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The epic GameStop short squeeze continues to roil global markets—even Bitcoin is off




This is the web version of the Bull Sheet, Fortune’s no-BS daily newsletter on the markets. Sign up to receive it in your inbox here.

Good morning. With the exception of the dollar, the screens are a blur of red this morning. Bitcoin, crude, gold, global stocks, U.S. futures—they’re all faltering. Not even Reddit bulls can muster the magic to extend the GameStop rally.

At the close of trading yesterday there were mounting worries that the GameStop squeeze was hitting the wider markets. As futures plunge this morning, that concern is morphing into legit fears.

In today’s essay, I dig deeper into the phenomenon of viral stocks like GameStop, and what it means to your portfolio.

But first, let’s see what’s moving the markets.

Markets update


  • The major Asia indexes are slumping in afternoon trading, with Hang Seng down 2.6%.
  • The GameStop effect is going global with retail investors from Sydney to Amsterdam bidding up stocks to catch out short investors. One winner from the increased volatility this morning is the previously undervalued Japanese e-commerce giant Rakuten, up 7.5% in Tokyo.
  • Could the once high-flying fintech Ant Group really remake itself into a stodgy bank holding company? That’s the plan being floated to appease Chinese authorities.


  • The European bourses were lower out of the gates with the Stoxx Europe 600 down 0.8% at the open, before falling further.
  • Shares in Volkswagen were down 1% in early trading after the German automaker slipped to the world’s second biggest car company behind Toyota, handing over the crown after a five-year run.
  • COVID vaccine shots are running out fast in Europe, putting huge pressure on Brussels to find a fix. It won’t come from AstraZeneca any time soon. The EU tried and failed yesterday to force the drugmaker to divert supplies from its U.K. factories across the English Channel. Reminder: the EU hasn’t yet granted regulatory approval for even a single dose of the AZ vaccine.


  • U.S. futures point to another weak open. That’s after the S&P 500 and Dow yesterday suffered their worst losses since October on a mixed batch of earnings.
  • Shares in Apple are down 3.3% in pre-market trading after the iPhone maker posted knock-out earnings, and hit a series of records. Why is the stock slumping? As Fortune‘s Aaron Pressman explains, investors are unclear where its next big hits will come from.
  • With Big Tech disappointing, what about the small fries? In the pre-market, GameStop is down 16% and AMC Entertainment has plunged 27% after monster rallies on Wednesday. Meanwhile, the startling rise in these Reddit-fueled trades has caught the eye of U.S. Treasury Secretary Janet Yellen and the White House.
  • That scrutiny is probably too late for hedge fund kings like Steve Cohen, Gabe Plotkin and Dan Sundheim. They’re out billions so far on the GameStop short squeeze.


  • Gold is down, trading below $1,840/ounce.
  • The dollar is up.
  • Crude is slumping, with Brent trading around $55/barrel.
  • As of 10 a.m. Rome time, Bitcoin was down nearly 2% at $31,000. It’s had a rough two-day stretch, coinciding with the slump in big-cap stocks.


Viral stocks

What happens when YOLO goes FOMO? You get tendies and ????????, of course.

Let me explain. There’s a new kind of stock we need to familiarize ourselves with. We’ve spoken often here about value stocks and growth stocks. Well, now there are viral stocks.

“Just like there are viral tweets, there are viral stocks,” Ivan Ćosović, founder of Dusseldorf-based Breakout Point GmbH, a data analytics firm that tracks retail investors and activist shorts, told me yesterday.

Breakout Point has been tracking the growth over the past year in stocks that get chatted-up on investor message boards—forums such as Reddit’s WallStreetBets. The most attractive grow in interest from a few comments to a torrent. Shortly after that, many of these chatted-up minnows—names like GameStop and AMC Entertainment, but also penny stocks like OcuGen and Zomedica—make the jump to Robinhood’s “100 Most Popular” list. From there, the army of retail investors bid them up, turning the occasional guppy into a Wall Street whale like GME.

Don’t be fooled. WallStreetBets is no amateur chat room. It’s become a force in the markets. And it’s growing like gangbusters. The parabolic surge in subscribers in recent days (they’ve clocked more than 1 million new subs between Saturday and Wednesday afternoon, as the next chart below shows) resembles the share price chart for, ahem, GME.

