Uncrackable quantum messages can now be sent through the air and will soon be beamed into space.
Researchers at the University of Science and Technology in China (USTC) worked out in 2018 how to secretly share "quantum keys" between orbiting satellites and ground stations, as Live Science previously reported. That made the connection between the Chinese Micius satellite and three ground sites it communicates with in Europe and Asia by far the largest secure quantum network in the world. But the quantum secrecy tool Micius originally used had a few leaks, requiring scientists to develop a more advanced form of quantum encryption known as measurement-device-independent quantum key distribution (MDI-QKD). Now, those same researchers have, for the first time, pulled off MDI-QKD wirelessly, across a city in China, without any fiber optics involved. And they're getting ready to send MDI-QKD up to Micius.
"The results by the Chinese group [are] very interesting for the quantum communication community," said Daniel Oblak, a quantum communications researcher at the University of Calgary in Ontario who did not work on the experiment.
It opens the door, he said, to practical quantum-encrypted networks relying on both satellites and fiber-optic cables working in tandem, something not possible with current technology.
Every bit of secure data you've ever sent from your phone — instructions to your bank through a mobile app, for example, or Whatsapp messages with your mom — has been broadcast across huge distances full of potential hackers. But any snoops listening in probably couldn't make any sense of that information because it was transformed into gibberish that could only be deciphered with a secure key, basically a long string of numbers. That string of numbers gets scrambled up with the information it protects, and only someone who knows the string can unscramble them.
Those systems aren't perfect though, vulnerable to attack from anyone who listened in when the key was being shared. They also don't typically use sufficiently long strings of numbers to be perfectly secure even against someone who didn't listen in on the key, according to Belgian cryptographer Gilles Van Assche's book "Quantum Cryptography and Secret-Key Distillation" (Cambridge University Press, 2006).
So in the 1980s, researchers developed a theoretical method for generating secure keys using quantum mechanics. They figured out that secure keys could be encoded into the quantum properties of individual particles, and exchanged secretly back and forth. The advantage of this "quantum key distribution" (QKD) is that quantum physics dictates that the very act of observing a particle irreparably changes it. So any spies who tried to intercept the quantum key could be immediately detected by the changes in the particles.
Securing the quantum vault
In recent years, as researchers began building prototype quantum key distribution networks using photons (light particles), an important flaw turned up in the system — "Side channel attacks" could siphon copies of a quantum key directly from the receiver, a study published in 2012 in the journal Physical Review Letters found.
So researchers developed MDI-QKD, calling it in that 2012 paper "a simple solution to remove all (existing and yet to be discovered) detector side channels."
In MDI-QKD, both the sender and receiver of a message send their quantum key photons at the same time (as well as decoys) to a third party. Each photon contains a single bit of information: a one or a zero. The third party doesn't have to be secure, and it can't read the information the photons convey.
"All it can tell is the relation between the [photons]," said Wolfgang Tittel, a quantum communications expert with QuTech, a collaboration between Delft University of Technology in the Netherlands and the Netherlands Organization for Applied Scientific Research. It can just say "whether they are the same or different."
When both the sender and the receiver send a one or a zero, they get a message from the relay saying they sent the same bit. If they send different numbers, the relay broadcasts that they sent different numbers. A hacker spying on the relay could only tell whether the photons were the same or different, but not whether they represented a one or a zero.
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"But of course the people who sent the states know what they sent, so they know what the other person sent," Tittel told Live Science.
All those ones and zeros add up to a secure quantum key, and there's no way for a hacker to tell what it is.
But MDI-QKD has its own challenges, said Tittel, who was not involved with this latest experiment. It requires that both photons arrive at the relay at precisely the same time.
"We found that this is difficult because of changes in the temperature of the device," he said, which can mess up the timing.
And that's using dedicated fiber-optic cables. Sending photons through the air requires accounting for atmospheric turbulence, which makes timing even more unpredictable.
That's why the new experiment is so impressive, Tittel said. While China has been doing standard QKD with Micius since 2018, no one had until now figured out how to do the more unbreakable encryption system over long distances without fiber-optic cables to carry the photons back and forth.
In the new study, the researchers sent a MDI-QKD secure key across 11.9 miles (19.2 kilometers) of open air between two buildings in the city of Hefei. To make sure the photons arrived at the relay at exactly the same time, they developed algorithms that enabled the sender and receiver devices to account for the fluctuations in that stretch of atmosphere.
Getting MDI-QKD into space will require more problem-solving, including better algorithms that can account for the even greater distances involved.
"The second challenge we hope to overcome is associated with the motion of satellites," Qiang Zhang, one of the authors of the paper, told Phys.org.
