TheChek News Flow

It's starting to look like the new ultra-high net worth individuals are formerly twenty-somethings that got their start trading on Robinhood. Some of those who have smashed and grabbed on the platform are now turning to professionals to help protect their winnings. At least that was the takeaway from a Bloomberg report featuring several Robinhood traders who have done well and are now seeking out professional financial advisors to manage their wealth.

The piece featured traders like 31 year old Jeremy Johnson, who, after investing $15,000 per year with Robinhood, has decided to move on to greener pastures. “You can save your money all you want, but if it’s not doing anything, what does it look like long term?” he asked Bloomberg.

Rather than be a bad omen for financial advisors, the pandemic has actually helped the field grow. For Johnson, a financial advisor meant help saving more money, life insurance recommendations and a mix of different types of investments.

And he's not alone: 40% of U.S. based investors said they need more financial advice. 56% of those people said they would be willing to pay for such advice, up 5% from 2019. 82% that pay for the financial advice say it's worth the price. Investors who have an advisor are twice as likely to say they have the best investment strategy compared to those who go it alone, BBG notes.

Investment advisor Aspiriant LLC said it saw a push in demand after stocks plunged back in March of 2020. Additional clients turned up during the year as high profile IPOs hit the market, the firm said. Its client list was up 32% in 2020.

30 year old pharmacist Tia Ware, who was once taken back by the $1200 fee of hiring a financial advisor, has come around to the idea. She said: “At first I was like ‘hell no. But now, yes, when I see my accounts. If I didn’t have a financial adviser, I’d only have shoes and bags to show for it.”

After the pandemic started, she said she engaged with her advisor far more often than in years past.

Brokerages like Schwab say they have created a new pipeline to financial advisors by taking on new accounts as a result of zero trading fees. Schwab's digital advisory assets grew 18% in 2020 to $57.9 billion.

People are "more warm and receptive to paying for and receiving advice" during turmoil, financial advisor Eddie Welch concluded.

He said that while Robinhood makes it easy to get into the market, “it’s a little more difficult to get into the market with a plan. And in most cases I think that’s what people seek from us.”

Last Friday, in the aftermath of the Gamespot's historic eruption which sent the stock from $40 to the mid-70s (before it doubled again on Monday rising as high as $158), we had a feeling which way the wind was blowing and laid out all the Russell 3000 stocks that had the highest Short Interest (50%> of float).

Also on Friday, we put together an equal weighted basket of the companies listed above which on Monday... well... exploded, in light with our expectations that WallStreetBets/Robinhood traders would go down the list and systematically ramp up each and every one of these most shorted names, sending them in the stratosphere.

That's exactly what happened.

And yet, while the market reaction was as we expected, one thing we did not anticipate was the "fracture point" which as we now know was Gabe Plotkin's Melvin Capital, which effectively blew up today and suffered a multi-billion margin call on its shorts (as reported earlier), and only a $2.75 billion bailout from Citadel and Point72 (both prior investors in the fund) avoided a far greater disaster (had the $12 billion Melvin Capital been forced to start liquidating its longs to pay its margin calls, all bets would have been off).

What is most remarkable, however, is that a quick look at Melvin's put positions - which had attracted the ire of WallStreetBets investors who were long the names that Plotkin was short - shows that most of them were amazingly the same as the most shorted names shown above! One wonders how many idea dinners Plotkin attended to pitch his positions to his hapless peers who followed him right into the Big Short Squeeze abyss, and how many other hedge funds had been caught in the conflagration. Incidentally the reason why the WallStreetBets vendetta was targeted at Plotkin is because unlike traditional shorts, it had to disclose its puts in its quarterly 13F. Ironically, had Melvin merely kept its bearish bets in the form of regular shorts - which hedge funds have no obligation to report - all of this could have been avoided.

And so, without further ado, here are Melvin Capital's puts.

Why do we care? Because as S3 Partners founder Bob Sloan told Bloomberg in a TV interview today, GameStop could rise even further after surging 95% over the past week: “Get prepared for another round of short squeeze. You’re going to see GameStop go way higher.”

The reason: while the negative hit from Plotkin's shorts and/or puts may have been neutralized, especially with the help of the nearly $3 billion in excess funding from Steve Cohen and Ken Griffin, which removes his incentive to cover shorts at all costs, earlier today we learned that as the hobbled hedge fund cralwed through the finish line, suffering massive P&L losses, countless other hedge funds took its place shorting Gamestop et al. In fact, GME's short interest as a percent of float declined from 142% two weeks ago to... 139% today.

Bottom line: brace for even more fireworks as WallStreetbets reignites the squeeze, only this time it won't be Melvin but some other hedge fund that will be crushed under the collective weight of a few thousand Robinhood bulls. Which, incidentally, would be great news for Ken Griffin. Not only does he know which stocks will be ramped by Robinhood before anyone else - after all Citadel is the biggest buyer of RH orderflow - but once the short hedge fund on the other side blows up, Griffen can just pull another Melvin, and swoop in with another "bailout loan-for-revenue" scheme - i.e., an offer that simply can not be refused - and forcibly takes an equity stake in another distressed hedge fund... and another... and another, and so on, all with the help of a few thousand stimmychecked Gen-Zers.