In a week that has been marked by the direct confrontation between short-selling hedge funds and retail investors centered around Reddit’s Wallstreetbets forum, major financial institutions have joined the debate.
War on Equality
For Michael Hartnett, the Chief Investment Strategist at Bank of America, the ongoing drama represents “another escalation in War on Inequality”.
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Hartnett and his colleagues believe that unequal wealth distribution can only be resolved through higher wages for the unprivileged and higher taxation for the rich.
“In 2006 the “value” of US labor (wages) was 15x the size of market cap of Big Tech; in 2021 market cap of 7 largest US tech companies ($9.0tn) almost equivalent to “value” of US labor (wages = $9.6tn); note market cap of Big Tech has risen hand-in-hand with central bank liquidity supernova past 10 years,” Hartnett wrote in a note sent to clients on Friday.
Ortex data shows short-selling hedge funds have lost more than $70 billion so far this year. As expected, hedge funds lost over $1 billion from shorting GameStop shares, followed by a $600 million loss from Bed Bath & Beyond.
It is apparent that trends are changing and the latest data about inflows into financial markets is another sign of the changing times. Bitcoin (BTC) is a winner of the year so far as it trades around 20% higher year-to-end, while the last week saw an influx of $24.0 billion to equities, $15.7 billion to bonds, $6.4 billion to cash, and $200 million to gold.
“Record inflow to muni bonds ($2.5bn), biggest inflow to bank loans past 3 weeks since ‘17 ($2.5bn), stock investors committed to “barbell”…flows to tech ($2.3bn), healthcare ($1.9bn) and energy ($1.8bn), financials ($0.7bn),” Hartnett added.
Summary
Chief Investment Strategist at Bank of America and his colleagues believe that the ongoing war between WSB and short-selling hedge funds is “another escalation in War on Inequality”.
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