Portfolio Allocation Review (January 2021) - Apes Together Strong!

Core Stock Allocation

Total Portfolio Allocation

Transaction Summary for January 2021

• Bought VanEck Vectors Semiconductor ETF, SMH

This week, we witnessed the best financial drama unfolding as r/wallstreetbets took on the institutional hedge funds. For the first time we are seeing such a large scale coordinated rally over a stock, wanting to send a message to those financial bankers who have been profiteering from the retail investors for the longest time ever.

The drama pretty much started after retail investor realized that the GameStop (GME) stock is so over shorted by hedge funds that all the free float shares in the market will not be sufficient to cover all the short positions. When one of the hedge funds company, Melvin Capital started to short the meme stocks, GME, this incurred the wrath of the retail investor. This was a declaration of war, and people then started calling on social media to buy up all the GME shares, resulting in what is called a short squeeze. The social media where most of these people gathered are at subreddit r/wallstreetbets.

I have followed WSB for quite some time, and it’s mainly for the meme. But in the past few months, those meme stocks which are mentioned in WSB have all rallied spectacularly. From Tesla, Nio, Palantir, BlackBerry to GameStop etc. All the calls on the stocks resulted in the price to soar. The power of retail investor has become significant enough to move the markets. As of now, there are closed to 6 million followers in the subreddit and continued to raise.

One of the pioneers who has bought GME when it at around $3 goes by the username, u/DeepF**kingValue, became a multi-millionaire investing in GME with only around $50K. His profit was closed to $50 millions at one stage. He started calling people to buy into GME, and then holding onto the shares as the short squeeze will cause the hedge funds to buy back their shares later at a much higher price since there is not enough supply of shares to cover all their shorts position. Many multi-millionaires were made from buying GME stock. As more people piled onto the stock, the stock soars even higher and the hedge fund are ‘squeezed’ as the number of shares remaining become lesser and lesser. The amount of loss these hedge funds could incurred are technically infinite as the price rises.

These hedge funds companies are also not novice in the financial market, and they tried ways to strike fear into the public so that people would sell their shares, and they can cover back their losses. They quickly got the media companies to release the news that the company has already closed their short position. They then targeted the social media groups. Discord servers are shutdown, and Facebook groups are closed in order to prevent people from rallying. The more they tried to stop the people from buying, the more the people tried to buy the stock.

What could be the last attempt to stop the price of GME from rising was that the brokerages such as Robinhood App, IBKR etc. started preventing people from buying the stock and only allows selling. As only selling is allowed, price naturally falls and these hedge funds companies will be able to cover their short positions. Many see this as market manipulation since Citadel is the parent company of Melvin Capital, and Citadel is a paying customer to Robinhood App who has been buying trading data from the brokerage. Within hours, a Class Action complaint was launched against Robinhood. Many lawmakers and public figures also started calling out Robinhood for market manipulation. 

As I speak, the war is still ongoing and there is no limit on how high the price of GME could goes to. Some hedge funds companies might fold and cause a ripple effect in the market. I am what the ‘autists and retards’ in WSB would call, a ‘boomer’ investor. I did not follow any trade in WSB, but I made my first purchase of the year, a semiconductor ETF, after the small retracement on Thursday. This will be part of my satellite portfolio which focuses on growth, and will continue to accumulate should there be any dumping by hedge funds to cover their losses.

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