caroline: from bloomberg's world headquarters in new york and here in london, i'm caroline hyde to be ready -- caroline hyde. romaine: growth over momentum leads today. >> the question is, "what'd you miss?" caroline: it is a ho-hum end to the week but there is buzz not justified bernie sanders' coat

selling out, but a bubble across the board in markets. a bank of america strategist warning that the rally is forming a bubble in asset classes. u.s. stocks are in a bubble, predicting joe biden economic recovery plan will prepare up -- will propel them to new heights. we are going to examine these warnings. one stock that got our attention today, gamestop. joe: one of the most wild stories you are going to see, gamestop shares going nuts. it was up over 70% at one point, massive shorts, closing with a gain of 51% after traders on message boards gordon aided -- coordinated a bull raid on the stock. romaine: it encapsulates a lot

of the movements we have seen over the past few days. this was a four dollar stock six months ago and it is on fire. we were talking about this earlier on the previous show, basically there was some fundamental catalyst for the increase we saw last week, with ryan working his magic now that he has gained some control of the board. joe: joining us to talk about it more is katie. gamestop shares surging 51%. is it because the present value of gamestop's future cash flows rose by 51% or was there something else going on? >> like romaine said, there was some fundamental news, but if you look at the rest of this company's fundamentals, gamestop has posted profit once in the past six quarters, so there is not much to go on from a

fundamental stance. what seems to be driving the stock is this showdown between citroen research and army that is wall street on reddit. citroen posted a critical tweet of the company on tuesday and that unleashed this backlash. if you look at wall street that's right now, they are celebrating, especially because theyrecommenting on gamestop. caroline: the internet remains undefeated and seemingly short-sellers in this case. what does it speed to more broadly about retail's impact in the market and what we are seeing? it does not feel like this is all retail that is pushing very -- various benchmarks to new highs. katie: if you check out the short interest on this, there is a lot of money here.

we are not talking about a penny stock, which went crazy early this week and last week. we are talking about $54 a share, that is a lot of money going around, and if you look at data from partners, 141% of available shares were sorted coming into today, which is possible because he can short shares multiple times. s3 estimates that that has caused market losses for those people that came into this with a bearish position. a lot of money on the line. romaine: i am curious about the broader market, maybe you can explain this. a legendary investor, we were given his thoughts earlier about the idea of a bubble and there was mockery from some of the younger people that said you

cannot approach the current environment with the old-school, bottom up fundamental assessments that were the hallmark for a certain generation. have we reached some rubicon where that stuff does not matter or is this justice a bubble that it's going to pop one day and we are going to finally fall back in love with that csa? katie: that is the question, this tug-of-war we are talking about applies to the broader market where you have investors who have been in this for a long time saying you have to look at the fundamentals, things are so overvalued. yet, things keep going up. we had a story last week where we focus on retail investors, how they are approaching the stimulus checks that might be coming, and we spoke to several who said, i'm going to put this into the market. i'm not going to be buying shoes or taking trips, i might as well double down on some of these stocks. if you think about what is

coming, the stimulus not only in the form of direct payments but going to support businesses and municipalities, there is a la backstop both on the monetary policy side from the fed and also coming from the financial side, the fiscal side. even the long time bearish investors i speak to say that this party could go on for a long longer, we are in a bubble according to those people, but it could keep growing. joe: back to gamestop for a second, you have been following this reddit phenomenon for a long time. the strategy is not digestible long -- is not to just go along, but it has weaponized call options buying. how does the stock get selected and what specifically is the trade that forces what they believe is a perpetual motion machine higher? katie: this is an interesting

nuance, this frenzy we have seen over the past few months. they are heading to the options market as well, which you might think is maybe a more sophisticated place, but it is cheaper to buy a call option than to buy the shares themselves. if you look at the most actively traded options today, it is a gamestop call with a $60 strike expiring today and yesterday, it was worth seven cents. today, it is worth a little under two dollars but that is cheaper than $64 per share. in terms of how that works, even though that is not a lot of money, the dealers who are selling those calls have to hedge themselves, so they have to go in and buy the underlying stock. we have seen this happen throughout the past several months and it is at work here and gamestop where it is this self reinforcing feedback loop and people go heavy in the

