The Dude Abides -- Gasoline Demand Really Ties This Story Together -- January 28, 2021

Disclaimer: there will be content and typographical errors on this page.  See reader's comment at bottom of the post.

So, let's start here.

Like the Dude's rug, "gasoline demand" really pulled together the events of yesterday. 

I've said several times on the blog, if I had to choose one metric, one metric only, that told me how the US economy was doing, it would be gasoline demand. 

With the pandemic, that may change. 

The "recovery" is K-shaped. The upward leg is reflected in the Apple metrics. The downward leg is reflected in the gasoline demand metrics.

Unfortunately I won't catch Melissa's "Fast Money" today or tomorrow. She had a fascinating show yesterday following a most turbulent day on the Dow. Look at the plunge on Dow yesterday:

Melissa's "panelists' said the market plunge was due to GME and the spike in the volatility index. Sure. The volatility index is the one metric that every home-gamer and professional trader alike follow, above everything else. LOL. 

Quick: without looking. What's the volatility index today? Does anyone even know what that metric actually measures?

The market was reversing direction and paring its losses early in the afternoon right up until the moment Jay Powell started concluding his prepared remarks.  It became even worse during the Q&A portion: the Dow reversed direction again, and plunged, trending toward a 1000-point drop. It was so obvious, even on mute, even a caveman could see the train wreck developing.  

CNBC showed it in real time, but my hunch is the panelists missed it because they were prepping for the "Melissa show" and weren't watching in real time what the rest of us saw. If one did not see it in real time, one would have completely missed it. Anybody who suggests differently tells me they were not watching it in real time.

Based on the CNBC crawlers -- I had the television on mute -- prepping for my own Webex call with Schwab and simultaneously helping Sophia log on to her own Webex call -- based on the CNBC crawlers, Jay Powell was providing no warm fuzzies about the pandemic or the US economy. CNBC's crawler, which usually suggests what the producers think is most important, said that Jay Powell admitted he had not yet met with the new CEO/CIC. Say what? What could be more important right now than the US economy during the pandemic.

Up until he spoke, everything coming out of Washington suggested, with regard to the pandemic, we had turned the corner. Not only would we vaccinate 100 million Americans in 100 days, the new CEO/CIC said we would vaccinate 300 million Americans by the end of the summer. The media was tripping all over themselves telling us how good things had turned now that "orange-man-bad" was out.

Based on the crawlers, Jay Powell wasn't buying it. He wasn't giving us any warm fuzzies. He suggested much more needed to be done and the Fed was standing by to help, although savvy investors knew/know that the Fed has very few (if any) arrows remaining in its collective quiver to do anything (except increase its purchase of US equities). Or if that's not politically correct, the Fed has very few tools remaining in its collective toolbox.

The one piece that I was missing when I suggested that yesterday on the blog was "gasoline demand."

Link here. 

The graphic was bad enough; then I added the "red line." Wow, it's atrocious. This is not how a recovering economy looks. Turn the page, and peel back the onion, and all the economic data supports/reflects/corroborates this "gasoline demand" metric. Even the governor of California has seen this chart and removed the "stay-at-home" order -- of course, the "recall effort" probably moved him as much as the economic data.

The "gasoline demand" chart really pulls together the events of yesterday.

The dude abides.

As tears go by. Generally songs "by committee" don't do well:

As Tears Go By, Marianne Faithful, written by Mick Jagger, Keith Richards, and Rolling Stones' manager Andrew Loog Oldham.

With regard to short trading and GME, a reader who is in the business provided this note:

In order to short a stock, it must be held in a margin account. Additionally the client has to sign a hypothecation agreement allowing the shares to be loaned. Also, a stock can only be shorted on an uptick which is usually a purchase. In my practice, when I shorted, I called the trade desk to have them borrow the shares. Often, there were no shares available. Rules are in place to prevent these short situations. However, these rules are obviously not being followed. Hedge funds and wall street give too much to politicians, so here we are.

Part of my response: I still can't explain the 140% number: the percent of shares said to be shorted as reported by Yahoo!Finance.

However, now after reading the above note from the reader, I can see how it occurs.  

Later: here we go. It's called "naked short selling." I had heard that term before but never understood now. A huge "thank you" to a reader who explained it to me.  

Here from Investopedia:

Naked shorting is the illegal practice of short selling  shares that have not been affirmatively determined to exist. Ordinarily, traders must borrow a stock, or determine that it can be borrowed, before they sell it short. So naked shorting refers to short pressure on a stock that may be larger than the tradable shares in the market. Despite being made illegal after the 2008 - 2009 financial crisis, naked shorting continues to happen because of loopholes in rules and discrepancies between paper and electronic trading systems. 

For those who think this is important, remember, "GME" happened under Biden's watch. It is interesting that Melissa and her crew, as well as Jim Cramer, conveniently ignored explaining it to their audience, which suggests to me they are complicit, at least at some level. 

In addition to the four panelists and their regular guests, both Melissa and Jim Cramer have had many guests on their programs, all of whom knew what was going on and failed to mention it.