Connect with us

Markets

The Crazy World of Stonks Explained

Published

on

View the full-size version of this infographic

The Crazy World of Stonks

Can I share this graphic?
Yes. Visualizations are free to share and post in their original form across the web—even for publishers. Please link back to this page and attribute Visual Capitalist.
When do I need a license?
Licenses are required for some commercial uses, translations, or layout modifications. You can even whitelabel our visualizations. Explore your options.
Interested in this piece?
Click here to license this visualization.

Crazy World of Stocks, Gamestop, and Robinhood

The Crazy World of Stonks Explained

View the full-size version of this infographic here

You may have seen diamond hands, rockets, and r/wallstreetbets rallying cries in the past few weeks—but what does it all mean? In this graphic we explain the events that led to an explosive rise in GameStop’s share price, along with the Reddit revolution fueling it.

Gamestop’s stock has been on a wild roller coaster ride, rising by roughly 640% from the start of last week to its peak. After Robinhood and other brokers initializing trading restrictions due to the heightened market activity, the stock has since fallen more than 80% to $90 per share.

But the stock’s volatile price action doesn’t come close to telling the story of how this market frenzy began on the Reddit community r/wallstreetbets, the hedge funds that suffered when GameStop share price rose dramatically, and why Robinhood halted trading last week.

The Beginning of the GameStop Saga

While GameStop’s share price went higher than anyone expected this past week, the initial idea behind this rally was shared back in September 2019 by u/DeepFuckingValue, a frequent user in the r/wallstreetbets subreddit, a community where trade and investment ideas are shared.

The premise of his trade idea was simple: he saw unrecognized value and much more upside potential compared to the downside risk in GameStop.

While people were eager to proclaim the death of physical game sales, u/DeepFuckingValue noted the new generation of consoles on the horizon would bring gamers back to GameStop. Along with the company’s new board of directors and solid balance sheet, GameStop wasn’t as poorly positioned as many thought.

Among those betting against the company were a variety of hedge funds and other players who had an outstanding short interest against the stock. Just like the legendary investor Michael Burry proposed after him, u/DeepFuckingValue noted the possibility of a short squeeze if GameStop’s share price moved higher.

ℹ️ A short squeeze is when price rises against open short positions to the point they close their positions by buying back the stock, resulting in a positive feedback loop which continues pushing price higher and putting pressure on other shorts.

GameStop Rockets to the Moon

A collection of shorts had amassed on the game retailer’s stock, with hedge funds like Melvin Capital Management holding onto shorts for multiple years despite GME being at all-time lows. The r/wallstreetbets community caught onto this high short interest and wanted to “squeeze” them out of their positions.

In August and September of 2020, GameStop broke up from its lows around $4 a share, and returned 66% and 53% respectively, reaching new highs of $11 a share. Hedge funds piled in further as short interest on publicly traded shares reached 120%, yet GameStop’s uptrend continued, reaching more than $20 a share by the end of December.

Here’s what’s happened since:

DateGameStop (GME) Share PriceDeepFuckingValue's Unrealized Profits
January 12$19.95$1.2M
January 13$31.40$3.9M
January 14$39.91$4.0M
January 15$35.50
January 19$39.36$3.9M
January 20$39.12
January 21$43.03
January 22$65.01$7.8M
January 25$76.79$8.3M
January 26$147.98$17.2M
January 27$347.51$33.4M
January 28$193.60$18.6M
January 29$325.00$31.6M
February 1$225.00$21.2M
February 2$90.21$7.6M

Sources: TradingView, /u/DeepFuckingValue’s Reddit posts

As GameStop’s price ran into the triple digits by the end of January, Melvin Capital was forced to close their short position despite a $2.75B investment from Citadel and Point72. At the same time, in just a few weeks, the number of r/wallstreetbets subscribers shot up from 1.8M to 8.3M.

Robinhood Halts Trading and Institutes Position Limits

On January 28th, when GameStop shares reached highs above $460, Robinhood and other brokers halted purchases of GameStop shares and options along with the ability to purchase fractional shares of securities. The broker had received a bill from the NSCC (National Securities Clearing Corporation) of $3B, reflective of the high volatility and value at risk on the platform.