A moving target changes the behavior of photons in ways that have to be very precisely accounted for in order to make sense of the signal.
Tittel said that the motion of the satellite makes MDI-QKD "very difficult," but that it's plausible the USTC team might pull it off.
If they do, they will have developed a quantum network uncrackable by any known method of codebreaking. It would be the most secure long-distance communication network in the world.
When the Tampa Bay Buccaneers and Kansas City Chiefs face off in Super Bowl LV, the real heroes will be in the stands at Raymond James Stadium, not on the field.
While people in all walks of life have helped this country get through the ongoing COVID-19 pandemic in so many different ways, no group has been more valuable than front-line health care workers who have put their lives at risk to take care of others.
To recognize health care workers' unwavering commitment to serving their communities during this pandemic, the NFL is using Super Bowl LV as a way to honor and thank health care workers by providing approximately 7,500 tickets to vaccinated health care workers. In addition to giving tickets health care workers in the Tampa Bay area, the NFL is also providing four tickets to each NFL team, which in turn will give all-expense paid trips to four vaccinated health care workers in their communities.
The four local health care workers heading to Tampa Bay, employees of Virginia Mason Franciscan Health who were chosen by a random drawing, are:
Jocelyn Jacoby – Nutrition Assistant,Virginia Mason Medical Center
Cheryl Caraan, RN – Critical Care Nurse,Virginia Mason Medical Center
Bo Thach, RN – Registered Nurse, St. Joseph Medical Center
Lauren Pier, RN – Critical Care Charge Nurse, St. Anthony Hospital
"It is such a huge honor to be one of the health care workers being recognized," said Pier. "This year has been rough on us. Finding out that the Seahawks and the NFL wanted to recognize us this year at the Super Bowl makes us not feel invisible and see that the work we are doing is noticed."
Said Gary S. Kaplan, MD, CEO, Virginia Mason Franciscan Health, "Our work is all about improving the health and well-being of the patients we serve, and I am so proud of all our team members during the COVID-19 response. I truly feel that everyone in our organization has been a hero in this effort. No one saw it coming, and it has transformed our lives."
Added Ketul J. Patel, CEO, Virginia Mason Franciscan Health, "Our team has been managing the pandemic for nearly a year and has demonstrated true heroism and dedication each day while serving our communities. I am so proud of their resilience as we continue to navigate COVID and also administer the vaccine. The future is looking brighter thanks to every member of our team."
In addition to recognizing these health care worker heroes, this initiative also hopes to promote the importance of vaccination and appropriate health practices, including wearing masks in public settings.
Caraan, who in addition to her role as a critical care nurse also added the title of mom in 2020 with the birth of a son in June, emphasized that message of people continuing to do the right thing as vaccinations continue.
"It finally felt like there's a light at the end of this very long tunnel," Caraan said. "I am beholden to the researchers and scientists who have worked diligently to make a safe and effective vaccine. However, that light is still far away, and we still have to keep each other safe by continuing to mask and keep distanced, and get as many people as we can vaccinated, but it's a relief knowing that those who have been vaccinated won't die from COVID."
In a little over a week, the Buccaneers and Chiefs will play for a championship, and after the game a Super Bowl MVP will be named, but this year, the real MVPs will be the heal care workers in the stands and all around the country who have helped get us through this pandemic.
Said Jacoby, a Seattle native who spent two seasons working concessions at the Kingdome when she was a kid, "I am grateful for the opportunity to go to the Super Bowl and to have the spotlight shined on Health Care Workers, front line and those of us just behind, supporting them and our patients."
Spot and futures silver prices jumped 11% on Monday morning in London, as retail investors extended their enthusiastic buying from the metal to mining stocks and online dealers.
Silver-related prices had risen in the last trading sessions, fueled by Reddit posts, YouTube videos and other social media discussions suggesting a type of investing similar to the one that led to the pile-on into videogames retailer GameStop last week.
Online posts suggested last week that higher silver prices might hurt banks and brokers with large short positions, and that a “squeeze” similar to last week’s GameStop play might be possible.
The silver frenzy led U.S. retail dealers of the physical metal to suspend operations over the weekend after being unable to service customers, according to Bloomberg.
The iShares Silver Trust, the world’s largest silver-backed exchange-traded fund, received more than $1 billion of inflows on Friday. It is backed by physical silver in its vaults, which it must acquire when investments in the fund increase.
The outlook: A GameStop GME, -30.77% repeat may not be the most plausible scenario. The size of the world silver market doesn’t compare to the tiny GameStop market capitalization, and most banks shorting silver do so to hedge their physical ownership of the metal — not because they bet on falling prices.