options market. caroline: katie all over it for us. thank you. fascinating workings underneath this at the moment. we continue to examine the various points of potential access and areas that the retail market has liked as well. we discussed the facts and the connection to ev's, that is next. this is bloomberg. ♪

romaine: we are examining the health of the market and whether

there are excesses out there. are they healthy excesses or bubbles waiting to be popped? we talked a moment ago about a gamestop. you have to throw crypto in their. -- in there. joe: if there is a private auto tech company, there is almost certainly a swarm of bankers surrounding it. every day, there are new names, companies. one had their boom earlier last year. i never heard of canoe. there are so many now on they are and they all had there been up an extraordinary moment. romaine: don't look at me. caroline: meanwhile, there are private hands still getting a ton of money in the private market. why hasn't anyone -- joe: it is crazy it has not happened yet.

i'm not wrong, right? it is a nonstop stream of companies none of us have heard of commending huge valuations right now. >> but that is also where the pump -- where the pressure comes from. the thing is, there is a finite list. there is a mandate, especially if it is lifted on an exchange, to complete a merger within three years. you have looked at the run-up in tesla stocks, that has everyone excited about the potential of ev stocks. it is also reflected in gm and ford. people are assigning a value to the potential of electric vehicles. there are a finite number out there and these facts have a deadline. it is a combination of both those things, the enthusiasm for the sector but also, you have to go shopping, you have to get the deal with the company when it is available, and that is one reason from the spac's

perspective that these are happening in quick succession. romaine: i'm looking at canoe's website, driven by technology. these are interesting-looking vehicles. whether they come to fruition, who knows? the big question for a lot of investors, you have companies out there right now selling a vision. you can argue that it worked for certain people, elon musk the visionary who you can point to, tangible success. investors have been rewarded. a lot of other companies, you wonder, are we going to see these products? ed: the commonality between a lot of them is they are pretty revenue but from the companies themselves, that is the attraction of the spac route. it allows companies to market to investors using financial projections, not solid finances. a lot of these companies, a lot of the investment is based on a

business plan. they don't have many tangible assets, they don't often have a manufacturing facility. a lot of the pieces are missing. so they go by this route because it is not carry the scrutiny that a direct listing dolls and a terms of the private routes, you have to remember, when you go through a private round, the number of stakeholders increases and you have to surrender a chunk of your company. when you are a startup, you don't have much to show for it, back options are an attractive one. caroline: as you say, how the mighty fall when you think about nicola. the herb and discharged that we saw, how much it has fallen. our people being burned and learning? are there people thinking about regulation to stop the retail buyer clamoring in and finding they are losing their money? ed: i heard you talking about

gamestop. the commonality with the z test with these ev spacs is the retail trader it's going all in. they are getting involved with these spacs before murders are completed. nicola is a cautionary tale for many. the nicola of today is different than when i first started writing about it last year. a lot of plans that it had are now gone. it is completely scaled-back. the ftc is looking into nikolai now. that has been a cautionary tale. that is the next area to look to. we have not done much reporting around that but the concern is the run-up in a lot of these stocks is that it is being driven by retail investors and they are trying to play the market often before a transaction has been completed. joe: i know you say there is a

finite number of companies in this category, but for the time being, can we expect plenty more out there? ed: there are different types of quality companies. we have done a lot of reporting. lucid mortars -- motors has established itself as a technology leader in the ev space, it has demonstrated significant range, it has a factory, it is backed by the saudi public wealth fund, that is different than some of the other names. in terms of where these companies are coming from, some of them have been around for a little while and as private companies, they did not make a great deal of progress in terms of bringing their product to market, so the question that i have is what changes overnight by going down this route? how does this make your business more execution of all them -- executionable that when you were

a private company? romaine: breaking it all down for us. coming up, we will talk about jeremy grantham saying it is impossible to know how long the burst of euphoria and markets will continue. we dig into some of the speculation. this is bloomberg. ♪