In an informal interview with Elon Musk on Clubhouse, Robinhood CEO Vlad Tenev said that halting purchases and instituting position limits allowed the bill’s cost to ultimately drop to $700M. Before this interview, the company published a blog post of what happened on their end, along with an explainer of how trades are settled with clearinghouses.

While position limits which limited the amount of shares and options users could buy had originally been placed on 51 different securities, today only five have position limits. These include r/wallstreetbets favorites like GameStop (GME), AMC Entertainment (AMC), and Nokia (NOK).

Robinhood’s New Position Limits

SymbolSharesOptions Contracts
AMC1,2501,250
EXPR3,0003,000
GME100100
NAKD12,000N/A
NOK2,0002,000

You can see the latest position limits on Robinhood’s platform here.

Along with these position limits, Robinhood has instated further limitations related to pattern day traders. This limits users with less than $25,000 in their account to fewer than four trades over five business days.

r/wallstreetbets Discovers Dogecoin and Eyes Silver Shorts

As buying was halted for many of the preferred r/wallstreetbets stocks, the community shifted its attention to the cryptocurrency Dogecoin. Prior to the 28th, Dogecoin had been trading for $0.007 a coin, but in less than 24 hours the coin rose 1,000% to a high of $0.086.

Following this, the meme-based cryptocurrency has since levelled off around $0.033, which is still nearly a 350% return for anyone who had bought before the 28th.

Dogecoin cryptocurrency price rise

Since their foray into cryptocurrency, some r/wallstreetbets users have now identified silver as a new opportunity with short squeeze potential. Since the 28th, silver has risen about 5%. Increased volumes for various silver brokers caused delays or resulted in the suspension of silver purchases over the weekend.

Despite the rally and growing excitement around the precious metal, there are those in the r/wallstreetbets community who consider this a distraction. Malicious players with a short interest in GameStop may be trying to draw attention away from the GameStop short squeeze.

What’s Next for Robinhood and r/wallstreetbets?

Since these unprecedented market events, Robinhood raised $3.4B in an investment round to further support their goal of “expanding everyday investors’ ability to invest”. Yet the company faces dozens of lawsuits for their halting of share purchases on the 28th of January, and will likely have to put its IPO on the backburner.

Their decision to halt purchases ultimately removed large amounts of buy pressure from GameStop and other securities, and its newly instated position limits and pattern day trader rule have driven many users away from the platform.

With their actions, Robinhood unwittingly spurred a deep divide between Main Street and Wall Street. Many r/wallstreetbets members now feel their trades and investments carry an idealistic importance worth more than potential profits or losses.

While there is still plenty of this story left to play out, last week saw an irreversible change in how many individual investors perceive the market, its participants, and its rules. While new rules and regulations will change shape going forward, one thing is clear: the rise of information sharing has changed how financial markets will be traded forever.

Subscribe to Visual Capitalist

Thank you!
Given email address is already subscribed, thank you!
Please provide a valid email address.
Please complete the CAPTCHA.
Oops. Something went wrong. Please try again later.

Comments

Markets

Mapped: The Top 10 Billionaire Cities

Where do the most billionaires live? For years, NYC has topped the list of billionaire cities, but 2020 marked a monumental shift.

Published

on

top 10 cities for billionaires

Mapped: The Top 10 Billionaire Cities in 2020

In 2020, the world gained 493 new billionaires—that’s one every 17 hours.

For the last seven years, New York City has been home to more billionaires than any other city in the world. However, last year marked a monumental shift in the status quo.

Beijing has unseated the Big Apple, and is now home to 100 billionaires. That’s one more billionaire than the 99 living in New York City.

Today’s map uses data from Forbes to display the top 10 cities that house the most billionaires.

Where do the Most Billionaires Live?

The richest of the rich are quite concentrated in cities, but some cities seem to best suit the billionaire lifestyle. Here’s a breakdown of the top 10 billionaire capitals and the collective net worth of all the ultra wealthy that live there.

