Pattern in GameStop Bonds Spells Trouble For Reddit’s Favorite Stock

GameStop shares have been on a wild ride in recent days, mostly upward:

Much of this is driven by a new turnaround plan by GameStop board member and Chewy founder Ryan Cohen, who aims to turn GameStop into an online-first retailer. But if this is such a game changer for the company, why isn’t this reflected in its bonds?

GameStop owes a lot of money to a lot of people, and they don’t seem to be any more confident about getting it back than they were months ago:

GameStop’s two-year bond, on the other hand, tells an interesting story — one that strikes a much more cautious tone about the likelihood that Chewy Inc. founder and activist investor Ryan Cohen can revitalize the video-game retailer through a digital transformation. For all the whipsawing of the company’s stock price over the past two months, its debt has been relatively stoic, suggesting a rocket-ship-like turnaround is still anything but certain. The bonds last traded on March 5 at 103.5 cents on the dollar to yield 6.34%, or about 620 basis points above comparable Treasuries. That price is actually a bit lower than it was on Jan. 13, when the stock was still trading at about $30 a share.

If GameStop had truly turned a corner, why wouldn’t the price of the bonds go up along with the stock? A stronger company means higher likelihood of repayment, and hence higher bond prices.

My theory: retail traders on Robinhood are buying stock and stock options, not bonds. The bond buyers are institutional investors with a more sober outlook.

So, if you want to know the true picture at GameStop, I suggest looking beyond the stock and options to the bonds. If those start to move, something may really be changing at GameStop.

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Photo: “Retail GameStop” by ccPixs.com is licensed under CC BY 2.0

How Alex Jones Lost Bitcoin Worth $563 Million

Ten years ago, when bitcoin was worth only $5 each, cryptocurrency proponent Max Keiser gave conspiracy theorist Alex Jones a laptop. It contained 10,000 bitcoin, which would now be worth over $500 million.

That laptop has gone missing:

Alex Jones, the founder of the right-wing media group Infowars, has revealed that he has lost the laptop containing 10,000 bitcoins given to him by television personality and bitcoin proponent Max Keiser. During the Flagrant 2 show with Andrew Schulz and Akaash Singh on Tuesday, he said that Keiser gave him 10K BTC on a laptop 10 years ago.

This highlights a real problem with cryptocurrencies. Unless you use an application to manage and store your crypto, you can lose the USB or laptop, forget the password, etc. Do that and the money is gone forever.

Better starting looking, Alex!

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Photo: “Alex Jones” by seanpanderson is licensed under CC BY 2.0

Texas Is Suing Itself To Stop Mask Mandates As Essential Workers Are Thrown Under the Bus

The state of Texas lifted its mask mandate recently. As if this dangerous policy weren’t enough, it is now suing the city of Austin for choosing to keep a mandate and protect its citizens:

The Attorney General for Texas is suing officials in Austin after they refused to enforce an order that ended a statewide mask mandate, he said on Thursday.

If Austin can’t make a city ordinance to keep its people safe from death in the middle of a pandemic, why does the city government exist? One may as well dissolve it.

These rules are putting essential workers, many of them poorly paid and from minority groups, in an impossible position. They’re at risk from the virus because they’re exposed to so many people, and now they have to enforce their own store’s mask mandate. But the state law gives cover to anti-maskers who violate the store rules and behave like infants when asked to mask up.

I find this totally unacceptable. To be frank, it makes me quite angry. I’m only grateful I live far away.

If the federal government can legally intervene, it should.

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Photo: “Greg Abbott” by Gage Skidmore is licensed under CC BY-SA 2.0

The US Government Is Selling Its Bitcoin

The US government is selling its bitcoin…all $38,000 worth:

Tucked away among the Ford, Dodge and Chevy sedans, the 12,000-gallon storage container and the inoperable Caterpillar tractor being auctioned off by the U.S. government is an unusual item: 0.7501 of a Bitcoin.