What’s so daunting to Wall Street pros is that many of these stocks are making the jump to the big time for no other reason than they’re getting a lot of buzz on message boards. Breakout Point describes this as a swarm. (As Ćosović’s described this, my mind went to that creepy Black Mirror episode featuring the out-of-control swarms of mechanical bees programmed by social media mobs.)

What makes a viral stock worthy of retail investor attention? There’s a bit of gamesmanship at play. As we’ve seen from AMC and GameStop, it helps if the stocks have been targeted by shorts and hedge funds. But a lot of times these stocks pop for no other reason than they’re getting a lot of buzz. In this way, the narrative behind the stock counts more than news flow or fundamentals.

What’s the narrative? “Today, the story is AMC. Tomorrow it’s something else,” Ćosović told me yesterday, before adding, “and no story is too small.”

It all sounds very fuzzy, but retail investors are making serious bank—”tendies” in Reddit parlance—on these trades.

But before you plot your next move, consider what UBS’s chief economist Paul Donovan says in a sobering investor note this morning.

“The story told about the Reddit-inspired bubbles is that wealth is being transferred from large short sellers to ordinary retail investors. The longer the bubbles last, the less likely that is to be true,” Donovan writes. “Instead, wealth is transferred from ordinary investors to bubble sellers. That transfer becomes permanent when the bubble bursts.”

Bubble sellers do well during investing manias. That’s not narrative. That’s fact.


Have a nice day, everyone. I’ll see you here tomorrow… Until then, there’s more news below.

Bernhard Warner

As always, you can write to or reply to this email with suggestions and feedback.


Coinbase’s near-term outlook is ‘still grim’, JPMorgan says, while BofA is more positive about firm’s ability to face crypto winter



Coinbase's near-term outlook is 'still grim', JPMorgan says, while BofA is more positive about firm's ability to face crypto winter

Coinbase is well positioned to successfully navigate this crypto winter and take market share, Bank of America said in a research report Tuesday. It maintained its buy recommendation following the exchange’s second-quarter results.

The results warrant “a muted stock reaction,” the report said. Net revenue of $803 million was below the bank’s and consensus estimates, while its adjusted $151 million loss before interest, tax, depreciation and amortization was better than the street expected. Importantly, the company remains “cautiously optimistic” it can reach its goal of no more than $500 million of adjusted EBITDA loss for the full year, the report added.

Coinbase shares fell almost 8% in premarket trading to $80.74.

Bank of America notes that Coinbase had no counterparty exposure to the crypto insolvencies witnessed in the second quarter. The company also has a “history of no credit losses from financing activities, holds customer assets 1:1, and any lending activity of customer crypto is at the discretion of the customer, with 100%+ collateral required.” These rigorous risk-management practices will be a “positive long-term differentiator” for the stock, the bank said.

JPMorgan said Coinbase had endured another challenging quarter, while noting some positives.

Trading volume and revenue were down materially. Subscription revenue was also lower, but would have been much worse were it not for higher interest rates, it said in a research report Wednesday.

The company is taking steps on expense management, and in addition to the June headcount reductions, is scaling back marketing and pausing some product investments, the note said.

The bank says the company’s near-term outlook is “still grim,” noting that the exchange expects a continued decline in 3Q 2022 monthly transacting users (MTUs) and trading volumes, but says Coinbase could take more “cost actions” if crypto prices fall further.

JPMorgan is less optimistic than Bank of America about the company in the near term, saying pressure on revenue from falling crypto markets will have a negative impact on the stock price. Still, it sees positives including higher interest rates, from which the firm will generate revenue. It also sees opportunities for the exchange to grow its user base, leveraging almost $6 billion of cash. The surge in crypto prices in July, and the forthcoming Ethereum Merge are also seen as positive catalysts, it added.

The bank maintained its neutral rating on the stock and raised its price target to $64 from $61.

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Elon Musk sold $6.9B in Tesla stock in case he’s forced to buy Twitter



Elon Musk sold $6.9B in Tesla stock in case he's forced to buy Twitter

Elon Musk sold $6.9 billion of his shares in Tesla Inc., the billionaire’s biggest sale on record, saying he needed cash in case he is forced to go ahead with his aborted deal to buy Twitter Inc.