>> today, we are focused on speculation that we may be seeing the cross markets, jeremy grantham, ending on this issue with a warning for investors. jeremy: the market had resisted opportunities to bubble earlier in this cycle. it looked like it was getting

close to years ago, then it fizzled away, the confidence dissipated. most ball markets can go on forever and you don't know how long and you don't know how high they can go. it is a burst of euphoria that typically brings these things to when end and we are seeing it all around us today. >> joining us now, corey hoffstein. thank you for joining us. we see retail slamming the bid on these call options on a scale we have never seen before. how hard does that make coming up with historical parallels like understanding where we are in this cycle? corey: one thing we have to ask ourselves, how much the meta game has changed. there are people who would say this feels like 1999. maybe 1996, maybe 2000.

i think what makes today different that people are not recognizing is the bull of forums like reddit, the access that investors have, the trade options via applications like robin hood, the lower commissions in which they are getting charged. the role of social media platforms in influencing a lot these trades. you look at some of the alternative data, a big pickup among financial youtubers and tiktok influencers talking about trading options in a lot of these retail names and i think that is having a bigger outside influence then a lot of people would believe. caroline: clearly, took citron off guard. how does one factor it in? how do you do your research to assure that your analysis

might seem secure but when you're betting a gone -- betting against the wrong group, it carries no weight? corey: it is something you have to start considering how it is going to play with a lot of the quantitative factors. for example, momentum as a factor would start to look like at a stoplight gamestop, that is going to rank highly against short-term momentum measure, but it is important that researchers who are working in momentum take into account some of these dynamics and say, our expectation is that momentum works because investors are under reacting to fundamental news in the markets, not because we have optioned buyers and short-sellers going to war with each other. romaine: talk about what we are seeing the option market. there was research earlier this week about the lack of put options in terms of the amount

out there and how this was some signal that there was a systemic risk element in the market should this bubble proved to be a bubble. what are you seeing? corey: we are seeing a few chopped option -- huge adoption of call option by an among retail participants. there are real barriers to entry within the asset management space, both mutual funds cannot just by options, but -- buy options, but we are seeing adoption of higher call option volumes and a lot of that is small orders which would suggest it is retail investors that are doing the trading. when it is retail investors that are buying upside calls in individual securities, if you

get a large concentrated effort among those investors, whether it is on purpose or not, that can have an outsized effect because of the leverage they are playing with. joe: i want to go back to your point about how this retail participation can create the appearance of a classical momentum move but maybe is not going to behave fundamentally the same way. talk to us about how tricky that is, if a tiktok influencer gets on there, talking about gamestop or something, creating the appearance of classical momentum, but not necessarily going to behave in the weight research would predict. corey: research would predict that naive momentum factor would be we would break stocks -- rank stocks based on a 12 month return, expecting them to

outperform in the short term. the classical research does not take into account when that performance happens. it does not matter whether it occurred 12 months -- occurred over 12 months or there was a rocketship in the last month. when you have these situations where an individual security is not -- is not creating consistent gains, but you see a gamestop that is dramatically jumping in a one-month period, momentum investors are going to start picking up on those names and they may be able to ride the wave of retailer, but they may also ultimately be the back holders as retail moves out of that name and into something else. caroline: do you expect any regulation to come in to protect the retail investor and stop this from happening? corey: this is an interesting question that i was having a chat with someone else earlier today. what we saw today with gamestop,

i liken it to this old internet meme of do you want to find dust you want to fight one horse-sized dock or 1000 dock-cite sources? you would expect an issue if people are trying to control a stock price, but i don't know if there is explicit regulation around different parties does happening to buy stocks. if you have a large confluence of people that buy short dated options and it happens to move the stock price because there is a liquidity issue within that security, i don't know if that is illegal. i do think it is something i would expect regulators to look at. caroline: interesting, almost what people thought was behind the oil going negative, a small amount of people all betting in an extraordinary way. thank you so much.

>> that does it for "what'd you miss?" romaine: bloomberg technology is coming up next. dedrick australia up next in asia. have a great day, everyone. this is bloomberg.

♪ emily: i am emily chang in san francisco. president biden's second full day in office. an assessment of what is to come. he warns more than 600,000 people in the u.s. will likely die of covid. and how he plans