The federal government did not reveal the source of its cryptocurrency holdings, but I imagine they were probably seized in a bust of some sort. Indeed, a far larger collection was sold off when the Silk Road was shut down:

The government doesn’t say where its surplus digital currency came from. And while it’s a far cry from the 30,000 Bitcoins auctioned off by the U.S. Marshals Service in 2014 after they were seized from the Silk Road marketplace, the GSA auction is one more indication of how Bitcoin is becoming more and more mainstream.

This does make me wonder if eventually states and sovereign wealth funds will buy crypto and hold it. Can the day be far in the future?

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Photo: “Vice President Joe Biden visit to Israel March 2016” by U.S. Embassy Jerusalem is licensed under CC BY 2.0

This New Indicator May Tell You Where Bitcoin Is Headed

For many years, investors in stocks have been able to see how volatile the market is expected to be by relying on a gauge called the CBOE Volatility Index, or VIX. This measure, often called the “fear gauge,” reads how much volatility investors are expecting based on option prices.

Nothing like this has ever existed for cryptocurrencies. Until now:

A bitcoin “fear gauge,” similar to the Cboe Volatility Index (VIX) investors use to gauge volatility in the stock market, saw its first trades on Wednesday.

The T3i BitVol Index measures the expected 30-day implied volatility in bitcoin derived from tradable bitcoin option prices.

The index goes two years back so far. Current expected volatility appears higher than normal.

A high VIX tends to correlate with a drop in stocks. A low VIX tends to predict calm, gradually rising markets. This pattern may hold with Bitcoin as well, giving crypto holders a chance to see a bit into the future.

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Photo: “Winklevoss Twins – Caricature” by DonkeyHotey is licensed under CC BY-SA 2.0

For the Vaccinated, Masks May Be Over

If you’ve been vaccinated for COVID, can you finally take off the mask? Early data from Israel says yes:

Pfizer Inc and BioNTech SE said on Wednesday that real-world data from Israel suggests that their COVID-19 vaccine is 94% effective in preventing asymptomatic infections, meaning the vaccine could significantly reduce transmission.

If you don’t even have an asymptomatic infection, you shouldn’t be able to transmit the disease to others. That said, this data is preliminary and is not yet peer reviewed.

The problem with real world application of this knowledge is that anyone can say they’re vaccinated. At a grocery store, for example, it would be hard to check everyone given constraints on time and manpower. So, I expect to see masks continue in public places until case rates are very low and everyone who wants a vaccine has had a chance.

That said, this data can inform our actions in private settings. I look forward to being able to wear one less frequently!

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Why NFT’s Aren’t BS

On November 15, 2017, the painting Salvator Mundi by Leonardo da Vinci sold for a $450,312,500, the highest price ever paid for a painting. It is currently believed to be aboard a yacht in the Red Sea owned by Saudi Crown Prince Mohammed bin Salman.

We are used to sky high prices for physical pieces of art. But until recently, digital art had almost no value. It could be reproduced infinitely, so how could anyone sell or own it?

Enter Non-Fungible Tokens (NFT’s). These tokens are pieces of art, videos, etc. that have a unique digital key. Their one and only owner is recorded on the blockchain, just like the ownership of cryptocurrencies like bitcoin.

The NFT market is exploding (see the March 8th post here):

The 10 largest NFTs have leapt by between 60% and 900% so far this year, according to crypto data provider Messari. In turn, sales of the tokens footed to more than $60 million in February per Bloomberg, up from $250,000 a year ago.

Beeple, a major digital artist, has done very well in the NFT market:

Beeple, who made his first foray into NFT’s in October, generated $3.5 million in proceeds from a 20-work digital art collection two months later.

NPR just put out an interesting, brief interview with Beeple here.

Monetizing digital art is no less legitimate than monetizing physical art, in my view. Why should art made of pixels be worth nothing while art made of paint and canvas be worth hundreds of millions? The medium doesn’t make something art or not art.