February 02, 2021 at 03:40AM
https://www.marketwatch.com/story/retail-investors-send-silver-soaring-to-eight-year-highs-why-it-may-not-be-a-gamestop-repeat-11612187735
Retail investors send silver soaring to eight-year highs. Why it may not be a GameStop repeat - MarketWatch
U.S. stock futures climbed Monday, suggesting that the major benchmarks will recover some ground following their worst week since October. Silver prices soared.
Futures tied to the S&P 500 rose 0.9%. Contracts linked to the tech-heavy Nasdaq-100 advanced 1%, and those tied to the Dow Jones Industrial Average gained 0.7%.
The Cboe Volatility Index, a gauge of stress in the U.S. stock market, declined almost 5% on Monday after gaining 45% in January. Some investors expect volatility to edge down this week as many hedge funds have already reduced short positions on stocks that have attracted a tremendous amount of attention on the internet.
“There has always been, in financial markets, a desire on the part of investors to get rich quick and so you may still wind up with isolated incidents in which you wind up with volatile performance of certain assets,” said Mark Dowding, chief investment officer at BlueBay Asset Management.
The broader stock market is likely to continue its rally this year, he added. “We think markets are going to do really well in the near term because you’ve got the hope that the economies are going to get better and we have a lot of policy support,” Mr. Dowding said.
A recent decline in U.S. Covid-19 infection rates will likely support market sentiment and allow stocks to retrace some of Friday’s losses, said Patrick Spencer, managing director at U.S. investment firm Baird. Newly reported coronavirus cases were down Sunday from a day earlier, as were hospitalizations and deaths.
“People were positioned very conservatively going into the weekend, and the news on the coronavirus and the continuation of central bank stimulation will add to momentum,” Mr. Spencer said. “You’ve still got a lot of cash on the sidelines wanting to come back into the market.”
Silver prices rallied, fueled by a wave of fresh enthusiasm from online traders. The move indicates that the recent bout of volatility is likely to extend into a second week in at least some pockets of the global financial market.
The most actively traded silver futures climbed over 10% to $29.70 a troy ounce, its highest level since February 2013. The precious metal has gained in recent sessions after users on Reddit’s WallStreetBets forum posted about executing a “short squeeze” similar to ones credited with fueling recent gains in other stocks such as GameStop and AMC. That suggests individual investors are taking on hedge funds that are betting on silver prices falling.
Wall Street is in an uproar over GameStop shares this week, after members of Reddit’s popular WallStreetBets forum encouraged bets on the video game retailer. WSJ explains how options trading is driving the action and what’s at stake.
“I totally underestimated this,” said Carsten Fritsch, a commodities analyst at Commerzbank. “I couldn’t imagine this could ever happen to a serious and large market like silver.”
In bond markets, the yield on the 10-year Treasury note ticked down to 1.076%, from 1.090% Friday. Yields fall when prices rise.
Investors are continuing to monitor the corporate earnings season, with 111 companies from the S&P 500 index reporting this week. Results from big technology companies including Amazon.com and Alphabet are due Tuesday.
The Institute for Supply Management’s manufacturing index for January, due at 10 a.m. ET, is expected to show U.S. factory activity continued to expand, though perhaps at a slower pace than earlier months.
Overseas, the pan-continental Stoxx Europe 600 advanced 1.3%.
In Asia, benchmark indexes closed higher. South Korea’s Kospi climbed 2.7% and Hong Kong’s Hang Seng advanced 2.2%. China’s Shanghai Composite gained 0.6%.
GameStop and other stocks and assets have been volatile as online investors make big bets on Reddit forums.
