V for vendetta and volatility

This is the week a subreddit took on Wall Street and won . . . at least for now. The wild ride of the r/wallstreetbets discussion forum has become an investing rollercoaster and its vendetta against hedge funds has meant volatility for markets on both sides of the Atlantic.

Equities were falling on Friday and volatility measures were rising. Wall Street’s “fear gauge” — the Cboe Vix — sat at 30, well above its long-term average of just below 20. The Vstoxx index, the European gauge of market volatility, climbed to its highest level since early November.

The stock in the eye of the storm rallied 72 per cent on Friday morning, rebounding from its first fall in six days after brokerages loosened trading restrictions. GameStop jumped to $332.96 and wiped away its losses from Thursday, when it fell 44 per cent. It roughly doubled in value at the start of the Friday session before trading was halted due to volatility.

Merryn Somerset Webb comments that as a fightback against Wall Street, the movement is hopeless: “The money that banks and fund managers make comes from trading commission and fees — not from their investment performance.”

Our analysis suggests hedge funds are now doing their research on the foul-mouthed online message boards that are targeting them, in an effort to stay ahead of the day traders and beat them at their own game.

Trading app Robinhood has earned the opprobrium of retail investors in restricting trades, but it has the more serious problem of having enough capital on hand to cover the surge in transactions. It has had to raise more than $1bn from its existing investors and tap credit lines from banks to shore up its financial position. 

We have a blow-by-blow explanation of how this “short squeeze” has developed and Robert Armstrong has answers to the key questions, such as whether this will end badly.

“Definitely,” he says. “GameStop shares are probably worth less than $10, based on the company’s fundamentals. That fact will assert itself eventually, whatever anyone does, and someone will lose a lot of money. It’s been a zero-sum game all along.”

The Internet of (Five) Things

1. BaFin head ousted over Wirecard scandal
Germany’s finance minister has pushed out Felix Hufeld, head of the country’s financial watchdog BaFin, over his handling of the Wirecard scandal. Olaf Scholz said the affair had revealed that Germany’s system of financial regulation “needs to be reorganised”.

2. UK to probe Uber’s Autocab deal
The Competition and Markets Authority has launched an investigation into Uber’s acquisition of the taxi technology company, Autocab, over fears the tie-up could limit competition in the market for ride-hailing software. Autocab, which struck the deal with Uber in August last year, provides taxi operators with booking and dispatch software and connects drivers with trips via an online marketplace.

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3. Apple and Facebook’s war of words
Apple chief Tim Cook launched a stinging attack on ad-based social networks such as Facebook on Thursday, arguing that such platforms were responsible for real-world violence and dehumanising consumers. His comments came a day after Facebook chief executive Mark Zuckerberg accused Apple of “regularly” using its dominance to favour its own products, in an escalating war of words between the two companies.

4. Europe trailing US and Asia in 5G
Europe has rapidly fallen behind the US and Asia in the race to build 5G networks despite increased investment by the region’s largest players. The number of Europeans able to connect to a 5G network was 24 per cent at the end of September. That pales in comparison with the 76 per cent of Americans able to connect to 5G and even higher rates in some parts of Asia, such as South Korea where it is 93 per cent, according to Analysys Mason research.

5. Twitter acts on Huawei followers
Twitter says it has taken action on thousands of accounts that have helped to create unusually large followings for the tweets of Huawei employees. Meanwhile, Bellingcat founder Eliot Higgins says, in his Lunch with the FT: “We’re sitting on the precipice of the misinformation age: from the information age to the misinformation age.” 

Tech tools — Moley’s robotic kitchen

Moley, after six years and £10m spent on development, has created an automated kitchen that will be demonstrated in a west London showroom from this month, costing from £248,000. Jonathan Margolis says two robotic arms attached to a ceiling track can move up and down the length of a kitchen surface, from fridge, to cooker, to sink, preparing a meal. The lifelike fingers can wield most kitchen equipment — and are deft at manipulating the ingredients for a wide range of commonly home-cooked dishes, such as steaks, pastas and stews. However, it does need to have pre-weighed and prepped ingredients laid out for it or put in a smart fridge and the intricacies of, say, peeling a potato and cutting out the not-great bits are still currently beyond it.