Reddit Traders Beat The Masters of the Universe: Jim Bianco

it's probably not going away. That's what Jim Bianco, our next guest, says, Wall Street never saw the Redators coming. To Bianco as president of Bianco Research and Bloomberg Opinion columnist, Jim just first of all, on today's action. Are the rehdators sort of retreating just a little bit into their corners in preparation for something else big? Or they just now sort of having executed their plan for game stop? Are they sort of just retreating in general? I think

that the retreating from the trade um they won. The announcement was yesterday when we found out that the gigantic short in the in game stock and some of these other stocks was covered by the hedge funds. The hedge funds took a big loss. They walked away, and now the short squeeze is ending, and so that they're all exiting the trade right now, and they're exiting presumably in a a big loss. Dave Portnoy texting, are sending out a tweeting he lost seven hundred thousand dollars on the mean

stocks here. This is I mean, the retail investors are getting crushed here, aren't they. No, they're not getting crushed. There are some that are losing. Portnoy loss some money, but that's not a big loss for him. He'll be back, you know, probably with a bigger gainer loss by the end of the week if you follow him like like I do closely. Um, a lot of the a lot of the buying on all the way up to the top, which we found out now was a shortcover. It wasn't

necessarily retailed. Look, if the answer is there's seven point five million people in Reddit that some of those people lose with the market with this stock going down. Yes, So if you're asking us the perfection in the trade, um, no, there isn't. But if you said, here's a group of hedge funds, here's a group of retail traders who did better the retail traders by far did better in this episode. The masters of the Universe got hurt a lot worse in this trade than the retail traders. Yeah, Jim, how

do they not see this coming? I mean some of them are definitely in there on those reddits, uh you know sub breddits. I was communicating with one, you know, very large hedge fund manager last week and he actually said, it's really shocking a swarm of small investors overpowering any sense of value. These were his words. How do they not see this coming? I think the problem is the word collusion. Look when the stock got over to a of the float, I think it's illegal. It's a short,

it's a naked short. But even if it isn't illegal, Uh, it is very poor risk management by a lot of these hedge funds to have that bigger short. Why they have that bigger short because they all looked at each other and let me let me not men sports. Is Goldman Sachs gonna stick it to us? Is another hedge fund gonna stick it to us? Is JP Morgan gonna stick it to us? No, none of them are going

to stick it to us. So it's not imprudent to run that kind of risk, and then they said, who out there is going to figure this out and stick it to us? And we found out who because if you go on the Reddit boards, they talked exactly about the Starting in October, they identified Melvin Capital as being the big short and when the uh when when the short does? Report came out by Citron Research two weeks ago. They literally said, this is the this is the event.

Right now, let's go. We've got them because they're at maximum squeeze potential. I think when Michael Lewis whites the book, he's gonna call this. Now, we've got the greatest trade that's ever been done. So jim um. Some of these meme stocks, if you will, all to MidCap, relatively thin floats, um, big short positions, easy to squeeze. Re surprised to see the Reddit traders going to something like a commodity like silver, Yeah, I was surprised by that. Um. That doesn't seem to

be kind of their modus operandi. And there is some debate on Reddit whether or not they're actually doing that as well too. But even if it is silver, it isn't silver. You know one of my favorite movies, it's a hunt for Red October when the torpedo missed the boat moving around in the ocean. That's the Reddit traders looking for another target. So there'll be another chapter to

this story. I don't know if it will be next week or in three months, but this crowd is still out there unless the I would say before the last two weeks, we've been seeing this coming. When Buffets sold his airlines, it was no less than Dave Portnoy who led the charge that said Buffett is old and he's past his prime. Let's all up the airlines. They doubled in a month. Portantly made a ton of money off that trade back then, and the airlines are even higher.

They bought the work from home stocks that weren't in the indexes. They bought Tesla one up and then got into the SMP. They've even been playing the cryptocurrencies, so they've been largely winning at this Now. I'm not saying they're gonna win forever, but what they've been doing is they've been looking at Wall streets practices, which has a little bit of collusion. This is the kind of the way we all do this, and they've been gaming their system over and over again and taking advantage of it.

