Paul Wiseman And Joseph Pisani, The Associated Press
Published Saturday, January 30, 2021 2:49PM EST
WASHINGTON – They’ve endured a financial crisis. Two deep recessions. Mounds of student debt. Stagnant pay. Costly health care. Dim job prospects.
They’ve seen the uber-rich grow richer while a pandemic threw tens of millions of people out of work and left many more isolated and vulnerable at home.
Now, they feel, it’s payback time.
Nearly a decade after the Occupy protest movement left Wall Street more or less unscathed, the citadel of financial might faces a new assault.
Day traders, mobilized on a Reddit chatroom, have poured about all the money they can find into the stocks of a struggling video game retailer called GameStop and a few other beaten-down companies. Their buying has swollen those companies’ share prices beyond anyone’s imagination – and, not coincidentally, inflicted huge losses on the hedge funds of the super-rich, who had placed bets that the stocks would drop.
Their strategy, of course, is freighted with risk. The prices of the stocks they’ve bought are now multiples above any level justified by revenue, earnings or future prospects. The danger is that at any time, the stocks could collapse.
Maybe so. But as one Reddit user wrote Friday, asserting that hedge fund financiers would drink Champagne as they looked down upon Occupy Wall Street protesters in 2011:
“I’d rather lose it all than give them what they need to destroy me … I’ll burn it all down just to spite them.”
Their rage and hell-bent drive to pick on powerful Wall Street financiers have sent shivers through ordinary investors and heightened fears about the fragility of the markets in general after a prolonged period of stock gains fueled by ultra-low interest rates. Those fears just caused the S&P 500 index to suffer its worst week of losses since October.
GameStop shares? They rocketed nearly 70% on Friday. Over the past three weeks, they’ve delivered a stupefying 1,600% gain.
“They figured out how to play the way Wall Street has been playing for a long time,” said Robert Thompson, who has long tracked cultural trends as director of Syracuse University’s Bleier Center for Television and Popular Culture. “I’m amazed it didn’t happen earlier.”
Feeding the frenzy have been young traders like 27-year-old Zach Weir, who this week bought five shares of GameStop.
“I’m a college student, so that’s basically a month’s rent for me,” said Weir, who is pursuing a master’s degree in marketing.
He did it, he said, because he believes in the cause: Protecting a cherished game store, where he would hang out as a teenager on Friday nights, from financial tycoons who want the company to fail.
And if he loses his investment?
“If my account goes to zero, it goes to zero,” Weir said. “At this point, it’s not about the money. I think this is bigger than the money now”
Frustration and rage over widening financial inequities in the American economy have been mounting for years. The richest 1% of Americans collected about 19% of pre-tax income in 2019, up from less than 11% four decades earlier, according to the World Inequality Database, run by Emmanuel Saez and Gabriel Zucman, economists at the University of California, Berkeley, along with other researchers.
New York University economist Edward Wolff has found that the richest 10% of Americans own roughly 85% of stock wealth, a share that has grown steadily over time.
The financial crisis that ignited the Great Recession of 2007-2009 intensified resentment toward the bankers who had financed the dodgy loans behind the catastrophe and had ignored the obvious risks, only to receive bailouts from taxpayers and largely escape accountability. Rising outrage fueled the Occupy movement, in which protesters took over New York’s Zuccotti Park and other public spaces and demanded far-reaching financial reforms that mainly didn’t happen.
The coronavirus inflicted further pain, flattening the economy and causing more than 20 million Americans to lose jobs. This week, a report from the anti-poverty group Oxfam found that the world’s 10 richest men have swollen their collective wealth by $500 billion since the pandemic erupted in March. In the meantime, nearly 10 million people who lost jobs to the pandemic remain unemployed.
The stock market, the chosen target of the Reddit day traders, has long stood as America’s premier symbol of entrenched wealth. But technology, including forums like Reddit, has made it ever easier, faster and simpler for the aggrieved to mobilize, swap information and collectively plot strategy. And e-trading apps, notably Robinhood, allow amateur traders to buy commission-free stocks with one click.
They spotted a vulnerability in the market: The so-called short squeeze.
When hedge funds and other investors want to bet that a stock price will fall, they arrange a short sale: They borrow shares of, say, GameStop. Then they sell those borrowed shares, planning to buy back the stock later at a lower price and pocket the gain.