RankCityRegionNumber of BillionairesNet Worth of the City's Billionaires
#1Beijing🇨🇳 Asia100$484.3B
#2New York City 🇺🇸 North America99$560.5B
#3Hong Kong🇨🇳 Asia80$448.4B
#4Moscow🇷🇺 Europe79$420.6B
#5Shenzhen🇨🇳 Asia68$415.3B
#6Shanghai 🇨🇳 Asia64$259.6B
#7London 🇬🇧 Europe63$316.1B
#8Mumbai🇮🇳 Asia48$265.0B
#9San Fransisco🇺🇸 North America48$190.0B
#10Hangzhou🇨🇳 Asia47$269.2B

Some cities have some obvious billionaires that come to mind. New York’s richest person and former mayor, Michael Bloomberg, is worth $59 billion. Beijing’s richest billionaire is the founder of TikTok (among other things), Zhang Yiming with a net worth of $35.6 billion.

In terms of the locations themselves, London, New York, and San Francisco are the only Western cities to make the list. Though New York was ousted from the top position last year, altogether the city’s billionaires are still worth more than Beijing’s.

One new city to make the top 10 list of billionaire cities was Hangzhou, the home of Jack Ma. It booted out Singapore from the 10th spot.

East Meets West

More than half of the top 10 cities are located in Asia, providing evidence of the shift eastwards when it comes to seats of wealth. Five of the six Asian cities listed are all in China.

What’s helped lead to this?

The country has seen an e-commerce boom, not in the least thanks to the pandemic. Additionally, the efficient handling of COVID-19 has allowed the economy to get back on track much more quickly than other countries. According to the BBC, 50% of China’s new billionaires have made their wealth either through tech or manufacturing.

Four of the Chinese cities on the list also had the biggest billionaire growth in 2020. Each of them gained more than 10 net new billionaires:

  • 🇨🇳 Hangzhou: 21
  • 🇨🇳 Shanghai: 18
  • 🇨🇳 Shenzhen: 24
  • 🇨🇳 Beijing: 33

The only other city to gain more than 10 new billionaires in 2020 was San Francisco with 11.

Now sitting at 698 billionaires, China is coming up on the 724 held by the United States. Beijing overtaking NYC could be the beginning of a larger tipping point.

Shifting Tides

Asia-Pacific’s collective 1,149 billionaires are worth $4.7 trillion, while U.S. billionaires are worth $4.4 trillion in total wealth.

Overall, it looks like the wealth tides may be turning as China continues to progress economically and more billionaires become based in the East over the West.

Subscribe to Visual Capitalist

Thank you!
Given email address is already subscribed, thank you!
Please provide a valid email address.
Please complete the CAPTCHA.
Oops. Something went wrong. Please try again later.

Continue Reading

Markets

Which Asian Economies Have the Most Sustainable Trade Policies?

The Sustainable Trade Index ranks 19 Asian economies and the U.S. across three categories of trade sustainability.

Published

on

Which Asian Economies Have the Most Sustainable Trade Policies?

To say that Asia has benefited from international trade is an understatement. By opening its economies to the rest of the world, the region has become a leading exporter in many of today’s most important industries.

Trade has also improved Asia’s quality of life, lifting over one billion people out of poverty since 1990. Without the proper controls, however, such rapid growth could have harmful effects on Asia’s environment and society.

In this infographic from The Hinrich Foundation, we break down the results of their 2020 Sustainable Trade Index (STI). Since 2016, this index has ranked 19 Asian economies and the U.S. across three categories of trade sustainability: economic, social, and environmental.

What Exactly is Sustainable Trade?

International trade is an important source of economic growth, enabling domestic businesses to expand, reach new customers, and gain exposure to foreign markets.

At the same time, countries that focus too heavily on exports put themselves at greater long-term risk. For example, an aggressive expansion into manufacturing is likely to impair the quality of a country’s air, while overdependence on a single product or sector can create an economy that is susceptible to demand shocks.

