Prof. Racket wrote:
Ghost of Igloi wrote:
HSGFX will continue to be a huge winner in 2022.
Imagine being bearish when US GDP just came in at almost 7%
Does that mean you won the omicron bet?
Prof. Racket wrote:
Ghost of Igloi wrote:
HSGFX will continue to be a huge winner in 2022.
Imagine being bearish when US GDP just came in at almost 7%
Does that mean you won the omicron bet?
Hardloper wrote:
Prof. Racket wrote:
Imagine being bearish when US GDP just came in at almost 7%
Does that mean you won the omicron bet?
I still am not really even sure what the scope of that bet was, but I am more than happy to declare myself the victor.
Maser wrote:
seattle prattle wrote:
I have to fight the temptation to start buying it back in some kind of FOMO trade at every little bounce the market takes throughout the day.
How about during every huge intraday bounce?😁
Yeah, things are very tempting. I have never used margin, and my use of geared vehicles is in small amounts and intraday, just for playing around, really. A few years ago I made a big bet with SPXL which turned out well, but I nearly had a coronary while waiting.
Yes I have been doing selective buying, this has been planned for a while. Of course most of the things I had planned to buy have enjoyed a recent bump in the shift to value, but many still look hood on the 5-yr, for instance. And even with the bump, P/E’s are still very reasonable. Oil responds to itself, the oil guy I know is currently neutral to positive on certain stocks.
So I have been buying, but not all at once, things that potentially get cheaper when the DXY rises. It’s interesting now because of the opposing pricing forces of rotation to value and currency changes. My guess is that they will get a bit cheaper in the short term, as FOMO’ers pile back into the seemingly inevitable US pump and as US interest rates rise. I will be buying, regardless.
Futures are now up, but that means little. As often, it’s about expectations. Yesterday, some expected (more hoped, really) that the Fed would retreat a bit, which they more-or-less didn’t. Now the prior expectations count in the industry as “settled expectations”, and everyone will move forward on that basis until such time as there is a dislocation, if ever.
Powell also admitted that they were wrong on inflation and that it could sustain longer than expected (even with their fudging!). Interesting.
One thing that I found disturbing is how the Fed is seemingly catering to the markets, rather than to sound economic/monetary policy. Powell said that monetary policy is driven by/based on/all about expectations, which I find an amazing statement. The basic value of money is ignored, and the role it plays in secondary markets is paramount. Tells me that money is now a big boy’s game, and that it has lost utility for the everyman because the “store of value” role is entirely subservient to the social policy execution role.
I am glad that I am moving out of USD. Even the minor amounts I have put into savings bonds will soon be able to be withdrawn immediately, with what amounts to very little penalty. With the Fed inflation projection, I might even spring for some paper bonds this year, to maxx out the buy.
I will admit that i didn't listen to Powell's speech in its entirety, and am working off of listening to commentaries and news coverage of it for the most part.
That said, the version I heard is that Powell spooked the market because he opened the door to more interest rate rises than the mere 3 or 4 previously mentioned, and he raised the possibility that some might be more than a quarter point (i.e.: half point) at a time. That could mean as many as 5 or even 6 raising of rates, if conditions necessitated.
As for the point about playing to the markets specifically, what i heard was that he would only be concerned about market moves in so far as it might effect the labor market, which is to say, he is not so concerned about how the stock market responds.
On the markets turning negative for the day - saw that coming. I might do some buying if we revisit the lows from Monday's sell off, or if we get a couple of days of sustained traction.
Prof. Racket wrote:
Hardloper wrote:
Does that mean you won the omicron bet?
I still am not really even sure what the scope of that bet was, but I am more than happy to declare myself the victor.
Also, this -
https://www.wsj.com/articles/weekly-jobless-claims-01-27-2022-11643232186agip wrote:
Take hedge-fund activity in the manic Monday session. When the S&P 500 wiped out an intraday loss of nearly 4%, the fast money tracked by Morgan Stanley duly cut their short positions at the fastest clip in a year.