As a member of r/WallStreetBets, a popular Reddit forum, let me tell you this: It wasn’t supposed to ever happen. Our happy band of rag-tag investors was supposed to use our little corner of the internet to exchange risky stock investment ideas, not take down one of America’s most prominent hedge funds. Source: Mehaniq / Shutterstock.com Yet here we are. In the past week, traders reading WSB and other forums have pushed GameStop (NYSE:GME) and a host of other highly shorted stocks to impossibly high levels, bankrupting at least one hedge fund and causing several platforms to halt trading. So ham-handed was Wall Street’s response that Congress members Ted Cruz and Alexandria Ocasio-Cortez, long-sworn enemies, even managed a coordinated tongue-wagging (Twitter-wagging?) at the U.S. financial system. But as Citadel picks up the pieces of Melvin Capital and Reddit users find their next short-squeeze target, people are starting to ask, “what’s next?”InvestorPlace - Stock Market News, Stock Advice & Trading Tips Reddit’s r/WallStreetBets Gives Citron a Taste Let me be clear: You won’t find my posts on r/WallStreetBets. As much as I read and enjoy the platform, my work and ethics prevent me from talking about any stock I own. (Sorry, Elon Musk. I wish I were you.) Wall Street Bets has always been about having fun. Many of the posts are intentionally moronic — think out-of-the-money calls on failing retailers — and there are plenty of contributors who show screenshots of life savings going to zero. Profitable or not, it was about finding the joys and absurdities of market speculation. Back in November, GameStop was among these fun little ventures. And it all seemed quite a standard fare for the subreddit billed as “4chan finding a Bloomberg Terminal.” GameStop fans cheered on buyers while cursing out Melvin Capital for shorting the stock. All in hopes of realizing America’s favorite pastime: making a lot of money with as little effort as possible. But then Citron Research changed it all. Citron Research? Meet r/WallStreetBets On Jan. 19, respected short-seller Andrew Left managed to finally pick the wrong target. As long-time Wall Street outsider, Mr. Left made a name for himself exposing companies like Valeant Pharmaceuticals, whose executives were channel stuffing and spiking the prices of the lifesaving drugs. He would have made a great WSB contributor, if he were willing to put up with hate speech from 15 year olds. But then something happened. The day before the presidential inauguration, Mr. Left announced he would make a case why GameStop shares were worth only $20. Perhaps Mr. Left was right to target GameStop, a shrinking company that still awarded its executives $20 million. Or he could have been wrong — at $20, GameStop would still be worth less than half of Best Buy (NYSE:BBY) when adjusted for sales. But that didn’t matter one bit. Suddenly, GameStop became more than a money-making venture to Redditors. It became a way to fight back against Wall Street greed; now it was war. How Did WSB Do It? In a financial system that values a stock based on its last trade price, even tiny trades at weird prices will revalue a hedge fund’s entire holding. In other words, a few well-timed buys can cause mayhem, especially in stocks with few sellers. That’s exactly what happened with GME. Until then, short interest had remained relatively stable. Market makers, the underpinnings of the U.S. financial system, were doing their job in matching orders and sales. That all changed on Wednesday when prices jumped from $150 to $350. As market makers began to seize up, markets started going wild. That spelled problems for Robinhood. On Wednesday, Robinhood halted trading for GameStop and almost a dozen other companies. “In order to protect our firm and protect our customers,” CEO Vlad Tenev would later tell CNBC’s Andrew Ross Sorkin, “we had to limit buying in these stocks.” Can Robinhood Go Under? In the world of trading, most conservatively-run platforms don’t have trouble managing liquidity. As long as you hold enough capital and maintain disciplined margin requirements, it’s rare for your clearinghouse to force you to raise fresh capital. But when it comes to Wall Street, financial companies all seem to run into the same issue — when your customers are making so much money, it’s hard to resist the temptation to join them. Financial regulators have long known these Wall Street shenanigans. Banks from Bear Stearns to Barings all went under when they tried trading customer money as their own, leaving taxpayers and shareholders footing the bill. Many more have experimented with bare-minimum capitalization — only later to realize their disastrous mistakes. So, over the years, smart governments have occasionally found the willpower to ban such practices and enforce strict margin and capital requirements. (Often, these rules would come undone by even smarter financial lobbyists.) Today, many platforms use a loophole to lease customer securities for profit. And when GME stock can get leased out at 25% interest rates to short-sellers, there’s a great temptation for these financial firms to double-dip. Did Robinhood do that? Possibly. Despite Robinhood’s claims that its trading shutdown was proactive, the company still drew down capital lines and banned users from buying more GameStop shares — a signal that Robinhood itself might have been short on capital and shares. (Since Robinhood is a private company, we may never know the truth.) But will Robinhood get in regulatory trouble? Almost certainly. The company banned trading in a dozen stocks on Wednesday during peak investment demand — reportedly because the company needed time to raise fresh capital. So, as retail investors watched from the sidelines, hedge funds cashed out at otherwise lower prices. In a very real sense, Robinhood arguably saved institutions billions of dollars at investors’ expense. Should We Be Scared? As Wall Street picks up the remnants of Melvin Capital and the GME fallout, two things have become clear. 