quarantine, I'm still genuinely surprised we've gotten along as well as we have.  He's probably had fewer complete breakdowns about how horrible I am during the past 10 months than during any other 10-month period since we've met.  As horrible as I am, we're still both here.