Goldman Sachs Group Inc. clients also rushed to close out bearish exposures at the fifth-largest rate in the past five years. The deleveraging was mostly concentrated in the world of exchange-traded funds.
So while hedging demand in one form or another remains elevated by last year’s standards, a cohort of investors is cutting their protective buffers -- in a bullish sign for the Wednesday stock rebound ahead of the Federal Reserve meeting.
“It seems like there has been a decent amount of short-covering,” said Stuart Kaiser, head of equity derivatives research at UBS Group AG. “The feeling is that net exposure is higher but gross exposure hasn’t moved much this week, so that would imply some shorts getting covered.”
Hedge funds cut ETF short wagers cross the board in the Monday market roller-coaster, making the biggest single-day reduction since October 2020, the Goldman analysis also shows. Meanwhile, bearish bets against the world’s largest passive product appear to have fallen. Put open interest on the $406 billion SPDR S&P 500 ETF Trust (ticker SPY) has dropped near a 2014 low -- dragging the ETF’s put-call open interest ratio to the lowest levels since around March 2021.
this should take some of the selling pressure and volatility off the market. When all these shorts are closed out, traders have less incentive to sell at every twitch of the market. a significant step back to normalcy.
on the other hand, all that short covering is the same as buying and that is already done. So less big buying from institutions coming up now. That will not help.
But this is how big money shorting works...it accelerates the downside and the upside, and creates a giant well of buying, waiting to be come back into the market, when the shorts are covered.
They're HEDGE funds, if they cover shorts and or reduce puts, than it's probably because they have reduced their equity long positions. As James Chanos puts it ( no pun intended ), you go short so you can go long.
Yes, very glib—or tautological, depending on how you look at it.
Agip futures can be great, bet a little with big potential upside. I have used them in limited fashion in the past, but I know 2 guys who do nothing bit options trading.
Those jerks messed with ABBV, just as I was going to buy, some douche futures guys drove the price up.😡
Seattle, my point was that the Fed is following the markets, rather than leading with sound policy guidance. Apparently Powell believes that Treasury should do the same...which they are.
Wow, I know, big revelation: money talks.
True now as much as it ever was.
Regarding this margin discussion, here’s a story.
I was at an entrepreneur’s conference when I was young, and the discussion was about debt financing. It was the same scenario presented: well, if you can make more than you borrow, why wouldn’t you?
When real loans are taken by real players, they are much more sophisticated than simple margin loans. With a margin loan, you are not in control, you have no leverage and no negotiating power, there are only 2 parties and not a plurality of interests and diverse risks, etc.
Like business, the bottom line is this: if it was so easy, everyone would be doing it successfully. Margin, unlike even, say, an RE loan, is ruthless.
My advice is to first talk to someone you know who has ACTUALLY done it. It is not a frivolous game.
Prof. Racket wrote:
la gente esta muy loca wrote:
Bumping this ( with some editing ) from last year re MSFT.
Market makers are neutral on the trade so not sure why they'd need to buy back in a lower price. I think a bear raid is way more likely
You're confusing MMs with Prime Brokers.
"Market makers rely heavily on short selling to supply liquidity when filling
customer orders for securities not held in inventory, enabling them to maintain two-sided quotes
without carrying large positions. Short selling by market makers helps offset imbalances in the
flow of buy and sell orders, when demand would otherwise exceed supply." ( pp 12-13 )
"A short sale is the sale of a security that the seller does not own or any sale that is
consummated by the delivery of a security borrowed by, or for the account of, the seller. Data
made public by self-regulatory organizations (“SROs”) indicate that orders marked “short” under
current regulations account for approximately 49% of listed equity share volume." ( p 4 )
https://www.sec.gov/files/short-sale-position-and-transaction-reporting%2C0.pdfla gente esta muy loca wrote:
agip wrote:
Take hedge-fund activity in the manic Monday session. When the S&P 500 wiped out an intraday loss of nearly 4%, the fast money tracked by Morgan Stanley duly cut their short positions at the fastest clip in a year.