“The primary principle which underpins sustainable trade is balance. Trade cannot be pursued solely for economic gains, without considering environmental and social outcomes.”
– Merle A. Hinrich

Thus, sustainable trade supports not only economic growth, but also environmental protection and strengthened social capital. It involves finding a balance between short-term incentives and long-term resilience.

Measuring Sustainable Trade

The Sustainable Trade Index (STI) is based on three underlying pillars of trade sustainability. Every economy in the STI receives a score between 0 and 100 for each pillar.

PillarNumber of IndicatorsExamples of Indicators
Economic pillar21
  • Use of trade tariffs
  • Logistics performance
  • Growth in labor force
Social pillar12
  • Level of economic inequality
  • Presence of child labor
  • Educational attainment
Environmental pillar14
  • Level of air pollution
  • Reliance on natural resources
  • Environmental standards

The economic pillar measures a country’s ability to to grow its economy through trade, while the social pillar measures a population’s tolerance for trade expansion, given the costs and benefits of economic growth.

Last but not least, the environmental pillar measures a country’s proficiency at managing climate-related risks. Individual pillar scores are then aggregated to arrive at an overall ranking, which also has a maximum possible score of 100.

The Sustainable Trade Index 2020: Overall Rankings

For the first time in the STI’s history, Japan and South Korea have tied for first place. Both countries have placed in the top five previously, but 2020 marks the first time for either to take the top spot.

RankEconomyOverall Score
1 (tied)🇯🇵 Japan75.1
1 (tied)🇰🇷 South Korea75.1
3🇸🇬 Singapore70.2
4🇭🇰 Hong Kong68.3
5🇹🇼 Taiwan67.0
6🇺🇸 U.S.66.2
7🇨🇳 China56.5
8🇵🇭 Philippines55.9
🌏 Average55.1
9🇹🇭 Thailand50.5
10🇱🇰 Sri Lanka50.4
11🇲🇾 Malaysia49.5
12🇧🇩 Bangladesh49.4
13🇧🇳 Brunei48.5
14🇰🇭 Cambodia47.8
15 (tied)🇮🇳 India46.9
15 (tied)🇻🇳 Vietnam46.9
17🇮🇩 Indonesia46.3
18🇱🇦 Laos46.1
19🇵🇰 Pakistan43.9
20🇲🇲 Myanmar40.3

Advanced economies like Singapore, Hong Kong, and Taiwan were also strong performers, each scoring in the high 60s. At the other end of the spectrum, developing countries such as India and Vietnam were tightly packed within the 40 to 50 range.

To learn more, here’s how each country performed in the three underlying pillars.

1. Economic Pillar Rankings

Hong Kong topped the economic pillar for the first time thanks to its low trade costs and well-developed financial sector. Financial services have increased their contribution to Hong Kong’s GDP from 13% in 2004 to 20% in 2018.

The region’s recently initiated national security law—which has resulted in greater political instability—may have a negative effect on future rankings.

RankEconomyEconomic Score
1🇭🇰 Hong Kong69.6
2🇸🇬 Singapore68.7
3🇨🇳 China64.9
4🇰🇷 South Korea63.3
5 (tied)🇲🇾 Malaysia61.2
5 (tied)🇺🇸 U.S.61.2
7🇹🇼 Taiwan60.3
8🇧🇳 Brunei59.3
9 (tied)🇯🇵 Japan58.6
9 (tied)🇵🇭 Philippines58.6
🌏 Average56.9
11🇧🇩 Bangladesh56.3
12🇰🇭 Cambodia56
13🇱🇰 Sri Lanka54.7
14🇻🇳 Vietnam53.9
15🇮🇩 Indonesia52.1
16🇮🇳 India51.4
17🇲🇲 Myanmar49.5
18🇹🇭 Thailand47.4
19🇵🇰 Pakistan46.9
20🇱🇦 Laos44.0 

China was also a strong performer, climbing to third for the first time. Asia’s largest economy benefits from a well-diversified group of trading partners, meaning it doesn’t rely too heavily on a single market.

