Investing megathread extravaganza

[DaFace]

A place to talk about investing stuff.

[SithCeNtZ]

Originally Posted by Buehler445

I had to do some highway driving today. That's when my mind really ****ing goes. If I drive around here, I'm always looking at crops and shit, and when I'm doing field work I'm operating the machine instead of spacing off. But I spaced out today.

Is this not the .com bubble? I mean we're not having companies with 0 revenue (except Nikola) have huge stock prices, but P:E is way out of line and there is just stupid money floating around.

I haven't thought about the .com bubble because it was sooooo stupid we could never do anything like that again, right? But there are a lot of similarities.

I don't think it will be that severe, but it certainly has seemed that the rise of some of these stocks is a game of musical chairs. Everyone keeps building them higher and higher for no reason and it may be that tipping point where the music has stopped and people are scrambling to get their profits. I could easily see someone like Tesla slip back to 250-325. There was no reason for it to triple in 6 months like it had, and I think people with huge positions and experience know that and are therefore selling leading to the drop.

[SupDock]

Originally Posted by Hammock Parties

Expected pullback.

Tomorrow should be a nice green day.

After hours trading looks like tomorrow will be a bloodbath.

[lewdog]

Originally Posted by Hammock Parties

Expected pullback.

Tomorrow should be a nice green day.

[ChiliConCarnage]

Originally Posted by SupDock

After hours trading looks like tomorrow will be a bloodbath.

Extended holiday weekends tend to be sell offs. It's sort of silly but it's probably been needed for tech, its been overbought for a bit. The 10y yield being around a 150 p/e is going to drive future FCF valuations a bit bonkers for high growth. A cooldown prior to elections madness makes sense.

[Demonpenz]

Litecoin got wrecked

[Munson]

Should I buy more Tesla/Apple now, or wait for them to drop some more?

Sent from my SM-J737T using Tapatalk

[Hog's Gone Fishin]

Originally Posted by Munson

Should I buy more Tesla/Apple now, or wait for them to drop some more?

Sent from my SM-J737T using Tapatalk

If you try waiting for a bottom you always miss the bottom.

I think Amazon is a great investment especially now because I imagine sooner or later they will do a stock split and when that gets announced its going to fly 50%

[TwistedChief]

Originally Posted by lewdog

Woof. Things are starting to get crazy.

Lots of "fear of missing out" talk coming from people at work, friends, message boards.

Don't let FOMO have you making bad decisions.

I put all my money with Lewdog Financial.

[TwistedChief]

BTW - everyone in the market had been citing an insanely large buyer of tech calls recently as really pushing this last leg of the move higher. The buyer has been unmasked:

https://www.ft.com/content/75587aa6-...4-3ff866753fa2

SoftBank is the “Nasdaq whale” that has bought billions of dollars’ worth of US equity derivatives in a move that stoked the fevered rally in big tech stocks before a sharp pullback on Thursday, according to people familiar with the matter.

The Japanese conglomerate has been snapping up options in tech stocks during the past month in huge amounts, contributing to the largest trading volumes in contracts linked to individual companies in at least 10 years, these people said. One banker described it as a “dangerous” bet.

The aggressive move into the options market marks a new chapter for the investment powerhouse, which in recent years has made huge bets on privately held technology start-ups through its $100bn Vision Fund. After the coronavirus market tumult hit those bets hard, the company established an asset management unit for public investments using capital contributed by its founder Masayoshi Son.*

Now it has also made a splash in trading derivatives linked to some of those new investments, which has shocked market veterans. “These are some of the biggest trades I’ve seen in 20 years of doing this,” said one derivatives-focused US hedge fund manager. “The flow is huge.”

The surge in purchases of call options — derivatives that give the user the right to buy a stock at a pre-agreed price — has been the talk of Wall Street in recent weeks, as the sheer size of the trades appears to have exacerbated a “melt-up” in many big technology stocks over the summer. Shares in Tesla soared 26 per cent in under a week to September 1, while Amazon and Google parent Alphabet gained about 9 per cent.