Wall Street is going to have to change the way they do money. We're never going to see another big short interest in a stock like this again as we move forward, because the fear is there now that somebody will stick it to us if we ever do it. Jim, are you concerned on the effect that this will have on short setters and short sellers making their research available

for everybody to view. I mean, in a sense, the short sellers were the little guy for a long time, and they were the people that were sticized by some in the market, and they were the people that were, you know, putting themselves out there, not saying that they were all, you know, heroes or Robin hoods themselves. Let's you know, let's make that very very clear. But some of them did have excellent research and they were willing to share it with the world, and it can't have

been all bad, no. I agree. Short selling is a critical function in the market, and the guys like Jim Chainos Marcotis, they are been very very good at identifying literally fraudulent companies and explaining why they've been fraudulent through research reports, and profiting off of that. That is a very valuable service. But then there were these smash and grab type of short sellers that kind of got in the way, and like I said, the other institutions didn't

put a stop to it until retail did. And now all short sellers have been tarnished. And I think that at the end of the day, that's not a good thing. It is still a valuable function that was a little overdone, that's finally getting pulled back from the frost. But if if the Jim chanos Is marcutis Is of the world have to go into hiding now or witness protection programs because of this, I don't think in the long run

this has benefits all of us. Jim, do you expect any regulatory oversight to grow out of this from Washington or the SEC um. We've heard some rumblings. I hope there is, but I think they're looking in the wrong place. I think they need to start with their short selling rules. One of the reasons the SEC was invented in ninety three was abuse of short selling in the nine crash, and they still after ninety years, can't seem to get

it right. I hope that they start looking there at that and I think maybe they should start looking at the institutional community too, Is there a little bit of coordination or collusion going on there as well? That's in some cases like the famous you know idea spanners at the hedge funds old that's not really legal for them to do that. But we've done whole showtime shows called billions about this because such an accepted practice right now

on Wall Street. I hope they looked there as opposed to how do we how do we restrict and restrain these message boards? They weren't the problem. They identified the problem, right. Hey, Jim, thanks so much for joining us. We always appreciate getting your perspective on markets. Jim Bianco, President of Bianco Research and Bloomberg Opinion Calumnis. You can read all of Jim's work and all of the Bloomberg opinion columnists at Bloomberg dot com, Slash Opinion or O P I N. Go

on the terminal. Lizza Chapman joins us now. She is a venture capital reporter here at Bloomberg. And the reason we want to talk to Lizette is because we have been waiting for robin Hood to go public, potentially in May of this year or so. Lizette have the events of the last few weeks changed robin hoodsplans at Alls absolutely had thrown a real wench in um kind of how they approach the public markets. If anything, it's made it much more pressing because they realize that they do

need these extra capital requirements. So, you know, while before they were looking at an I p O or I p O or some type of way to go public, you know, early to late spring, now they're they're not even really talking about the timing as much as they are that yes, we need to go public, not a matter necessarily of when, but as why, and so as they resolved this recent hubub um, you know they'll be they'll be looking at um exactly how to go public. Yeah, Liz, is their talk or what is the level of talk

about a spack? A spack to me might be a way to consider it, could be could get them into the public market sooner, perhaps with less scrutiny. Um, what are they thinking about us back? That's a great point, and a lot of companies have definitely availed themselves as that like last year was all time record high. It was more last year than it was I think in the past twenty years combined. So it's definitely top of talks.

But right now, to be honest, this is a you know, this is a you know, small but fast growing company. Um it is. They say that they are profitable. Um you know, that's what we've been told. According to sources familiar um back is one of the options. Um so is a direct listing, which is what palat here and Spotify. You may remember they've done that previously. So those are two other options that they're also talking and thinking about.

