Why the GameStop frenzy may hurt retirees along with hedge funds
Reddit users and other retail investors who piled into GameStop stock aimed to take down Wall Street.
Pension funds, which support ordinary Americans in retirement, may be an unintended casualty.
Some hedge funds have sustained big losses as a result of bets against GameStop stock. Melvin Capital, for example, lost more than 50% in January.
But pension plans — which invest assets on behalf of workers like teachers and police officers — may hold big positions in hedge funds. That means a financial hit for hedge funds could spill over to workers’ retirement assets.
“Your ‘eat the rich’ mentality just took a bite out of the pension funds of working Americans,” Barbara Roper, director of investor protection at the Consumer Federation of America, said of GameStop investors who targeted Wall Street
“It’s not a victimless game, and it’s not a Wall Street billionaire who’s going to ultimately pay the price,” Roper added.
Roughly 7% of the $4.5 trillion in state and local pension plans are allocated to hedge funds, according to data published by the Center for Retirement Research at Boston College and the Center for State and Local Government Excellence. These plans (which don’t include plans in the private sector) support 14.7 million workers and 11.2 million retirees.
But many pensions allocate much more, some even north of 20% of their overall portfolio, according to Pensions & Investments.
Fox Business/Suzanne O’Halloran
CME raises silver margins after surge, CFTC on alert
Silver is no longer a sleepy commodity, for now, posting its biggest one day percentage gain since March 2009.
However, the 9.29% rally to $29.39 per troy ounce on Monday, prompted the CME, the world’s largest derivatives exchange which offers trading in silver futures and options, to raise margins starting tomorrow after the close of business, per a notice reviewed by FOX Business.
The move in silver also caught the attention of the Commodity Futures Trading Commission (CFTC}, the top regulator for commodities futures trading.
“The CFTC is closely monitoring recent activity in the silver markets,” said Acting Chairman Rostin Behnam in a released statement. “The Commission is communicating with fellow regulators, the exchanges, and stakeholders to address any potential threats to the integrity of the derivatives markets for silver, and remains vigilant in surveilling these markets for fraud and manipulation.”
CNN Business/Tami Luhby and Anneken Tappe
American jobs won’t return to pre-pandemic levels until 2024, CBO says
The number of employed Americans won’t return to its pre-pandemic level until 2024, but the broad economy is expected to fully recover by the middle of this year, according to a Congressional Budget Office report issued Monday.
The projection shows just how long the job market still has to go to heal after suffering the steepest loss on record in April, when 20.5 million jobs evaporated and the unemployment rate shot up to 14.7% in a single month.
It could pressure the White House and Capitol Hill to speed the passage of another relief bill, as well as an economic recovery package. President Joe Biden is already facing resistance in Congress to the $1.9 trillion rescue proposal he unveiled last month. He is scheduled to meet Monday afternoon with a group of GOP senators, who have put together a $618 billion counteroffer. The President also plans to release a recovery package later this month.
The nation’s recovery remains on shaky footing, with the economy adding back only about half of the positions that disappeared. A whopping 140,000 jobs were lost in December, the first monthly loss since April. The forecast for the January report, which will be released Friday, calls for only 50,000 positions to be added. The unemployment rate is expected to remain flat at 6.7%, where it has been stuck since November.
Doctor predicts another Covid surge amid presence of new variants
Dr. Nahid Bhadelia, medical director of the Special Pathogens Unit at Boston Medical Center, told CNBC’s “The News with Shepard Smith” that she anticipates another surge of Covid infections as the new variants of the virus appear across the U.S.
“If I encounter a person who has one of these variants, I’m much more likely to catch the infection from them, and then also, in turn, I’m much more likely to transmit it, which means we might have a lot more infections,” said Bhadelia, medical director of the Special Pathogens Unit at Boston Medical Center. “And so, you might see more infections in February that then lead to more hospitalizations and deaths in March.”
CDC director Dr. Rochelle Walensky said on Monday that the dangerous new Covid variants “remain a great concern,” despite cases falling nationwide. At least 32 states have reported cases of the new Covid Strains detected in the U.K, Brazil, and South Africa, according to the CDC. Health officials in Maryland reported the state’s first case of the South African variant over the weekend, making it the third known case of the strain in the U.S.