“In the (hopefully unlikely) event that Twitter forces this deal to close *and* some equity partners don’t come through, it is important to avoid an emergency sale of Tesla stock,” Musk tweeted late Tuesday after the sales were disclosed in a series of regulatory filings. 

Asked by followers if he was done selling and would buy Tesla stock again if the $44 billion deal doesn’t close, Musk responded: “Yes.”

Tesla’s chief executive officer offloaded about 7.92 million shares on Aug. 5, according to the new filings. The sale comes just four months after the world’s richest person said he had no further plans to sell Tesla shares after disposing of $8.5 billion of stock in the wake of his initial offer to buy Twitter.  

Musk last month said he was terminating the agreement to buy the social network where he has more than 102 million followers and take it private, claiming the company has made “misleading representations” over the number of spam bots on the service. Twitter has since sued to force Musk to consummate the deal, and a trial in the Delaware Chancery Court has been set for October. 

In May, Musk dropped plans to partially fund the purchase with a margin loan tied to his Tesla stake and increased the size of the equity component of the deal to $33.5 billion. He had previously announced that he secured $7.1 billion of equity commitments from investors including billionaire Larry Ellison, Sequoia Capital, and Binance. 

“I’ll put the odds at 75% that he’s buying Twitter. I’m shocked,” said Gene Munster, a former technology analyst who’s now a managing partner at venture-capital firm Loup Ventures. “This is going to be a headwind for Tesla in the near term. In the long term, all that matters is deliveries and gross margin.”

At the weekend, Musk tweeted that if Twitter provided its method of sampling accounts to determine the number of bots and how they are confirmed to be real, “the deal should proceed on original terms.” 

Musk, 51, has now sold around $32 billion worth of stock in Tesla over the past 10 months. The disposals started in November after Musk, a prolific Twitter user, polled users of the platform on whether he should trim his stake. The purpose of the latest sales wasn’t immediately clear.  

Tesla shares have risen about 35% from recent lows reached in May, though are still down about 20% this year. 

With a $250.2 billion fortune, Musk is the world’s richest person, according to the Bloomberg Billionaires Index, but his wealth has fallen around $20 billion this year as Tesla shares declined.    

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The rent is too d*mn high for Gen Z: Younger generations are ‘squeezed the most’ by higher rents, BofA says



The rent is too d*mn high for Gen Z: Younger generations are 'squeezed the most' by higher rents, BofA says

Most of Gen Z is too young to remember the 2010 New York gubernatorial candidate Jimmy McMillan.

But over a decade later, they would probably agree with his signature issue (and catchphrase): the rent is too damn high.

This July, median rent payments were 7.4% higher than during the same period last year, according to a Bank of America report released Tuesday. 

The national median price for a one-bedroom apartment has been hitting new highs nearly every month this summer. It was $1,450 for July, according to rental platform Zumper. In the country’s largest city, New York, average rent exceeded a shocking $5,000 a month for the first time ever in June. 

But inflation in the rental market hasn’t hit each generation equally, and no one is getting squeezed harder by the higher monthly payments as Gen Z. Those born after 1996 have seen their median rent payment go up 16% since last July, compared to just a 3% increase for Baby Boomers, BofA internal data shows. 
“Younger consumers are getting squeezed the most by higher rent inflation,” BofA wrote.

The great rent comeback

Early in the pandemic, landlords slashed rents and gave significant COVID discounts to entice tenants to stay instead of leaving urban areas. Once those deals started expiring in 2021, many landlords suddenly raised payments once again, sometimes asking for over double their pandemic value. 

Young people across the board have been hit hard, and rent burdens compared to age can be seen even within a single generation. Younger millennials had their median rent payment grow 11% from last year, while the median payment for older millennials rose 7%. Gen X experienced a 5% median rent increase, according to BofA. 

It’s not a surprise, then, that Gen Z feels so strapped for cash. The majority of young people, 61%, said they want to receive their wages daily instead of twice a week, a practice typically reserved for workers living paycheck to paycheck, according to a report from the Center for Generational Kinetics, which specializes in research across the generations. Rising rent inflation has even priced nearly a third of Gen Zers out of the apartment search altogether. Around 29% of them have resorted to living at home as a “long-term housing solution,” according to a June survey from personal finance company Credit Karma.

It’s no wonder—the rent really is too high.

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