But but to be honest, you know, there so they've been so focused on just dealing with this crisis right now. I mean they raised you know, they were able to raise they had to raise one billion dollars in a span of twelve hours, and that that number increased to three point four billion over the course of seventy two hours, just to you know, create that comfort and make sure that they could continue trading regularly against But that has

been their primary focus up until now. Now. Who knows. Yeah, for sure, they definitely want to, you know, keep working beautifully so that people don't lose trust or face. In Robin Hood, Lizzat we were just speaking with somebody who mentioned the game stuff. Probably should have tried to buy Twitch at some point, and we know, of course that Amazon boa Twitch for less than a billion dollar or is. But we did get Uber making another acquisition today for

one point one billion dollars. Not the alcohol startup Drizzly. Talk to us about this pricing. I mean, essentially, this is literally an alcohol delivery service. Is it worth one point one billion dollars? Well, I'm sure that the investors who last um backed in twent seventeen and valued at at seventies three millions according to pitch Book, I'm sure they are popping champaign today and ordering a plenty of things by Drizzly or other means, because that is one

heck of a return. So sent three million, not even three years, barely three years ago. Yeah, exactly, So, I mean, you know, and that's kind of the way the venture capital game is played, right, You only need one really great company to knock it out of the park to make up for all the other losses. Um. You know

what Uber guests with this is um. You know, they get to expand their alcohol delivering They were doing it for four through Postmates, which you remember they acquired uh last year for two point six billions and they were able to do it through a corner shop, which was their acquisition in Mexico. But this is a really big push doubling down, maybe even tripling down and delivery boost

sales or through the roof. During the pandemic, um, you know, Drizzly itself said that their sales were up four above historical levels, um back in May, and UM, you know, I think many people can say that that, you know, alcohol consumption is up historically, so you know this this this is a chance for Uber to really dig down into delivery because, as we've talked about before, it's ride

hailing service. It's just been decimated by the pandemic. So people are shut in, people are ordering food, you know, and and now booze and um. They can also do uh pharmaceuticals or pharmacy, uh, you know, items and also packages. So this is part of Uber's overall shift to just say, look, guys, we're not gonna do flying cars. Are not going to do um, you know, flying flying tax these are electric scooters. Were just going to do delivery and rides and darn it,

we're going to turn a profit this year. So that's their focus. Hey, was that how what's the mood out there in Silicon Valley as it relates to doing deals raising capital. How much does the pandemic slow things down? Oh? Man, I don't know. I've been you know, kind of cloistered away. Silicon Valley is more of a of an idea, I think to send an actual location. So I've been working

from home since since March. But I can tell you from talking to early stage investors, UM, some of them say that that their deal flow is higher than it's ever been, and the numbers back that up. You know, even though they're not doing all these deals in in you know, over coffees and over drinks and networking, all that stuff has gone. Yet last year was the highest

amount of venture capital on on record. And we also saw, um, you know, the most of the megafunding deals, the massive million plus deals that pumps that total um, you know, to an all time I So to your answer, you know, to your question, what's the mood, Um, it's busy. I think people are just grinding it through, still getting deals done. They're doing it on zoom, they're doing it and called um. But um, you know, we're still very much affective on the pandemic here as we are in other parts of

the nation. Hey, Lozette, thank you so much for joining us. We really appreciated getting your thoughts there on some interesting news coming out of the valley there with Uber and UH with Robin Hood as well. Listen Lazette Chapman, venture capital reporter for a Bloomberg News in are based out in San Francisco. Well, one of the industries that was

certainly disrupted by the pandemic was retail. The acceleration of the migration from bricks and mortar to e commerce just really proceeded during this pandemic and continues to do so. Let's get the latest on kind of where we are in the retail environment here. We do that with Tay Lopez. He's executive chairman and CEO of Retail e Commerce Ventures based in Miami, Florida. Ty, thank so much for joining us.