But shorting can backfire disastrously if the stock surges instead of falling. Then the short sellers can be forced to bail out of their bets by buying the target stock. Their buying, in turn, can send the stock price ever higher and makes things even worse for the short sellers in an intensifying feedback loop.
GameStop, its future imperiled by e-commerce and a pandemic that has kept customers away, is among the most heavily shorted stocks. Some of the Reddit rebels are gamers who want to protect the retailer from the predations of Wall Street. Or just deliver a righteous blow to hedge funds and financiers who have lived large as others have suffered hardships.
Not all the day traders are inflamed by anger. They just see an opportunity to make money and pay bills.
“A lot of people are having trouble paying rent,” said Alexis Goldstein, a veteran of the Occupy movement. “A lot of people are at risk of eviction. A lot of people are very desperate, quite frankly, for new ways to make money.”
Yet Goldstein worries that the revolt will ultimately fail.
For one thing, some of the Wall Street firms that are targets of the Redditers actually profit from the very volatility that the Redditers’ assault has whipped up.
And the most sophisticated professional traders are no doubt calculating how to capitalize on the chaos. Normally, they have to work hard and invest heavily to determine what their competitors are doing and to profit from that information. By contrast, the Reddit day traders are announcing their intentions, brazenly and publicly.
“I suspect it’s not Robinhood investors and Redditers who are making money,” Goldstein said.
She would like to see a different slate of reforms – reforms to rein in Wall Street’s excesses while helping those who’ve been left behind.
“Hopefully, we can ask fundamental questions about whether we want our markets to be speculation-driven or do we want them to create innovation and jobs,” she said. “Stop hustling so hard for a buck and instead rebuild the social safety net.”
Tom Osran, a 59-year-old Chicago lawyer, has been reading the WallStreetBets forum on Reddit for years. But it was only last week that he decided to act for the first time, buying into GameStop. His investment, he said, is up 1,000% from last week, though he declined to reveal the dollar amount.
Osran said he figures that its astronomical stock rise can save GameStop from hedge funds that are betting that a company with 40,000 employees will fail.
“It’s fun being part of a movement,” Osran said.
He knows he could lose everything he put into GameStop shares. Yet he’s philosophical.
“We’re all adults, we all know stocks can go up and down,” Osran said. “It’s been insanely lucrative so far, but it could be all gone tomorrow.”
Pisani reported from New York.
As interest in electric vehicles soars, experts say they haven't quite hit the mainstream – CBC.ca
When a friend told Seymore Applebaum about the efficiency of plug-in hybrid electric vehicles, he was intrigued.
Applebaum, who lives north of Toronto, was in the market for a new car. While safety features were top of mind, the high cost of gasoline couldn’t be ignored.
So in January, he traded in his sedan for a brand-new plug-in hybrid (PHEV), a vehicle that can run on both electricity and gasoline. Applebaum says he can travel almost 50 kilometres on battery power alone — more than enough to get around the city.
On a recent trip downtown, he recalled, “I drove about 45 kilometres … and the only thing I used was the electric motor and the electric battery that runs the car.”
“Normally, on a day like that, [it] would be comparable to $10, $15 of driving cost.”
Automotive industry analysts say rising gas prices have more consumers looking into electrified and electric vehicles (EVs).
Prices at the pump have soared across Canada in recent weeks. Estimates suggest Vancouver could see the country’s highest prices this weekend, potentially hitting $2.34 per litre for regular fuel. According to fuel price tracker GasBuddy, the national average as of Sunday afternoon was just below $1.98 per litre.
“Canadians are motivated by high fuel prices, but they truly believe this is the new normal,” said Peter Hatges, national automotive sector leader for KPMG in Canada, pointing a recent survey by the consulting group.
“When consumers believe it or perceive it to be true, they’re going to modify their behaviour around what kind of vehicles they buy.”
Kevin Roberts, director of industry insights and analytics for U.S.-based online vehicle marketplace CarGurus, told Cross Country Checkup he has seen a similar trend.
“As gas prices went up, interest in electric vehicles went up almost in lockstep with just a couple of days delay for both new and used vehicles,” he said.
But even as interest in electrified cars spikes, experts say too few options — and too high prices — mean they haven’t quite hit the mainstream.
