Juggling Dynamite

Better Markets is a public interest 501(c)(3) non-profit based in Washington, DC that advocates for greater transparency, accountability, and oversight in the domestic and global capital and commodity markets.

They make it their mission to clearly articulate for the public and legislators the conflicts of interest and trust abusing activities today rampant in a largely lawless financial industry.

Steal-from-the-poor-to give-to-the-rich-addiction-inducing-trading-app Robinhood was paid more than $450 million in 2020 alone for selling its clients’ orders to trading venues, known as “payment for order flow” or PFOF, aka “maker-taker” fees and rebates.

But Robinhood is far from alone; trust-abusing self-enrichment is the dominant financial model today.

Better Markets succinctly lays out the should-be-banned architecture behind some of the latest stories in Reddit, Robinhood, GameStop & Rigged Markets:  The Key Issues for Investigation; all screaming for a much-needed return to Glass-Steagall divisions in this sector.  Here’s their conclusion:

There is little doubt that today’s financial market are littered with multiple layers of legalized bribery, including PFOF and market manipulation that enriches the financial industry’s biggest firms and intermediaries at the expense of investors, price discovery, capital formation, and the orderly functioning of markets. There is no reason for the markets today to be so fragmented other than to serve as a wealth extraction mechanism that moves money from buy-side pockets to sell-side firms, intermediaries and their affiliates.

So, the conclusions thus far based on what little is currently known are twofold. To be sure, first, there should be a thorough investigation into the market mayhem precipitated by the so-called Reddit rebellion ignited in the subreddit community of WallStreetBets and apparently implemented by Robinhood’s retail army. However, second, that must not be allowed to obscure the need for a much broader and deeper investigation into the fragmented predatory financial ecosystem that enables such mayhem. For example, the biggest Wall Street banks and their subsidiaries and affiliates enable, fund and facilitate many of those trading practices because those banks are also (1) the prime brokers for most of the hedge funds, (2) the biggest derivatives dealers, (3) major market makers, and (4) significant lenders in various capacities including as securities lenders, while also playing numerous other roles in the financial system and, undoubtedly, in the transactions and activities at issue here.

Thus, while the direct and obvious participants in the market chaos like Robinhood, Reddit, Citadel, and the short-sellers must be intensely scrutinized, the many other financial firms, including the marquee Wall Street banks, driving, enabling, funding and incentivizing these activities –and enriching themselves from them –must also be thoroughly reviewed.

Also, see Anyone can manipulate the market. Here’s how to fix that, for reform suggestions on how to restore some semblance of free markets.

The more people COVID-19 infects, the more opportunity the virus has to evolve into new strains.  Variants originally found in the U.K. and South Africa have quickly become the dominant types in the countries where they were first detected.

As of late January, the UK variant had surfaced in 70 countries and territories including Canada and the U.S, and is on track to be the dominant North American strain by mid-March. See: COVID-19 variant in Barrie outbreak upends conventional wisdom of spread.

By late January, the South African variant had surfaced in 30 countries including Canada and America, and the Brazilian was detected in America.  See How Coronavirus Mutations Are Taking Over.

Preliminary estimates suggest the variant from the U.K. is 50%–70% more transmissible than earlier versions of the virus and early data suggests it could also be deadlier.

Scientists have also noted that the South African variant could be better at evading antibodies produced in response to natural infection and vaccination.  See New clinical trials raise fears the coronavirus is learning how to resist vaccines:

New data showing that two COVID-19 vaccines are far less effective in South Africa than in other places they were tested have heightened fears that the coronavirus is quickly finding ways to elude the world’s most powerful tools to contain it.

The U.S. company Novavax reported this week that although its vaccine was nearly 90% effective in clinical trials conducted in Britain, the figure fell to 49% in South Africa — and that nearly all the infections the company analyzed in South Africa involved the B.1.351 variant that emerged there late last year and has spread to the United States and at least 30 other countries.

…Researchers once believed it would take several more months, or even years, for the virus to develop resistance to vaccines. They said the speedy evolution is largely a result of the virus’ unchecked spread.

While vaccination programs are underway worldwide, effective distancing measures remain critical in containing COVID-19’s spread.  Read:  The Virus changed.  Now we must ‘Get to Zero’, or face catastrophe.

Between March 23 2020 and January 5, 2021, the US dollar index (greenback versus the Euro, Yen, Pound, Cdn$, Swiss franc and Swedish krona) fell 13.2% to test long-term support in the $89 area as shown below in my partner Cory Venable’s chart of December 31, 2020.

As the dollar fell, risk-assets on the other end of the global teeter-toter rose and dollar bears became ubiquitous with traders and asset managers the most dollar-short coming into January since 2006, as shown below.

When everyone agrees, something else tends to happen, of course, and since January 8, while the dollar index has quietly strengthened, stocks, commodities and cryptocurrencies have lost ground.

As shown below in Cory’s chart since 2000, at $90.50 starting February, if the oversold dollar (in red) continues to rise for a bit, the risk-on mania that has dominated since March should be in for its next round of comeuppance (S&P 500 price in blue).