One person familiar with SoftBank’s trades said it was “gobbling up” options on a scale that was even making some people within the organisation nervous. “People are caught with their pants down, massively short. This can continue. The whale is still hungry.”

The options boom means that the US stock market remains vulnerable to further bursts of volatility, according to Charlie McElligott, a strategist at Nomura. “The street is still very much in a dangerous space, and that flow is still out there,” he said in a note on Friday, adding that this leaves the market open to swings higher or lower.

The overall nominal value of calls traded on individual US stocks has averaged $335bn a day over the past two weeks, according to Goldman Sachs. That is more than triple the rolling average in 2017 to 2019. The retail trading boom has played a big part of the frenzy, but investors say the size of many recent option purchases are far too big to be retail-driven.*

Unusually, single-stock call trading volumes have surged beyond the average daily volumes of calls on the broader US stock market, and are almost as high as the level of trading in index puts — which give the buyer the right to sell at a pre-set price and act as a popular form of insurance against stocks falling.*

The size and aggressiveness of the mysterious call buyer, coupled with the summer trading lull, has been a major factor in not only the buoyant performance of many big tech names, but the broader US stock market, according to Mr McElligott. This week he warned that dynamics around options meant the heavy purchases forced banks on the other side of the trades to hedge themselves by buying stocks, in a “classic ‘tail wags the dog’ feedback loop”.*

This also helped explain the unusual sight of the US stock market climbing in tandem with the Vix index — often referred to as Wall Street’s “fear gauge” — and meant that equities were fragile and vulnerable to the kind of sudden setback that erupted on Thursday. “The equity volatility complex is acting ‘broken’ and indicative that ‘something’s gotta give’,” Mr McElligott warned in a note shortly before the Nasdaq fell 5 per cent.*

One banker familiar with the latest options trading activity said Thursday’s market pullback would have been painful for SoftBank, but he expected the buying to resume. A larger and longer-lasting stock-market decline would be more damaging for this strategy, and would probably involve rapid declines, he added.

The options buying comes alongside $10bn in public investments SoftBank is targeting through its new asset management arm.

According to a filing to the Securities and Exchange Commission last month, SoftBank has bought stakes of nearly $2bn in Amazon, Alphabet, Microsoft and Tesla — investments that are partially funded by cash from its $41bn asset sale programme that was triggered by a collapse in its share price during the Covid-19 market turmoil.*

[SupDock]

QQQ on sale today. This may be my option to invest more heavily in tech long term.

[Rain Man]

I don't quite get how the market responds to option trading. So Softbank is buying a bunch of call options. Why is that pushing the market up? Is it just magnifying momentum because they exercise calls when prices go up and that in turn makes prices go up more? And then the opposite happens when it goes down?

We're having a big pullback on tech. Is it all or mostly attributed to this one company? If so, that's scary.

[MagicHef]

Oops, sorry everybody.

[Rain Man]

Originally Posted by MagicHef

Oops, sorry everybody.

Get out of options! You're killing me!

[ChiliConCarnage]

Originally Posted by Rain Man

I don't quite get how the market responds to option trading. So Softbank is buying a bunch of call options. Why is that pushing the market up? Is it just magnifying momentum because they exercise calls when prices go up and that in turn makes prices go up more? And then the opposite happens when it goes down?

We're having a big pullback on tech. Is it all or mostly attributed to this one company? If so, that's scary.

I imagine the entities selling them a ton of calls are hedging the bet by purchasing a lot of shares. That's probably pushing prices up. I doubt it's the only thing. A lot of new traders/investors are pushing money in too. There are always traders riding momentum too. It got going and went a ways too far.

[RunKC]

Originally Posted by Rain Man

I wonder if we're in line for a big correction. It's completely "me-search" instead of research, but I've recently heard several independent bits of bad news in my personal network, to the point where I've wondered if some sort of tipping point has been reached in terms of companies holding the line on the economy.

The Dow went up almost 3k in August so a pullback was definitely warranted. What’s interesting was this same thing happened in May. May 1st to the 1st week of June the Dow went up a similar path then stabilized and then came back in August.

I’m thinking this will be similar