Where consumers in North America favour larger vehicles like SUVs and pickup trucks known for their utility, EVs tend to come in compact or sedan-style models. EV range — and the availability of chargers — are also considerations for many Canadians, said Hatges.
Ramp up production
Big investments into electrification by major automotive makers, however, are beginning to bear fruit.
A greater variety of models and sizes are coming onto the market in the coming years, the analysts say. Battery life is improving too, with several models able to travel more than 400 kilometres on a charge, according to manufacturer estimates.
“It’s absolutely a tipping point,” said Hatges. “I think there’s a confluence of factors that are pointing toward an alternative to the internal combustion engine.”
The big test for consumers will be whether manufacturers can cut prices enough to get customers in the showroom — and EVs on the road — said Grieg Mordue, associate professor and ArcelorMittal chair in advanced manufacturing policy at McMaster University in Hamilton, Ont.
While a handful of models start below $50,000, many run far north of that figure with some selling for over $100,000.
The sweet spot for Canadian buyers? Between $35,000 and $45,000, says Mordue. Key to hitting that price point is mass production, he added.
“We need production in North America of vehicles at that level, and we need high-volume vehicles — not little, niche vehicles where they sell 10,000 or 15,000 of them a year — because that’s a lot of the vehicles that we have now, Tesla notwithstanding,” Mordue told Checkup.
In April, GM announced a $2-billion investment, with support from the Ontario and federal governments, which will see electric vehicles rolling off assembly lines in Oshawa and Ingersoll, Ont., as early as this year.
Stellantis, which owns brands including Dodge and Jeep, is similarly investing billions into electrification at its Windsor and Brampton, Ont., plants.
Mordue cautions, however, that as plants begin producing electric models, it will take time for them to reach the existing output of gas-powered vehicles.
Focus on fuel efficiency
While interest in EVs may be gearing up, Hatges predicts a shift for gas-powered vehicles too.
“I think you’ll see a strive to make cars lighter, more fuel efficient, even when it comes to electricity,” he said. “Heavy vehicles use more power to power themselves down the road, whether it’s electricity or fuel.”
And as long as gas prices stay high, the market could see a shift from SUVs and trucks — which consumers and manufacturers have favoured in recent years — to gas-sipping models.
“We have a fascination with pickup trucks and SUVs, North Americans do, and there’s a lot of them on the road now…. I don’t see that changing any time soon,” he said.
“But in the medium term or in the immediate term, will you see a shift or reconsideration of cars that are more fuel efficient? I think so. The price in the pump is very, very significant.”
Applebaum touted the flexibility of a plug-in hybrid, saying he doesn’t worry about range at all. And though his PHEV cost more than a comparable non-electrified model, trading in his previous vehicle combined with the fuel savings over three to four years made it affordable, he said.
With gas prices now higher than they were in January, “that’s even more true,” he told Checkup.
Now, he says friends are taking notice.
“They’re saying the next car they purchase will be an electric car.”
Written by Jason Vermes with files from Abby Plener.
Gas prices reach another record in the GTA after six cents per litre increase overnight – CP24 Toronto's Breaking News
Gas prices have reached yet another new record after rising six cents per litre overnight.
As of midnight the average price of a litre of fuel across the Greater Toronto Area is now 208.9 cents per litre, according to Canadians for Affordable Energy President Dan McTeague.
The latest jump means that gas prices have now risen 11 cents per litre since Friday, with no real relief in sight due to supply shortages brought about by Russia’s decision to invade Ukraine and the international sanctions that have been imposed a result.
“When you look at the fundamentals, supply and demand for diesel and for gasoline going into the summer driving season, not only is it low or critically low and that is one of the main reasons why prices are going up but the second factor is the Canadian dollar,” McTeague told CP24 last week. “It continues to show weakness despite the fact that in the old good old days when oil was $100 a barrel we would be on par with the U.S. dollar. The fact that we’re not is costing you 33 cents a litre.”
Gas prices have risen by about 60 per cent since last May, when drivers were paying around $1.30 per litre to fill up.
Baby formula shortage: Canada's current situation – CTV News
A major infant formula recall by the U.S. manufacturer of Similac has exacerbated ongoing pandemic-related supply issues for some Canadian retailers, according to the Retail Council of Canada, while other stores have generally been able to keep shelves stocked, with shortages mostly temporary.