1) “Dumb money” isn’t so dumb after all, and 2) “smart money” is getting taken to the woodshed. First, let’s consider what Wall Street has long called “dumb money,” the retail investor. Most of these people are like you and me — investing the majority of savings in long-term stocks for retirement, while playing around with a small portion for fun. And the gleeful absurdity of r/WallStreetBets aside, most retail investors tend to know what they’re buying (even if they get the valuations wrong sometimes.) The top-100 Robinhood stocks represent a wide swatch of consumer-related companies that have grown in real-world popularity as well as stock-related fame. Second, the GME fiasco has revealed “smart money” for the absurd bets they sometimes take. While a long-short hedge fund can help investors smooth out gains, they’re often as bad as what they call “dumb money” in closing out losses. Melvin Capital, for instance, lost 30% of its net worth in the first three weeks of January. But it took another six days (after the stock had gained another 250%) for the hedge fund to finally relinquish its mammoth position. Since then, other hedge funds have stepped up to replace Melvin in this high-stakes game of “pass the hot potato,” as if trying to prove r/WallStreetBets’ point that hedge funds will always try to make more money off regular investors if they believe the odds are right. GameStop also exposed the revolving door behind hedge funds and market makers. When Ken Griffin’s Citadel LLC, a $35 billion fund, bailed out Melvin Capital, Twitter users quickly pointed out that Citadel also owns a market-making operation that services none other than Robinhood. Where to Go from Here? Investors looking to soak the financial system would do well to buy index funds and sit on them forever. You might not get the gleeful joy of seeing a hedge fund blow up, but companies like Citadel that rely on retail money will see revenues dry up. But for those looking to invest wisely, consider this. With retail investors’ newfound power, you can expect short-sellers to think twice about selling a company. Citron Research’s Andrew Left has already vowed never again to publish short-seller reports. Other hedge funds are nervously watching. That means hot stocks will move faster than ever. As Reddit users have learned this week, it doesn’t take much to influence stock prices when only the marginal trade counts. And with no one willing to short-sell stocks in the face of an angry mob, price spikes will become increasingly common. You can expect many winners and losers. The stock market, after all, is mostly a fixed-sum game. But for long-term investors, the same truth still holds: The road to consistent wealth has always been in buying a group of high-quality investments bought at a reasonable price. Practice that discipline with your core portfolio, and you’ll make plenty of merriment with joining me in reading about the trials and tribulations of others on r/WallStreetBets. On the date of publication, Tom Yeung did not have (either directly or indirectly) any positions in the securities mentioned in this article. Tom Yeung, CFA, is a registered investment advisor on a mission to bring simplicity to the world of investing. More From InvestorPlace Why Everyone Is Investing in 5G All WRONG Top Stock Picker Reveals His Next 1,000% Winner It doesn’t matter if you have $500 in savings or $5 million. Do this now. The post Reddit’s r/WallStreetBets Just Took Down a Hedge Fund. You’ll Love What Comes Next. appeared first on InvestorPlace.
GameStop's and AMC's stocks have been on an epic rollercoaster ride. Here's what's going on.
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For years, Wall Street investors bet that video game retailer GameStop would fail. The move toward online game buying would eventually spell doom, they said. The pandemic appeared to speed up those changes, too. Wall Street was so sure GameStop would fail that they made it one of the most heavily bet-against stocks on the market. Over the past few months though, a bunch of Reddit users have been buying up shares, pushing up GameStop's value and undermining Wall Street's big bets. At first, these forum traders bought because they believed the company was better off than the Wall Street doubters thought. Then, as GameStop value soared, Wall Street's bad bets started to cost investors billions of dollars.
Now the Reddit users want the price to rise even more, as they wage an epic battle against Wall Street.
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At one point, the Reddit users from the forum r/WallStreetBets sent the stock up more than 14,300% (you read that right), though it's gone through wild fluctuations. They've spread their strategy to struggling movie chain AMC, and tech company BlackBerry, too. In their wake, these online market players have upended Wall Street, creating a drama filled with memes, app trading disasters and weird internet lingo as big-time investors have lost billions of dollars.
It's a crazy story, complete with cameos by Tesla CEO Elon Musk and CNBC financial commentator and former hedge fund manager Jim Cramer. There's even Michael Burry, one of the subjects of the book and movie The Big Short, who happens to be a prominent investor in GameStop.
Even Silicon Valley found a way to get in the middle of this mess. It's wild.
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"We're seeing a phenomenon that I have never seen," Jim Cramer, a Wall Street commentator on CNBC and a former hedge fund manager, said during a segment as GameStock's stock began rocketing up. And GameStop could be just the start. "It's insane."
It all started last week, when posters on the Reddit stock trading chat community r/WallStreetBets pushed up shares in the struggling game retailer. With much of Wall Street betting against GameStop's success, r/WallStreetBets investors believed they could force a market rally by creating demand where there had been little before.
