Transcript

Well, this is our market alert video for the week ended February 19, 2021, and once again, it’s a week where the same mantra is in play which is we’re waiting on stimulus, and we’re waiting to find out what tax changes are going to happen, and assuming that the stimulus is what we think it is, and that the tax changes are not onerous, we continue to see that going forward we will see new all-time highs in the S&P and the Dow. So, nothing really exciting to talk about on that front. However, there were a lot of fireworks with regard to the whole GameStop situation, and if you watched any of that, you saw how politicians love to be on stage, and we’re putting the Robinhood and others on the hot seat, and so it was all very interesting actually. One of the things that, if you watched my video, I think it was 3 weeks ago where I explained why all of that was happening, just as a 30,000 foot recap, essentially what happened was that Reddit, which is a social media platform where you can actually post anonymously, was where these groups of investors, hundreds of thousands of them, got together and decided that they were going to buy GameStop, force the price up.

These big hedge funds that were betting that the price of GameStop would go down were caught in what’s called a ‘short squeeze’ and to get out of that, they had to buy the stock, which drove the price up, and all those investors, those people that were on Robinhood and communicating via Reddit, made a lot of money if they got out on time, and, so, that was all fun and exciting and interesting to watch at the time but there are two things that actually, and then, you know, I was on TD Advisor Network, essentially a television show on the internet, and they asked me, you know, what do you think about all that, and I said, well, GameStop is going to drop like a stone, and I don’t do this, and we don’t do it with our clients but if you want my opinion, you should short GameStop because it’s going to fall dramatically, and actually since I said that, I think it’s down about 90 percent, so it did in fact happen. It was pretty predictable.

Now, the thing that, there are two things that come from that. One is that there’s an interesting dynamic that happened there and that is that we have – there are laws against hedge funds all colluding to drive prices. There are laws against airlines colluding to make their prices such that they can drive prices and control that. So, there are laws against organizations doing that kind of thing. There are no laws against a bunch of people getting together and acting as a unit and driving prices, so it’s very interesting but in theory, you could say that all those investors that were doing that were little hedge fund people, individual people who are hedge funds, who are betting, but they were betting together. They were colluding, and if they were businesses that were doing that, that would be illegal. So, that’s one interesting dynamic about the whole thing.

The other thing though that maybe is a little bit more scary if you will, is that they could have caused a market accident, and what I mean by that is the hedge funds that got caught in that squeeze essentially to buy and get out of their positions, they have to have enough money to do that, and if they don’t, they have to borrow that money, and if they can’t borrow it, then they go under, and so they were put in what’s called a liquidity trap, and that liquidity trap, if it had caused three or four major hedge funds that have hundreds of billions of dollars invested to go under, and that money evaporating, that could have had a domino effect and caused the markets, not only in the United States but around the world, to drop dramatically.

This happened about 20 years ago where – they weren’t called hedge funds at the time but an investment company essentially big enough to cause that kind of a chain reaction went under because of a liquidity trap and it did cause a bear market. It was short, but it did cause one, and so this is something that you know, I think will come of this is there needs to be addressed, how do we not have a dislocation of such where people can band together and force a price that’s artificial cause inefficiencies in the market and force people out of business. That’s something that I think the regulators and politicians are going to be looking at over the next few months. Very interesting stuff.

Much more interesting than the market was this week and basically, like last week, was a lot of ups and downs and not much to say for it and not much economic data to really drive anything one way or the other. So, we go back on watch for the stimulus, will it pass, how big will it be, and we think it will pass. We think it will be big and because of that we also think that we’re going to see new all-time highs on the S&P and the Dow, and our investments should follow in the right direction as well. So, for now all is well. The important thing though is that had that turned out to be a domino effect like Lehman for example in 2008, one big institution just causes a whole ripple effect. That’s why we have our invest and protect strategy. It’s there because we don’t know – the unexpected is what we always worry about and we can’t expect it so we have to have a plan ready to act when it does and we have that.

So, rest assured, that had something bad happened, we would have taken action to protect you without hemming, hawing, hesitation. We would have been very direct and we would have taken care of business. Okay. So, we hope you have peace of mind. We hope you’re enjoying your second childhood. Those of you in the states where this massive Arctic vortex hit, I hope that you are safe and that you are getting warmer now that the temperatures are rising, and that you don’t have a bunch of burst pipes and damage, and that all is well with you. Okay, so, again, thank you for watching this video. And, by the way if you want to share this with your friends, please do. In the past, we’ve said don’t share, but in today’s world with the sharing economy if you will, I encourage you to post this and share it with your friends as you wish. Okay, so, again, thanks for watching and we’ll talk soon.

MMWKM Advisors, LLC (d/b/a Retirement Planners of America ) (“Retirement Planners of America”) is an SEC registered investment adviser with a primary business location in Plano, Texas. Past performance may not be indicative of future results. All investment strategies have the potential for profit or loss. References to the “invest and protect strategy” (the “Strategy”) and recommendations made under the Strategy from 2007 through 2009 refer to strategies collectively employed and recommendations collectively made by Retirement Planners of America’s principals while employed at Eagle Strategies, LLC., and also at Cambridge Investment Research Advisors, Inc. Four of the five principals remain as principals today, including the Retirement Planners of America’s founder, Ken Moraif, and Chief Investment Officer, Eli Dragon. Retirement Planners of America has been employing the Strategy since its inception in 2011. Therefore, any references to Retirement Planners of America’s performance or its investment advisory recommendations predating 2011 generally refer to recommendations made by Retirement Planners of America’s principals at the respective other firms described above. Like all investment strategies, the Strategy is not guaranteed. It is possible that it can incorrectly predict a bear market (generally accepted as a 20% drop in a market index), which has, in-fact, happened before at Retirement Planners of America and affected its clients accordingly. When the sell / “protect” portion of the Strategy is implemented, affected investors will incur transaction costs and taxable accounts will incur tax consequences. However, when implementing that portion of the Strategy, Retirement Planners of America generally believes that the benefit of avoiding bear markets outweighs the burden of these transaction costs and tax consequences.