Give us a sense of kind of where we are in the retail landscape now, you know, bricks and mortar versus e commerce. How are the retailers adapting? Yeah, I mean it's still a slow burn, slow transition. Hard to teach old dogs new tricks, as they say, so I don't see them changing fast enough to allay the you know, coming tidal wave that they're starting to feel. So yeah, that's the short answer in my opinion. So, Ty, what

brands are you using a potential targets? Well, you know, usually the bankruptcy and so on the first quarter they slowly ramp up. People tried to make it through and watch how the holidays, you know, November, December, Black Friday did. So I expect it to ramp up a little bit in the second quarter. It's usually snow slow. Now, Um, French Escas was one that was for sale. We did not go after that one. It's starting to heat up a little bit. People are realizing, hey, we can buy

these distressed brands. Um, the last thing we bought with Stein Martin radio shack in November and in November, so we'll see what's coming up. Everybody's kind of, like I said, they're saying, can we make the switch? Can we do it fast enough? And I think when the audited financials come out from the fourth quarter of last years when you'll start seeing bigger decisions being made about the bankruptcy

or selling. So t is your strategy to kind of identify high quality brands, brands that really have good value in the marketplace, but for whatever reason, did not manage that transition from physical to e commerce and then get that brand by that brand, acquire that brand and try to do it yourself. Yes, exactly what we're looking for is brands that are not distressed breaking the order that was distressed. So if we think the brand itself is distressed,

we're less interested. We've passed on various brands in the last six months. Sometimes you know, I'm just down being too busy, but sometimes we felt like, you know, that brand doesn't have much power. But when you look at something like stein Mart, for example, radio Shack, people still stop shopping their dress bomb here one. It's just the economics of the scores is what was distressed. And since we don't really take stores on that, that segmentation of

distress doesn't bother us at all. What about Game Stop? What kind of reputation does that brand have these days? Wow, that's a great clash hit. I would say, you know, if you look at the origin the Game Stop, it's this chewy co founder coming on the board and kind of bringing life that he can revive the brand. I read, I forget the name. I read yesterday an act of a shareholder or a consultant who told them two years ago, you should have bought Twitch. You know, that would have

been to play because that transitions you. Not only it's not e commerce, but it puts you in that world that you should be. And so I think games stopped. They have to do more. They have to have to be some fundamental changes. Um. I can't speak to it because I haven't researched much, but I thought I was an interesting quote. If they had, you know, made that Twitch acquisition several years ago, maybe they wouldn't be so distressed right now. So I think it's it's one on

the brink. It can be turned around maybe, but it's teetering, you know, so we'll see. Ty. What's the status of Brooks Brothers. That was a big brand at the beginning of this pandemic. I believe filed for bankers if it certainly challenged. Yes, a company called a b G Authentic Brands Group out of New York. I thought, I'm not mistaken made that made that acquisition. They do a little

bit different than us. Um, really well run business makes a lot of money backed by black Stones or black Rocks already, and they buy things that they focused on licensing revenue. So they felt for us Brookstone as our Brooks brothers. Um, you know, we didn't. We didn't understand how we can add as much value. But they buy it for the global licensing rights. And so I think that happened about four or five months ago that they made the acquisition. I think it was if I'm not

mistaken publicly, it was in the three hundreds. Wow. What's interesting talk to us about fundraising? Is it an easy time for fundraising? It feels like there's so much cash out there. I mean, so many stacks and so much you know, so many signals of frost really across this market. Are you seeing that tie or people coming to you to to to hunt your money? Uh? You know, but I want to say coming to us the instantly hand us money. But um, there is an element I'm reading

rereading Robert Schiller's book A Rational Exuberant. That's a good one for everybody to reread. The Noble Applies winner wrote it a while ago. But um, we raise money uniquely. We're not a fund or a holding company. We mostly raised from a network. We've kind of built this kind of group club of high network that credited investors. So most of what we do is with this group of hundreds of credit investors who directly have relationships with us.

But we are yes. I mean, the spack world is going to be fascinating because all these facts for and they have to eventually, you know, find a target or give the money back. So I think it is an interesting time. It's relatively easy to raise. But you know, one thing that you start to push up against the paradox of choice investors go, there's so much we at tact and there's so much to do they do, and there's so much to talk about. Time we'll have to do it again soon to talk more about all of this.