As a result, GameStop stock jumped more than 822%, from $17.25 per share at the beginning of the year to a high of $159.18 on Jan. 25. The next day, it dropped by nearly half, only to rise back up. And then Elon Musk tweeted about it to his 43 million followers (using that weird internet vocabulary, of course), and the price jumped 40%.
Later that week, the stock jumped even higher, to $483 per share, before halving again. Amid all the chaos, the stock market temporarily halted GameStop share trading more than a dozen times some days because share price moves were wildly swinging by large amounts.
It's not just GameStop either. Reddit traders set their eyes on BlackBerry too, attempting to pull the same trick against Wall Street's negative bets. So far, they've pushed shares up more than double from $6.58 per share, where they started at the beginning of the year, though its price has swung up and down as well..
There's also AMC Theaters, which saw its business crater as movie releases were pushed back and people stayed at home. But Reddit users think Wall Street's being overly pessimistic about that one too, leading them to spawn the hashtag #SaveAMC on Twitter. Its stock jumped from $2.01 per share at the beginning of the year to $19.90 on Jan. 27, before halving the next day.
Some trading companies such as Robinhood, TD Ameritrade and WeBull responded to the fluctuations by restricting trades of GameStop, AMC and other fast-moving stocks during the chaos.
Robinhood drew particular ire, leading US Reps. Rashida Tlaib and Alexandria Ocasio-Cortez, as well as Sen. Ted Cruz, to criticize its decision. Some people had already raised concerns about Robinhood before, saying it "gamified" stock trading. Now it's being accused of outright market manipulation, including through at least one class action lawsuit filed already. Robinhood, for its part, said market rules effectively forced it to put those restrictions in place.
It's a lot to take in. So, here's what you really need to know about GameStop, AMC and Wall Street.
How'd this happen?
GameStop is one of the largest video game retailers in the world, but it's struggled to remain relevant in the age of online sales.
Effectively, the r/WallStreetBets crowd realized Wall Street made a huge mistake. People known as short sellers who were betting GameStop stock would fall had been too aggressive.
The r/WallStreetBets crowd understood that if they could create artificial demand for GameStop shares with their own money, they could force Wall Street to recalibrate its bets, pushing prices even higher. And some investors who couldn't even back up their bets against GameStop, would have to pay even more.
As of Jan. 27, there were 3.8 million members of the r/WallStreetBets community, though it's nearly impossible to determine how many people are involved in the GameStop, AMC and BlackBerry schemes.
What we do know is that all this activity appears to have created a "short squeeze," where the short sellers betting against GameStop are being forced to buy more GameStop stock to cover their losses. That pushed the price up even more, which forces more short sellers to cover their losses, which pushes the price up even more. Some of the Reddit crowd believe that GameStop stock could reach into the thousands of dollars just because of this mechanism.
And that's why we're suddenly seeing GameStop's value jump.
When people buy a stock normally, they're betting it'll rise or share enough profits that they'll make more money than they put in.
Short sellers, or "shorts," do the opposite. Shorts trade with borrowed shares and sell them, with hopes they can make money if the stock falls in the future.
Imagine Ian Corp. is a public company, and its shares are worth $10. A "short" would borrow shares of Ian Corp. and sell them for $10. Their bet is that Ian Corp. stock will actually drop below that -- maybe to $4. If it does, then, they can buy the shares at $4 and pocket the other $6.
If Ian Corp. stock jumps to $25, then the lender who made this bet possible may push the short to cover their bet. That would mean the short effectively has to buy the shares at the new, higher price.
When a short is right, betting against a company, they can make a lot of money. But if they're wrong, they can lose a lot more money too.
There are other options and tools to bet against a company's future as well.
GameStop stock from Jan. 19 to Jan. 25.
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How much money did the GameStop shorts lose?
The losses appear to be tremendous. As of Jan. 27, shorts seemed to have lost $5 billion betting against GameStop this year, according to Investopedia. About $1.6 billion, or about half, of those losses happened on Friday, Jan. 29 when the stock jumped 51%.
It's also worth noting that GameStop began the year as one of the most shorted companies on the market.
That seems like a lot of money
It is, but what's perhaps an even bigger indication of how dramatic these moves were, stock markets temporarily halted share trading for AMC, GameStop and other fast moving shares dozens of times since the drama began.
These wild swings won't continue forever, will they?
Part of what's driven this behavior is the popularity of retail investing, or when traders who aren't Wall Street professionals buy and sell stocks. Stock trading apps, often with no fees, have made it easy for people to jump into the market. And social media has helped people to rally together, egging one another on to buy more and more of a stock.
"GameStop's rally is one in a series of eye-catching market moves to stir concerns among fund managers, some of whom say trading by individual investors is pushing stock prices out of whack with fundamentals," The Wall Street Journal wrote when the drama began.
