As I scan headlines, some articles blame the Fed’s recent statements, others a resurgence of Covid-19.
For example, Reuters reports “Dow slumps 5% on fears of spurt in virus infections, economic worries”
But if the Dow was going to dump $1500 on FOMC news, then it should have been yesterday on news Fed Projects 2020 Growth at -6.5%, Unemployment 9.3%.
Covid? Really?
That hardly looks like shocking news.
Making Up Headlines
Such articles make up headlines to fit the news, whether the headlines fit the news or not.
Panic Buying
Here’s an amusing headline The Nasdaq is exhibiting signs of panic-like buying–not selling–even as the stock market gets rocked Thursday.
The Nasdaq Arms Index, a volume-weighted breadth measure, fell to 0.389, while many on Wall Street see declines below 0.500 as suggesting panic buying. The Arms Index is calculated by dividing the ratio of the number of advancing stocks over decliners by the ratio of the volume of advancing stocks over declining volume. As the stock market rises, the Arms often falls below 1.000, as the buyers rush into advancing stocks. The current dynamic suggests that investors may continue to adhere to a trend of buying large-capitalization technology-related names that have helped the Nasdaq and the Nasdaq-100 index NDX, -3.46% outperform their peer indexes over the past several weeks. The number of stocks advancing on the Nasdaq on Thursday outnumbered decliners by nearly 15 to 1, while volume in advancing stocks represented 98.93% of total volume on the Nasdaq.
Casino or Stock Market
To understand today’s selloff one has to look at the past 3 weeks.
Note that Retail Buying Frenzy Goes Wild.
“In my 20 years of experience I’ve never seen retail traders push stocks around like they’re doing right now,” said Dennis Dick, a trader with Bright Trading LLC. “When the retail rush comes into something, it can really move.”
At least three London-based traders said the surge was down to “Robinhood” traders – Robinhood is a popular stock trading app that greets visitors to its website with the motto “It’s Time to Do Money.”
Robinhood’s website said at noon on Wednesday 9,417 of its users owned FANGDD, up from 4,002 shortly after the market opened. By midday the stock was down around 50%. A Robinhood spokeswoman was not immediately available for comment.
“This is what you get when the markets are powering ahead and investors will latch onto anything that has a name that linking to tech stocks,” said Jawaid Afsar, a trader at Securequity Ltd.
The moves in FANGDD are reminiscent of recent years in which punters chased any company with “cannabis” or “blockchain” in its name. The chaotic trading in FANGDD wasn’t a one-off.
Last week, a similar euphoria was seen in bankrupt or soon-to-be-bankrupt stocks with Hertz (HTZ.N), Chesapeake (CHK.N), Whiting (WLL.N) and JC Penney rising 300% to 500% before pulling back a bit, leaving seasoned traders scratching their heads.
Individuals Roll the Dice on Stocks as Veterans Fret
Similarly, the Wall Street Journal reports Individuals Roll the Dice on Stocks as Veterans Fret.
Options Traders Pile In
On June 8, Bloomberg reported Speculative Fervor in U.S. Stocks Surges to ‘Stunning’ Levels.
Traders established fresh bullish positions last week by buying 35.6 million new call options on equities, according to Sundial founder Jason Goepfert. That’s up from a peak of 28.7 million in February, when speculative activity was rampant, he wrote in a note Monday.
“Options traders make stunning bets on rising prices,” Goepfert wrote. “This kind of activity has a strong tendency to lead to negative returns in the S&P 500 and other indexes over a multi-week to multi-month time frame.”
Blazing Sentiment
WSJ today quoting Portnoy. He’s right:
“It took me a while to figure out that the stock market isn’t connected to the economy,” he said. “I tell people there are two rules to investing: Stocks only go up, and if you have any problems, see rule No. 1.”https://t.co/oGqCxjMydh
— Jim Bianco (@biancoresearch) June 10, 2020
“It took me a while to figure out that the stock market isn’t connected to the economy,” he said. “I tell people there are two rules to investing: Stocks only go up, and if you have any problems, see rule No. 1.”
Portnoy is a sports gambler turned to daytrading the market. He has a live feed to himself trading stocks.
“All I do is make money. this game is so f***ing easy”
There is a graveyard full of people who have been saying this about me for 20 years https://t.co/btjfKI0vPV
— Dave Portnoy (@stoolpresidente) June 11, 2020
You wanna get nuts? Let’s get FUCKING NUTS. How low can we go? Do the suits think I’m gonna flinch? #DDTG https://t.co/3vsBWvMpCO
— Dave Portnoy (@stoolpresidente) June 11, 2020
I Should Be Up A Billion Dollars Right Now
https://twitter.com/stoolpresidente/status/1270084893691842566
I’m the Captain Now!
I’m sure Warren Buffett is a great guy but when it comes to stocks he’s washed up. I’m the captain now. #DDTG pic.twitter.com/WqMR89c7kt
— Dave Portnoy (@stoolpresidente) June 9, 2020
Hold On to Your Nuts
When the bullets are flying is when I’m at my best. Today is what we call a “hold onto your nuts” day at #DDTG @jimcramer pic.twitter.com/FyLfc0XyNU
— Dave Portnoy (@stoolpresidente) June 11, 2020
That’s what’s been going on for weeks.
And millennials hopped onto the bandwagon, trading shares with no commission.
Blame the Fed?
Yes, blame the Fed, but today has nothing to do with it. Nor does yesterday.
The Fed is a serial asset bubble blower with huge long-term consequences. Don’t blame day-to-day things for bubbles the Fed fostered for decades.
A lot of people will be burnt buying bankrupt companies and other companies that will take years to get back to these levels once a crash that sticks happens, and it will.
Mish
The lesson here is that gambling addicts who can’t bet on sports have discovered day-trading. At least the house take is a lot smaller than at casinos.
A bankrupt company applies to issue new stock to sell to eager buyers! I would think many companies will take advantage of current prices to raise more equity, not bankrupt ones though -:)
wonderfully timed: link to bloomberg.com
Reminds me a few hedge fund managers I know. LOL.
Portnoy may represent what’s wrong with our society, but I do appreciate his candor that markets are divorced from the real economy. Anybody who disparages Warren Buffett can’t be all bad!
Hmm, this reminds me of back in the late 90’s. I daytraded a bit back in those days. About 80% of daytraders went broke (but until they did, they all thought it was easy). Some made a little, and a very few made a lot. I had the privilege of knowing two traders who were outstanding. One had the most amazing knack of knowing when the market would reverse that I have ever seen. The other had files and files of patterns, and he would guess what the pattern would be at the open, make a few trades, and then go play golf. Both of them actually traded Forex index futures, not actual stocks, for what it’s work. Me, I made a little, but it wasn’t worth the stress, and it made filling my tax returns out a total pain.
Stocks only went up in the late 1990’s, too. Until they didn’t. 😉
Smart money exited stocks and parked their cash in money market funds in the last months.
New dumb money entered stocks and unfortunately they’ll see this as a buying opportunity.
Wonder who is going to be on the right side.
I wonder why I didn’t think to buy a VIX etn this morning at 5am when I saw the huge down move in the Dow futures?
VIX will burn you like there is no tomorrow!
Frank Portnoy used to work at Morgan Stanley, so he should know …..
Basically we are F*****, but we know already.
There’s already been $5T put into the bond market. Part of that is to CLOs. If you want more, the Fed will put in whatever is needed. It is simply a computer at the Fed that intervenes in these junk bond markets. They learned from the last crisis that they should be proactively bailing out anything that could be leveraged or a derivative in the bond market.
You are as crazy as the loons at the Fed.
Take that insensitive comment back! You insult Loons!
He may be, but how is he wrong?
I can’t tell if Portnoy is being serious or not. I feel stupid.
I think that the Fed statements yesterday were meant to deflate the euphoria. Overall, it feels like there there is (as usual) some pretty effective psyops in play re small investor behavior (as per normal). Wash, rinse, repeat. For every share bought by a wannabe speculator in a FOMO-powered melt-up, there is a seller. Perhaps an institutional player with some actual inside information. Said institutional player who probably has a sizable gain. Then at max retail participation, the rug gets pulled out. At the bottom of the cycle, same institutional guys buy back in, with knowledge days in advance of the next announcement of QE, junk bond purchases, impending phoney jobs report, whatever. Could such a thing be allowed in America?
Such a thing IS America.
FUTURES up, soooooooo
Maybe the greater fools are lining up to buy?
Casino or Stock Market?
Completely Corrupt Casino
Bank stocks being annihilated today.
Citi down more than 10%!
That’s gonna leave a mark.
“Bank stocks being annihilated today.”
…
NIRP being digested for what it would do to banks??
Why all of a sudden?
Powell has said repeatedly that they have no intention of going there, and did so again yesterday.
Maybe Fed “credibility” is finally completely gone.
Last week some St Louis FRB economist had a paper on going NIRP.
drip drip drip …
“The Ugly American” personified. A simply disgusting human being.
I take great umbrage to your contention that the pool of “Greater Fools” has run out. America is exceptional in this particular category and the pool is far from running out.
He should have said “the pool of greater fools who still have money to gamble with has run out.”
“There’s a sucker born every minute”.
BTD
fed’s gonna add a third mandate
Dontcha know?
Keeping pension funds from imploding.
News at eleven 🤡
We essentially have a gambler’s economy in the US. Only about 20% of the population is actually necessary and productive. I know of many family and friends who have been relying on stock trading for monthly income. This what the low rates and bailouts of 2009 brought. Now its been institutionalized. I do blame the Fed for all this but Congress is also to blame. They could take away the Fed’s authority if there was enough courage. So how much money can the bond market provide to this stock bubble ? That is really what’s going on. The Fed is providing support to all markets via the bond market but I see a repeat of 2009 next. We just experienced the bounce from the Lehman bust that was seen in 2008. It took 9 months for the market to bottom from that point in summer 2008.
I watched the end of Powell’s presser Wednesday.
The last question he took was on stock market bubble … his rambling response included a lot of throat clearing … when finished he didn’t ask if there were any more questions … Get Me Outta Here …
He has to know now that he’s simply pushing on a string.
Hoping this doesn’t lead to negative interest rates.
Trump = schoolyard bully
Powell = 4 eyes nerd
Trump WANTS NIRP
= ???
Wall Street banks own the government = no negative interest rates unless a scheme is devised whereby they can make money in a negative rate environment
Karma on line 1 …
I’ll save some electrons for the “no problems here” crowd, so here it is…
V shaped!
Hoax!
Don’t fight the Fed !
Luckily for Hertz they’re making up for it today with their donut business. Ever had a Hertz Donut?
dessert or mini-spare tire? any difference?
Haven’t had one in over 30 years, and even back then I mostly watched other people have them. It was a dumb joke, perfect for the midwest in the 1980s.
There is actually a chain called Hurts Donut. “Wanna Hurts Donut?”
Watching the democrat’s Bolshevik revolution in American doesn’t inspire confidence.
Ehhh, it’s not bloodless, and it’s not a coup. Did you cross post from Conservative Treehouse? The right wants to open states and liberate everything, and that’s exactly what’s happening. Be careful when building a wish list, it might come true.