Tayl Opez of Retail e Commerce Adventures, thank you. Let's switch gears now to Global Oil ex on mobile. It pledged to safeguard it's mammoth dividend after posting its first annual loss in at least forty years, a show of defiance by an oil driller besieged by activist investors, lawmakers and climate change campaigners. Let's get the latest on that. We could do that with Fernando Vallier, oil and gas analyst for Bloomberg Intelligence Fernando talked to us about Exon Mobile.

Here a brutal, brutal year for them, but they're keeping the dividend. That's right, Paul. They're they're maintaining their fifteen billion dollar dividend, but at the sacrifice of restoring their their peer leading returns. Excellent has been the leader UH in returns on capital for the sector for several years, but since eighteen it lost its ground, first to Totel and now to Chevron, and it is maintaining its evidence but flashing growth in the projects that were supposed to

bring it back towards the head of the line. UM. You see the target for the Permian, for example, one of its ground jewels going from one point two million barrels by seven hundred thousand barrels a day UM. So the growth is really slowing down, and some of its other key pillars from as as soon as March of last year. But poor New Guinea and Mozambique also falling. By the wayside as it prefers to to funnel money towards the dividend as opposed to showing up. It's UH.

It's falling production and returns on capital. What made them make that decision. It was that there was too much risk in hanging on for some of these plays to to pay off. UM. I think it's primarily a concern that cutting its dividend will drive away some of its shareholder base. It is a retail focused shareholder base that's really for uh important that for whom the dividend is

very important. So there's a concern that if they do eventually cut the dividend, there would be a movement away from the stock, and then that would consequently impact it's cost the capital. My view is that by continuing to pay such a large dividend and not addressing its following return on capital, the sustainability of that dividend in the long term is coming into under question. Forna talk to us about Exxon's results for first annual loss in forty years.

What's the story. Well, the story is again uh, just fallen margins that were coming along before this as they continue to over invest. But obviously the pandemic taking its toll on the on returns both in the upstream and on the refining and chemicals segment. Chemicals has been the strongest, but even that we're closer to the ten year lows on margins than we are to to to the highs that we saw in Need seventeen and and again that's driven a massive gap in their balance sheet and a

significant cash outflow. Excellent also took a nineteen and a half billion dollar impairment on assets in the US on the natural gas side, and also Western Canada and Argentina place that they had under development that are now outside of their scope. Just generally for an under the price of oil today is pretty high, up on the three percent and above fifty a barrel for w C I is that just a factor of the weather, natural gas prices going up, and so wonder is there more at

play here? Well, there's been cuts in production, widespread cuts in production. The question is at this price, how much of it is restored? And we see, for example, as I mentioned in Canada, Canada is now backed up above pre pandemic levels, as Alberta removed quotas UH is. The US shale producers also increasing the amount of completion crews on the field, so we'll see higher production in there.

And then there's a question on how long Saudi Arabia and other members of OKAY plus we'll stick to their quota as and production quotes cut. If prices remain at this level. Uh, there is always a prisoner's dilemma that you don't want to be the guy that cuts too much and drives prices higher. So eventually we expect some of that production to come back online. We've also had Libya reopening their ports, so we're going to see some production there picked back up in the next couple of weeks.

All right, Fernando, thank you for that much. Appreciate the input there. Fernando Valet joining us there and Paul. It is quite stunting to see oil black about fifty five dollars a barrel. It's been in the forties for as long as I remember now. Yeah, And you know, we always talk about and we talk about a commodity top hat supplying demand, and it just feels like this commodity is driven by the demand side of the equation a

little bit more in this market. People expecting, uh, you know, good news on the COVID virus and reopening the economy, and this is you know, certainly at the top of a reopening trade for many investors. Yeah, for sure. Once again thanks to Fernando Valet. Oil and Gas analyst for Bloomberg Intelligence. Thanks for listening to Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever a podcast platform you prefer. I'm Bonnie Quinn, I'm

on Twitter at Bonnie Quinn, and I'm Paul Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio