Monthly Market Debrief

GameStop is back, baby (for now).

Market Snapshot

According to Dow Jones Market Data, May is typically the second worst-performing month of the year for the stock market, declining 0.1% on average and earning May the old Wall Street adage of “sell in May and go away.”

May took offense to Wall Street’s disrespect, returning 4.58% (the strongest May performance since 2020) and reaching a new all-time high. Let this be another reminder that nobody knows what the market is going to do at any given moment and that buy-and-hold investing is the move. Off my soapbox.

As we’re all well aware, it’s also an election year. Generally speaking, the markets tend to do well during an election year, but when we see the gains in the market depends on when the next president becomes clear.

Historically, close elections where investors didn’t know who would take the White House flatlined the markets until a winner emerged. This year, with YTD earnings at +11% for the S&P 500 and an arguably close race (depending on who you ask), goes to show that you should just buy index funds and hold. Okay, NOW I am off my soapbox.

To further complicate things, the Biden Administration recently proposed a significant overhaul to the US tax system, marketed as an initiative to have “the wealthiest Americans and largest corporations pay their fair share” in taxes, while ensuring that “no one earning less than $400,000 per year will pay a penny in new taxes.”

Proposed changes include increasing the top federal tax bracket from 37% to 39.7%, imposing a minimum tax on billionaires, and raising the corporate tax rate, among a number of other changes.

Although these changes wouldn’t directly impact the majority of US citizens’ tax bill, increased taxes or rumors of increased taxes generally negatively impact the stock market, which could affect your investments.

All that to say, who knows what the rest of the year will hold for the market.

Only one thing is for sure. The shirtless RFK Jr. thirst trap workout and nature pictures will continue until morale improves.

On a related note…

Current Event - Donald Trump Convicted

On May 30th, former President and presumptive 2024 Republican nominee Donald Trump was convicted of all 34 charges of falsifying business records in a criminal “hush money” trial, which is both a hilarious and depressing glimpse into the quality of the US political system and reinforces Wilson’s theory that we’re living in a simulation.

These verdicts make Trump the first former US President to be convicted of felony criminal charges.

So what was he charged for? The case stemmed from a $130,000 “hush money” payment that Trump’s attorney, Michael Cohen, made to adult film star Stormy Daniels prior to the 2016 election, in exchange for Daniels not publicizing their (alleged) sexual encounter.

In 2017, Cohen and Allen Weisselberg, an executive at the Trump Organization, agreed to a payment plan to reimburse Cohen the $130,000 through a series of monthly payments described as legal expenses for Cohen’s services.

Each of the 34 charges that Trump was convicted of corresponded to a check, invoice, or voucher used to reimburse Cohen. Prosecutors argued, and the jury agreed, that Trump knew the payments were to reimburse Cohen’s payment to Daniels and incorrectly recorded it as a legal expense. Cohen testified that Trump directed him to make the payments to Stormy Daniels.

To nobody’s surprise, reactions to Trump’s conviction have varied tremendously, from outrage, to humor, to relief, to apathy. An ABC News/Ipsos poll found that roughly 50% of Americans agree with the verdict, 27% disagree, and 23% are unsure. Almost half of those surveyed believe the charges against Trump were politically motivated.

Among Republicans that were polled, only 16% said Trump should end his presidential campaign, while 75% say he shouldn’t. Trump’s campaign indicates no intentions of stopping, even raising $52.8 million in the 24 hours after Trump’s conviction. A felony conviction isn’t a disqualifying factor for a presidential candidate, interestingly enough.

Also to nobody’s surprise, Elon Musk has gotten in on the social media fallout with this nugget of gold.

Trump’s sentencing has been set for July 11th, just four days before the Republican National Convention. Trump could face up to four years in prison and a $5,000 fine for each of the 34 counts. Todd Blanche, Trump’s lead defense attorney, has vowed to appeal the conviction.

Whether this verdict will help or hurt his chances at a presidential run are unclear.

In a normal world, my guess would be hurt, but Donald Trump has historically embodied the late philosopher Kelly Clarkson’s “what doesn’t kill you makes you stronger,” so I think the overall impact to his presidential run will be negligible.

Company Highlight - GameStop

I’m technically breaking the rules and using some news from June for this story, but this is too interesting not to talk about. Time travel with me for a moment.

The year was 2020. COVID-19 was ravaging the world, Peloton bikes were all the rage, and Tiger King first blessed the world with his beautiful mullet on Netflix.

Enter Keith Gill, better known as “DeepF*ckingValue” (censored for my parents who read this) on Reddit or “Roaring Kitty” on X/YouTube.

Gill made a $53,000 investment in GameStop in September 2019 and began publicly documenting his bets and endorsing the company’s value on YouTube and r/wallstreetbets, a subreddit for diamond-handed degenerate stock market investors like myself.

You can read this Reddit thread or watch “Eat the Rich: The GameStop Saga” on Netflix for the full sequence of events but to sum it up: GameStop’s stock value skyrocketed from under $1 per share to over $400, big hedge fund short sellers lost a LOT of money (like $5 billion), and a movement of retail investors committed to sticking it to hedge funds was born.

Following the boom and a gradual decline of GameStop’s value, Gill faced a lawsuit for market manipulation, appeared before Congress to discuss GameStop, and then shortly after went off the social media grid… until May 12th.

After a three-year social media hiatus, Gill took to X under Roaring Kitty to post this cryptic picture with no caption or context, followed by other epic movie comeback clips.

In the r/superstonk Reddit forum, Gill, posted a screenshot which is believed to show Gill’s GameStop stock and call option purchases, suggesting he owned more than 5 million shares of the company.

One day later, GameStop stock was up 74%, short-sellers were out another billion dollars, and the apes were united in full force yet again.

Even RFK Jr. hopped on board with a $24,000 investment in GameStop to “support the Ape retail rebellion” and “punish predatory short selling to the moon.” What a time to be alive.

Could this be considered market manipulation by Gill? Probably, but Elon Musk does it three times a week and nobody bats an eye.

Is Gill’s social media resurgence a ploy to pump GameStop stock and make a quick profit? Did he sell his social media accounts to someone trying to do the same? Or does he know something about GameStop that we don’t?

Only time will tell, but in the meantime… 💎🤲 (just kidding, don’t sue us).

Are you team HODL for GameStop or team “it’s a bubble?” Reply to this email to let us know!

Debrief on Deck

Conveniently enough, Wilson will be back next week to discuss what it means to short a stock, like the hedge funds did and are currently doing to GameStop.

Let’s see how it pans out for them!