How's Wall Street responding?
Many Reddit users accuse Wall Street investors of manipulating the market against them.
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Big name trading apps like Robinhood, ETrade and others have reportedly struggled to remain online amid all the hysteria. TD Ameritrade on Jan. 27 acted to restrict the sudden spikes in demand, "out of an abundance of caution amid unprecedented market conditions."
Robinhood has also come under particular scrutiny for appearing to severely restrict trades of some stocks while the market was wildly fluctuating that week. Politicians on both sides of the aisle in the US have called for an investigation into the app maker. Meanwhile, many angry Redditors say they'll stop using Robinhood. Some have even threatened to join a class action lawsuit.
Nasdaq said it will halt trading on a stock if it finds a link to unusual activity on social media. The company said it sees its role as a "self-regulatory organization" is to make sure its markets act in a "legitimate" way. "Regulators kind of have to catch up with the technology that's now available," Nasdaq CEO Adena Friedman told CNBC on on Jan. 27.
Throughout the past week, the markets have temporarily halted trades of GameStop and AMC stocks in particular because of the wide price swings and heavy volume.
I heard people are particularly angry at Robinhood. Why?
Of the stock trading apps, Robinhood appeared to be the most aggressive in shutting down purchases of highly volatile stocks like GameStop and AMC. The company hasn't given clear reasons, other than vaguely saying it's working in the interest of users. But the US government may not agree.
On Jan. 29, the Securities and Exchange Commission said it's "closely monitoring and evaluating the extreme price volatility of certain stocks' trading prices over the past several days."
The statement didn't mention Robinhood by name, but the commission said it would "closely review actions taken by regulated entities that may disadvantage investors or otherwise unduly inhibit their ability to trade certain securities."
Robinhood declined to comment about the SEC statement. The White House referred questions about GameStop and brokerage firms to the Treasury Department, which houses the SEC.
What does Robinhood have to say?
On Jan. 29, the company published a blog post explaining that the company it works with to help users trade stocks was what had set off all the drama. That company, a clearinghouse that helps facilitate the transaction of stocks and cash between buyers and sellers, requires Robinhood and other trading companies it works with to have a specific amount of money in deposits each day to cover their customer's stock trades. That amount changes each day, based in part on market volatility.
Robinhood said the increased share trading led its clearinghouse to demand Robinhood increase its deposits tenfold. "That's what led us to put temporary buying restrictions in place on a small number of securities that the clearinghouses had raised their deposit requirements on," the company said. The requirements were so large, it said, that it had to restrict trades in order to meet its requirements.
"It was not because we wanted to stop people from buying these stocks," the company added. "This is a dynamic, volatile market, and we have and may continue to take action to make sure we meet our requirements as a broker so we can continue to serve our customers for the long term."
Has Robinhood gotten in trouble with the SEC before?
It has. A little over a month ago, on Dec. 17, the SEC charged Robinhood with "repeated misstatements that failed to disclose the firm's receipt of payments from trading firms for routing customer order to them." What that means in plain English is that Robinhood didn't tell users that their share trades might be accessible by people competing against them in the market.
Robinhood made its name by offering stock trades without a standard commission that people often payed at other firms. The SEC said that between 2015 and 2018, Robinhood made misleading statements and omissions, including "in FAQ pages on its website, about its largest revenue source when describing how it made money – namely, payments from trading firms in exchange for Robinhood sending its customer orders to those firms for execution, also known as 'payment for order flow.'"
The SEC estimated that Robinhood's approach deprived users of $34.1 million, even after taking into account the savings from not paying a commission.
Robinhood agreed to pay $65 million to settle the charges "without admitting or denying" the SEC's findings.
"There are many new companies seeking to harness the power of technology to provide alternative ways for people to invest their money," Erin E. Schneider, director of the SEC's San Francisco regional office, said at the time. "But innovation does not negate responsibility under the federal securities laws."
What do the companies think of all this?
GameStop didn't respond to a request for comment. BlackBerry executives told MarketWatch it was "not aware" of any reason for the recent trading activity. BlackBerry did reach a settlement with Facebook earlier this month over a patent fight, though the terms were not disclosed.
Why are the Redditors doing this?
There's the seeming easy money aspect, which is compelling in and of itself if you're that comfortable with risk. But some of them are also framing this as a crusade against Wall Street. "We're in a war," one Redditor posted. "A war for the redistribution of wealth."
You promised me Elon Musk, how's he involved?
