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Finance

One man sent GME to the moon… again

A single wordless meme increased GameStop’s market cap by $4 billion. Here we go again. GameStop shares reached their highest level since 2022 on Monday, after day trader “Roaring Kitty” made his return to social media after a three-year absence.

Who? Keith Gill, known by many as "Roaring Kitty", was one of the leaders of Reddit's r/WallStreetBets, the forum behind GameStop’s historic 2000% stock gain in 2021. Amateur investors initially started the mass trading by targeting hedge funds that bought short positions (betting the market value would fall) against GameStop.

Gill’s reemergence sent GME skyrocketing toward its steepest single-day percentage gain since the meme stock craze three years ago.

It sent shares skyhigh

In total, GameStop’s stock soared 119% and closed almost 75% up on Monday due to Gill’s single post on X late Sunday night. The meme rapidly gathered tens of millions of views and investors around the globe (particularly ones active on r/WallStreetBets) started buying meme stocks like there’s no tomorrow.

• According to Bloomberg, over 175 million shares of GameStop were exchanged on Monday, more than 30 times what the company has seen traded on a daily basis in the last year.

  • Due to immense volatility, trading was halted nine times in nearly 90 minutes.

• The once-unprecedented rally cost short sellers, to put it lightly, a lot of money. Hedge funds holding short positions against the retailer lost over $1.3 billion.

  • Earlier this week, over 25% of all GameStop shares being held were in short positions, according to FactSet.

GME wasn’t the only meme stock that spiked: AMC shot up around 78% and Reddit 9% after Gill’s social media post.

So, another meme stock resurgence?

Experts don’t seem to think so. Jay Woods, chief global strategist at Freedom Capital Markets, told Reuters, "The first time this happened, it was more of a movement, but right now this looks like a craze where people are saying, 'Here's an opportunity' and 'Let's see if we can make a quick buck off of it.'"

Don’t expect so see things get as crazy, but if it continues into the month, it could be a nice follow up sequel. If you’d like to hear some theories about Kitty’s return from someone much more qualified than I am, Bloomberg columnist Matt Levine has some ideas.

Economy

Biden announced monumental tariffs on China

As the White House continues to subsidize the EV industry, the president unleashed a wall of tariffs on China. The Biden Administration announced increased tariffs on Chinese products Tuesday, a protectionist policy first implemented by former President Trump against the world’s second-largest economy in 2018.

Biden unveiled that tariffs on Chinese vehicles will quadruple from the existing 25% to 100%, making it extremely difficult, if not impossible, to sell them in America, according to the WSJ.

What does this mean?

What are tariffs and why do they matter? Tariffs are basically just taxes, which are usually taken from a part of the products total value. They are placed on foreign goods and services, which increases the cost and makes them less attractive to domestic consumers.

• They are sometimes placed to protect consumers from low-quality products or to help manufactures curb cheaper foreign competition.

However, economists say the cost of tariffs typically transfer to domestic consumers. This is because the importer passes the increased cost onto consumers in the form of higher prices.

US-China trade war

Along with the massive tariff increase on Chinese EVs, the Biden administration will also raise tariffs on other goods coming from China, such as batteries, minerals, semiconductors, steel, aluminum, and solar cells. China’s Ministry of Commerce called the move “typical political manipulation” in a statement released earlier this week.

Why increase tariffs? The Biden Administration is aiming to protect American manufacturers from the effects of China dumping low-cost products onto the market.

Most importantly… the EVs

Chinese EVs in particular, are a concern. China is able to make them with high quality at a low cost, thanks to its government, which heavily subsidizes the industry. Even with the new tariffs effectively doubling the cost of them, Chinese EVs are still cheaper than the least expensive American one.

Last year, solar panel prices were cut in half after China flooded the market with cheap imports, and Biden doesn’t want a repeat with the auto industry.

Seeing double: Biden’s tariff increase is one of the few things he has in common with former President Donald Trump, although, back in 2019, Biden accosted Trump for his move to impose tariffs on $300 billion worth of Chinese imports.

• In a post on X, Biden wrote, “He thinks his tariffs are being paid by China. Any freshman econ student could tell you that the American people are paying his tariffs.”

  • Biden’s stance (which seems to have changed) correlated with what we mentioned earlier about economists saying the cost of tariffs typically transfer to domestic consumers.

Regardless of who’s implementing policy, Europe seems to agree. The EU is investigating whether the EVs got unfair subsidies from Beijing and could place higher tariffs on them, joining the US in pointing out sketchy trade practices.

‘Phantom debt’ is a real issue

Along with the usual monetary struggles, you now have to worry about the money ghost. Almost every checkout in online shopping now gives you the option to “buy now, pay later”, splitting your payment up into four separate transactions. But, there’s a caveat.

With rising interest rates and inflation breaking down Americans’ already slim budgets, Bloomberg says buy now, pay later (BNPL) can be less of a convenience and more of a curse.

The short-term loans that lurk behind BNPL platforms gained traction during the pandemic, and the companies behind them don’t disclose transactions to credit scoring agencies (hence ‘phantom debt’), hiding information that would be used to paint a complete picture of the financial health of American households.