The global art market clocks in at $67 billion in sales, while the NFT market is only worth about $250 million. I expect to see that figure expand exponentially in the future, especially with the entry of blue chip art names like Christie’s.

Does that mean there is no NFT bubble? No. Some tokens may be overvalued and some people are probably speculating on quick price increases. But my view is that this market is legitimate and here to stay.

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Photo: “Mike Winkelmann – Beeple at Expanded Animation – OUT OF THE BOX, POSTCITY” by Ars Electronica is licensed under CC BY-NC-ND 2.0

New Stimulus Checks Could Set GameStop Off Like Never Before

With the House about to approve another $1.9 trillion in stimulus, the final hurdle before the legislation is signed by President Biden, I found myself wondering what this means for shares in GameStop and other meme stocks.

Those stocks took off big time in January, as personal income increased 10% month over month. Most Americans received a $600 stimulus check in December of 2020. A couple weeks later, shares in GameStop, AMC and others took off.

That stimulus is dwarfed by the new one, which will mean $1,400 checks for most Americans along with expanded unemployment, child tax credits, and other benefits. If a $600 check set meme stocks on a tear, what will $1,400 do?

Indeed, the expectation of stimulus payments may already be boosting GameStop shares, and may continue to do so in the future:

Market strategists have said tens of billions of dollars of U.S. President Joe Biden’s coronavirus relief package could indirectly find their way into shares, possibly boosting “meme stocks” that are heavily promoted by retail traders in online social media forums such as Reddit’s popular WallStreetBets.

My view of this company is that it’s lacking in fundamental value and should be avoided. However, it definitely wouldn’t surprise me if the stimulus gave the shares a short-term pop. The question is, how long will it last? You don’t want to be left without a chair when the music stops.

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Photo: “Money!” by ToGa Wanderings is licensed under CC BY 2.0

Will A Massive Uprising in North Korea Mean the End of Kim Jong-un?

North Korean defector and Youtuber Yeonmi Park is reporting a massive uprising in Musan, North Korea. The uprising began when police cracked down on a market selling Chinese products, which is illegal in North Korea despite them being the only goods available.

Farmers took their farm implements and attacked the police. The backdrop for this is an increasingly hungry population with little to lose. Indeed, the situation is so dire that even Russian diplomats are fleeing the country by railroad handcart, appalled at the lack of basic food and goods.

I haven’t been able to find independent corroboration of this uprising, and Park is unclear on what her sources are, but I assume she is still in contact with people inside North Korea.

Her discussion of the uprising begins here.

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Photo: “Kim Jong-un visiting Berlin.” by driver Photographer is licensed under CC BY-SA 2.0

Has Merck Found the Cure for COVID?

Merck has come out with great results from a new drug for COVID:

Over the weekend, the Big Pharma and its biotech partner Ridgeback announced their drug, molnupiravir, hit one of its secondary objectives from a new trial, namely to reduce time to negativity of infectious SARS-CoV-2 virus isolation from swabs in patients with symptomatic COVID-19.

The data show that, at Day 5, there was a reduction in positive viral culture in subjects who received molnupiravir (all doses) compared to placebo: 0% (0/47) for molnupiravir and 24% (6/25) for placebo.

These findings are preliminary, and more data will come out soon:

This is just a peek, with primary endpoints and more secondaries “to be presented at an upcoming medical meeting,” which will show a much clearer picture of how well this drug may be working.

We should know a lot more within the next few weeks:

Data from the phase 2/3 pivotal studies of the med are expected this quarter.

This drug could be great for people who are hesitant to get a vaccine, who haven’t been able to get one yet, or for whom the vaccine did not prevent infection (rare but possible). Good news!

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Photo: Merck CEO Kenneth Frazier, “File:Kenneth C. Frazier.jpg” by Merck (www. Merck.com) is licensed under CC BY-SA 3.0