The bottom five countries—India (16th), Myanmar (17th), Thailand (18th), Pakistan (19th) and Laos (20th)—suffered from issues such as payment risk, which is measured as the difficulty of getting money in and out of a country. This risk is especially damaging to trade because it discourages foreign direct investment.

2. Social Pillar Rankings

The social pillar features the highest average score, but also the largest gap from top to bottom. This gap has expanded over recent years, growing from 43.9 points in 2018 to 52.3 in 2020.

RankEconomySocial Score
1🇹🇼 Taiwan88
2🇯🇵 Japan87.3
3🇰🇷 South Korea86.9
4🇺🇸 U.S.83.1
5🇸🇬 Singapore63.1
6🇵🇭 Philippines62.4
7🇹🇭 Thailand60.9
🌏 Average59.1
8🇭🇰 Hong Kong57.8
9🇧🇩 Bangladesh55.8
10🇲🇾 Malaysia53.6
11🇱🇦 Laos53.0
12🇮🇳 India52.5
13🇮🇩 Indonesia52.4
14🇧🇳 Brunei51.6
15🇻🇳 Vietnam50.4
16🇨🇳 China50.2
17🇰🇭 Cambodia46.2
18🇱🇰 Sri Lanka46.1
19🇵🇰 Pakistan45.6
20🇲🇲 Myanmar35.7

Taiwan claimed the top spot for the second time, solidifying its reputation as Asia’s leader in human capital development. It performed well in the educational attainment indicator, with 93.6% of its population receiving a tertiary education.

China, despite its success in other pillars, only managed 16th. This was partly due to the effects of its now defunct one-child policy, which has been responsible for creating gender imbalances and a shrinking population.

3. Environmental Pillar Rankings

The environmental pillar has the lowest average score of the three. Japan, Singapore, Hong Kong, and South Korea were the only countries to score above 75.

RankEconomyEnvironmental Score
1🇯🇵 Japan80.0
2🇸🇬 Singapore78.7
3🇭🇰 Hong Kong77.4
4🇰🇷 South Korea75.2
5🇨🇳 China54.5
6🇺🇸 U.S.54.3
7🇹🇼 Taiwan52.8
8🇱🇰 Sri Lanka50.4
🌏 Average49.1
9🇵🇭 Philippines46.6
10🇹🇭 Thailand43.2
11🇰🇭 Cambodia41.2
12🇱🇦 Laos41.1
13🇵🇰 Pakistan39.3
14🇮🇳 India36.7
15🇻🇳 Vietnam36.3
16🇧🇩 Bangladesh36.0
17🇲🇲 Myanmar35.6
18🇧🇳 Brunei34.6
19🇮🇩 Indonesia34.3
20🇲🇾 Malaysia33.8

The top four performed well in areas such as air quality and water pollution, and with the exception of Hong Kong, have all introduced carbon pricing schemes in the past decade. This doesn’t mean these countries are without their flaws, however.

Land-constrained Singapore, for instance, ranked 16th in the deforestation indicator. The city-state is one of the densest population centers in the world, and has cut down forests to clear space for further settlement and urbanization.

Building Back Better From COVID-19

Despite the damage that COVID-19 has caused, there are some silver linings. This includes the environmental benefits experienced by China, where lockdowns reduced carbon emissions by 200 million tonnes in a single month. It’s been estimated that after two months, China’s reduced pollution levels saved the lives of 77,000 people.

These temporary improvements are an explicit reminder of the environmental and social costs associated with economic growth. In response, governments in Asia are taking steps to ensure the long-term sustainability of their nations. Japan and South Korea both announced their commitments to achieving carbon neutrality by 2050, while China set a similar goal for 2060.

Subscribe to Visual Capitalist

Thank you!
Given email address is already subscribed, thank you!
Please provide a valid email address.
Please complete the CAPTCHA.
Oops. Something went wrong. Please try again later.

Continue Reading

Subscribe

Join the 230,000+ subscribers who receive our daily email

Thank you!
Given email address is already subscribed, thank you!
Please provide a valid email address.
Please complete the CAPTCHA.
Oops. Something went wrong. Please try again later.

Popular