BNPL is bigger than you think

As aforementioned, BNPL skyrocketed during the pandemic as people increasingly bought products online. Although those years are behind us, the phantom debt brought by BNPL platforms is more prevalent than ever:

• According to the Consumer Financial Protection Bureau, the top five BNPL providers in the US loaned out over $24 billion in 2021 alone, a 100x increase from 2019.

• In addition, BNPL loans accounted for 7.5% of all online spending during the holiday season last year, which is a record amount, per Adobe Analytics.

Businesses allow consumers to pay more than they typically would if they just bought the products upfront, so BNPL platforms charge them for it… and they claim it works for both of them since customers get loans that often don’t have interest or fees.

But that isn’t always the case.

The real ‘phantom debt’

According to a Harris Poll survey conducted for Bloomberg, more than half of respondents who use BNPL said it allowed them to purchase more than they could afford, and 43% of customers said they were behind on payments.

Many users who consistently use the BNPL option do so because they’re bogged down financially, and while the BNPL platforms say there are no fees attached, the loans incur late fees and other penalties. This serves a dire sentence for those whose budgets are already meager.

• The same poll states nearly 25% of users felt that their BNPL spending was “out of control.”

• Harris also found that 23% of users said they couldn’t afford most of what they purchased without splitting payments.

  • Additionally, more than 33% of users used BNPL services because their credit cards were maxed out.

Not to mention Gen Z: Gen Z has higher debt levels and delinquency rates for most credit products (credit cards, mortgages, student loans, etc.) than Millennials did at the same age, according to Bloomberg. This makes them particularly vulnerable to “loan stacking,” or taking on multiple BNPL loans, which regulators say make it more difficult for them to keep track of overall debt and manage payments.

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Grab Bag

AI might design your next prescription

You might be able to thank AI for the next miracle drug. Drugs take a long time to make, not to mention the sheer amount of data, money, and experimentation that goes into it. That’s why biotech companies are massively investing in AI that can create new drug formulas and assess a patient’s biochemistry to recommend the right medication for them.

It’s already happening

Last week, Google announced, partnering with Isomorphic Labs, its DeepMind AI research laboratory unveiled an AI machine-learning model named AlphaFold 3 that can “[predict] the molecular details of diverse interactions… typically with unprecedented accuracy.”

Scientists fail 9 out of 10 times when trying to discover a new drug, mostly because they have a limited model of every molecule in the body and how they react to diseases.

• The CEO of a drug startup told MIT Technology Review that, in total, Big Pharma has “an ingredient list of at most 10 million molecules to build drugs from.”

• However, it is thought the total number of molecules that exist is around a decillion. For reference, that has 33 zeros.

This is where AI and machine-learning take the head. If the AI tool can estimate how a drug may affect the body, it can find better drug recommendations in less time.

In short, an AI tool like AlphaFold could save scientists from going through testing procedures that are often time intensive and costly, letting them test more hypothesis and theories.

The only problem: Researchers will still have to do lab work to make sure the AI model runs well enough to produce quantifiable results, and apparently, AlphaFold needs to get better at “predicting how proteins can change shape in living systems in response to their environment,” which could be an issue regarding the credibility of the technology.

People didn’t like Apple’s new ad

At least Apple had to apologize for something other than being a monopoly. Last week, Apple released a new ad centered on the brand new iPad Pro, but it got more backlash than most were expecting.

Why does everyone hate it?

In the ad, it shows a giant hydraulic press crushing creative objects — from a piano, to paint cans, to cameras, and a guitar — all to form its new $1,000 iPad Pro. It has over 60 million views on Tim Cook’s X page, and the replies are pretty scathing. After seeing the poor reception, Apple issued an apology and promised not to air the ad on TV as they initially planned.

Apple has always leaned into marketing as one of its strengths, but it didn’t work out so well this time:

• Artists are already concerned about AI (which big tech companies like Apple continue to heavily invest in) and how companies could eventually use the technology to replace them for cheap. The ad didn’t really put those concerns to rest.

This wasn’t neccisarily a great start to the tablets important release, which was on Wednesday, especially since iPad sales were down 25% last year compared to the year before.

It gets worse: Apple is also currently being sued by the DOJ for monopolizing the smartphone market. They really need to bring in those iPad sales, huh.

Fast Facts

Easy Answers: Jeopardy! is getting a pop culture spinoff on Amazon Prime Video. Perfect for those that suck at regular Jeopardy (definitely not me).

Peculiar Panda: A zoo in China was accused of dyeing dogs’ fur and trying to pass them off as pandas.

Breadwinner: Frenchies rejoice, as France reclaimed the world record for longest baguette, breaking Italy’s previous record. The bread, baked in a Paris suburb, measured 461 feet (140.53 meters), which is 235 times longer than your typical bakery baguette.

AI Search Engine: Starting this week, US users will see a “fully revamped” Google search experience enhanced with AI features, they announced Tuesday.

New Name: Vote on the NHL’s newest team name in Utah here. Some options include the Squall, Caribou, Black Diamonds, and Venom.

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