Aside from being a prolific Twitter user, Musk has also recently learned he can drive people to various companies' stocks. He tweeted about how much he enjoyed buying something for his dog off Etsy, and the stock jumped. Now he's tweeted about GameStop, stirring up more frenzy.
Any other people's opinions I should know about?
If you're a fan of Comedy Central's The Daily Show, Jon Stewart posted his first ever tweet in support of the Reddit crowd on Jan. 28. Among other things, he also said we clearly hadn't learned from the financial crisis.
This is bullshit. The Redditors aren't cheating, they're joining a party Wall Street insiders have been enjoying for years. Don't shut them down...maybe sue them for copyright infringement instead!!
We've learned nothing from 2008.
Love
StewBeef
I went to r/WallStreetBets and saw this post of someone's brokerage account worth tens of millions of dollars in GameStop stock.
That's Keith Gill, or Roaring Kitty on YouTube, one of the first people to kick off this rally. He spoke to The Wall Street Journal, telling his story about how he never expected this to happen.
He posts a screenshot of his share values from his ETrade brokerage every trading day, in what he calls a YOLO ("You only live once") update. Many r/WallStreetBets members cite his holding onto shares despite stock fluctuations as inspiration for them to hold as well. "REMEMBER: If [he] can hold even through a 130% dip, so can YOU," one Reddit user posted as the stock started to fluctuate.
"I thought this trade would be successful," Gill told the WSJ in the story published Jan. 29, "but I never expected what happened over the past week."
This sounds nuts
It is. And just watching it is enough to make your head spin. For example, on Jan. 27, the popular chat app Discord temporarily banned the r/WallStreetBets community from its service for violating its rules against hate speech and glorification of violence. Apparently, some of the nastier elements of the community had repeatedly broken Discord's rules. Discord said the group needed to do a better job keeping control of that behavior.
That appeared to spook investors, who suddenly sent GameStop and AMC stock diving that same time. Soon, the group was publicly available again. And it reversed the ban and promised to work with the community instead.
A little over an hour later, the Reddit community was publicly available again, denizens had created a new Discord chat group, and GameStop and AMC stocks were recovering from their sudden slumps. If you'd put down your phone to watch a movie before it happened, you might never have noticed by the time it was done.
Except you may have seen Elon Musk tweeted about how Discord wasn't cool anymore (Discord eventually reversed its decision.)
OK, and what about The Big Short guy?
Michael Burry is an interesting subject himself. He became famous for betting against the housing market before the great recession kicked in around 2007 and 2008. He'd invested in GameStop, but also said he believed all this behavior was "unnatural, insane and dangerous."
Of course, some of the Reddit members say they see this battle over GameStop as their Michael Burry moment, making it all that much more interesting.
Correction Jan. 25 at 5:52 p.m. PT: Fixed the explanation of short selling to make clear how the process works and that there are different ways to bet against a company's stock price rising.
DAVENPORT, Iowa (KWQC) - After getting several inches of snow throughout the Quad Cities and surrounding areas, many families are out and enjoying the weather!
Many viewers sent their pictures in, scroll through to see how many are having fun in the snow!
Inga the sheepadoodle is enjoying the snow!(KWQC Montse Ricossa)
Debbie Cunningham says "This is the beautiful scenery that I get to look at."(Debbie Cunningham)
Debbie Cunningham says "This is the beautiful scenery that I get to look at."(Debbie Cunningham)
Sun sets as wolf moon rises on January 28(Cindy Schulte)
Sally sent this snowman with the caption "S’now wine-ing"(Sally)
Barrett Hehlke, working on the set of the movie Valory in Cedar Rapids after the snowfall!(Kelli Hehlke)
"This is my Mom making snow angels and a snowman. Her 68th birthday is today too. Mom always loves playing in the snow. Happy Birthday to my winter wonderland Momma!!"(Margo Hinkle)
Melvin the Snowman from Kewanee, Illinois(Lexy)
My bonus son, Ellis, enjoying the tunnel that he and I made together!(Treva Haney)
These cousins really enjoyed sledding at their GG and Paw's house on Saturday!(Sam Rhoades)
Snow Smurf Clinton, IA from Stacy Rickerl(Stacy Rickerl)
Rhett and Dekker Morris love sledding and shoveling!(Kristen Morris)
Rhett and Dekker Morris love sledding and shoveling!(Kristen Morris)
Sylvia enjoying the snow ❄️(Sheila Schultz)
Sylvia enjoying the snow ❄️(Sheila Schultz)
Mia (akita) and Mowglie (great dane/mastiff) greeting mom after playing in the snow!(Tyler Hoogerwerf)
If you made any snowmen or played in the snow, be sure to send it to us by clicking here!
