On Wednesday we published a remarkable chart from Jesse Felder, showing that in the past few weeks, google search queries for "day trading" and "call option" had exploded to all time highs as retail daytraders flooded into the "can't lose" market.
To this we can now add the recent trends for "Robinhood" which, predictably is also at all time highs.
All of this was not lost on Hertz and Jefferies, who as we reported overnight, are now hoping to piggyback on this daytrading euphoria to sell up to a $1 billion of effectively worthless to these same momentum-chasing addicts.
But who are these furious dip buyers who will soon be responsible for a new financial product, the Initial Bankruptcy Offering? While conventional wisdom defines the typical Robinhooder as a bored, "unemployed from home" Millennial or Gen Zer, the anecdotal reality is even more bizarre. As former Goldman partner Joseph Mauro writes on twitter, his 10-year-old son can't find Fortnite players as they have migrated over to Robinhood.
Others shares similar experiences:
My son told me his friends were buying htz and chk. They’re 12.— George Contos (@Georgecontos3) June 9, 2020
Telling him to get in on it. Needless to say we had a nice chat about a few things.
Of course, all of this is likely tongue in cheek, but the fact that HTZ stock rose nearly 100% on the news the company would sell worthless stock to retail bagholders, lowering the cost basis of its creditors by $1 billion is merely confirmation that while daytraders may have made money chasing momentum, when it comes to even modestly complex "situations", things get scary.
In any case, here is Michael Every's take on this absurdity:
There is a great deal of nonsense on Twitter, now more than ever, but the odd gem too. One of the latter, I believe, describes at least a part of how the market got to the stage where it could fall so precipitously. A parent was complaining that half of their son’s Fortnite gaming companions were no longer joining his squad because they were all day-trading on a certain online platform associated with merry men instead. The boy in question is 10. Now this is entirely anecdotal – but seasoned professionals and journeymen will admit that the general level of market ridiculousness seen around us certainly fits that anecdote. To use Fortnite terminology for anyone reading (“Hi, day-trading 10-year old!”), what just happened is not a bug in our system: it is a feature.
His conclusion: with investors like this there is no way Hertz will not be able to pull off its new equity offering in a market "so silly it hurts":
S&P futures are up moderately again this morning following far smaller declines in Asian stock indices. Perhaps grandmothers in the east are buying the dip that crushed children in the West. Perhaps both will want to snap up the USD1bn in a new bankrupt stock offering from a US car rental company whose name tells you everything about how silly this market is: so silly it hurts.
JonesTrading strategist Mike O'Rourke summarized this raging insanity best overnight:
Powell is reinforcing the view that markets that moving higher are functioning and markets that are moving lower are malfunctioning (as he concluded). He stated, “We’re not focused on moving asset prices in a particular direction, or at all. We want markets to be working, and I think partly as a result of what we’ve done they are working and we hope that continues.” The Chairman spent the entire press conference talking about the uncertainty of the recovery, 22-24 million people unemployed, and the millions of people who will remain unemployed. Is that consistent with a market on the cusp of making new all time highs?
The market is more broken today than it was on March 23rd, and it is entirely due to the Central Bank. The most remarkable aspect about Federal Reserve policy over the past 12 years is that very little of it has been related to economics. It has almost entirely been tied to financial markets, and leadership of the Fed over that time has repeatedly exhibited ignorance as to the functioning of financial markets.
Bottom line: when the Fed has made stocks the risk-free asset, it's the 10-year-olds who are the "smart money"... which is probably bad news for all those mature professional advisors and hedge funders who are generously paid to analyze "fundamentals" - well, they have all been made redundant.