A number of powdered Similac products were recalled in February when four babies in the U.S. became very sick with a bacterial infection after consuming formula made at an Abbott Nutrition facility in Michigan. Two of the four hospitalized infants died. The plant was closed while the U.S. Food and Safety Administration (FDA) investigated.
The company, the largest manufacturer of infant formula in the U.S., said in a statement that “there is no evidence to link our formulas to these infant illnesses”. The plant remains shut for the investigation, however, and U.S. retail tracking company Datasembly said the out-of-stock percentage for baby formula in the U.S. reached 43 per cent for the first week of May.
While Canadian retailers have generally not experienced the bare shelves seen in many U.S. stores so far, some Canadian parents are nonetheless concerned about any potential impact, particularly as a number of products are specialty formulas made for infants with special dietary requirements.
“Some retailers that I have spoken to have seen an impact since last year because of those global supply chain challenges. But it’s definitely become considerably worse since the production facility closure and product recall,” said Michelle Wasylyshen, the national spokesperson for the Retail Council of Canada, in a phone interview on Friday.
Other retailers saw less of an impact, she said.
“The majority of that section within their stores, the baby formula is stocked. If there are any outages or shortages on the shelves, they should be temporary in nature for the most part.”
Wasylyshen said there was no clear answer on whether supply issues were regional because grocery retailers use different supply chains within the country and even within a province and there are different types of agreements and suppliers as well.
Walmart Canada told CTVNews.ca that there have been numerous ongoing global, industry-wide supply challenges with baby formula that have persisted for years and that it continued to work closely with its suppliers.
“Despite these challenges, including the most recent brand recall … [we] have secured a strong supply of baby formula across multiple brands and formats (concentrates, powder and ready-to-feed), to make available for sale both in-store and online,” said spokesperson Felicia Fefer in an email on Friday.
Costco and two of Canada’s three major grocery chains, Loblaws and Sobeys, had yet to respond at the time of publication. Metro declined to comment, saying the issue was not Metro specific.
STORE BRANDS, HEALTH CANADA ORDER HELPING
Despite concerns, there are differences between Canada and the U.S. that have helped diffuse some of the impact so far, Wasylyshen said.
All major grocery chains in Canada have strong “private label” or house brands, including for the infant formula category, she noted. While some of these store-brand versions of formula may also be manufactured by the same company as the major labels, most are sourced from competitors, giving shoppers more alternative options and preventing a two-fold impact.
In addition, Health Canada also approved an interim policy that temporarily allows other infant formula brands from the U.S., U.K., Ireland, and Germany to be imported into Canada. The policy is meant to “help prevent and mitigate shortages of these products in Canada in relation to the temporary closure of a large manufacturing plant in the United States, while ensuring a safe supply of these products to the vulnerable Canadians that rely on them” the document states.
The policy, which is in effect until June 30, also notes that safety assessments have been conducted by Health Canada for each product included in the list.
“Health Canada reviews infant formula submissions from manufacturers, including labelling and compositional requirements, before infant formula is sold in Canada,” Health Canada spokesperson Marie-Pier Burelle said in an email to CTVNews.ca on Friday.
“The products listed in Appendix A of the interim policy are imported from countries that have similar regulatory standards to Canada and are safe to use. These products would not normally be on the Canadian market because Health Canada has not received a request from manufacturers to conduct a pre-market regulatory review.”
The products might not meet some requirements like French and English labelling, for example, Wasylyshen said.
“They’re all still products that are safe and that are regulated, it’s just now they’re being temporarily allowed into Canada until we get a little bit more stability with the system,” she said, adding that this has been done in the past in situations where delivery of essential supplies was hampered.
CASCADING SUPPLY ISSUES
Ongoing global supply chain issues during the pandemic was already an issue prior to the recall, including global shortages of raw ingredients that go into making baby formula, Wasylyshen said. But complicating the current situation is that other suppliers are now beginning to experience issues due to the increased demand in other products that are available.
“It’s not a big problem yet, but the longer that we continue to see the Abbott shortage or Abbott products missing from the shelves, other suppliers could experience additional problems within a month or two – perhaps by summer, so that’s certainly something that we’ll want to keep our eye on.”
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