Goldman Sachs Group Inc. clients also rushed to close out bearish exposures at the fifth-largest rate in the past five years. The deleveraging was mostly concentrated in the world of exchange-traded funds.
So while hedging demand in one form or another remains elevated by last year’s standards, a cohort of investors is cutting their protective buffers -- in a bullish sign for the Wednesday stock rebound ahead of the Federal Reserve meeting.
“It seems like there has been a decent amount of short-covering,” said Stuart Kaiser, head of equity derivatives research at UBS Group AG. “The feeling is that net exposure is higher but gross exposure hasn’t moved much this week, so that would imply some shorts getting covered.”
Hedge funds cut ETF short wagers cross the board in the Monday market roller-coaster, making the biggest single-day reduction since October 2020, the Goldman analysis also shows. Meanwhile, bearish bets against the world’s largest passive product appear to have fallen. Put open interest on the $406 billion SPDR S&P 500 ETF Trust (ticker SPY) has dropped near a 2014 low -- dragging the ETF’s put-call open interest ratio to the lowest levels since around March 2021.
this should take some of the selling pressure and volatility off the market. When all these shorts are closed out, traders have less incentive to sell at every twitch of the market. a significant step back to normalcy.
on the other hand, all that short covering is the same as buying and that is already done. So less big buying from institutions coming up now. That will not help.
But this is how big money shorting works...it accelerates the downside and the upside, and creates a giant well of buying, waiting to be come back into the market, when the shorts are covered.
They're HEDGE funds, if they cover shorts and or reduce puts, than it's probably because they have reduced their equity long positions. As James Chanos puts it ( no pun intended ), you go short so you can go long.
I dunno man when i was at a long short hedge fund we'd increase and decrease short exposure depending on our view of the market. Seem pretty basic. If we were bearish we'd put on more shorts. If we were bullish we'd go long.
Which suggests that if hedgies are taking off shorts, they are less bearish than before. But they are too smart to be actually bullish. /snark
la gente esta muy loca wrote:
Prof. Racket wrote:
Market makers are neutral on the trade so not sure why they'd need to buy back in a lower price. I think a bear raid is way more likely
You're confusing MMs with Prime Brokers.
"Market makers rely heavily on short selling to supply liquidity when filling
customer orders for securities not held in inventory, enabling them to maintain two-sided quotes
without carrying large positions. Short selling by market makers helps offset imbalances in the
flow of buy and sell orders, when demand would otherwise exceed supply." ( pp 12-13 )
"A short sale is the sale of a security that the seller does not own or any sale that is
consummated by the delivery of a security borrowed by, or for the account of, the seller. Data
made public by self-regulatory organizations (“SROs”) indicate that orders marked “short” under
current regulations account for approximately 49% of listed equity share volume." ( p 4 )
https://www.sec.gov/files/short-sale-position-and-transaction-reporting%2C0.pdf
so they push opening high , short, than buy back at the lower price. A constant money maker back in the 90s.
It sounds like you're saying market makers are trying to actually get in on % gain from a short sell, which is not how actual market making works since they only make money on the bid-ask. This is because they stay effectively neutral on every trade (or at least they're supposed to).
Market makers rely heavily on short selling to supply liquidity when filling
customer orders for securities not held in inventory, enabling them to maintain two-sided quotes
without carrying large positions. Short selling by market makers helps offset imbalances in the
flow of buy and sell orders, when demand would otherwise exceed supply.
This is why market makers, and only market makers, are allowed to naked short - in order to maintain liquidity. If they had to actually locate the shares they had to short before they could let the sell go through then it would clog up things badly.
Maybe I'm not understanding what you're trying to say
with 45 minutes to go this market could close up 600 points or down 600 points.
getting a little sick of it.
I'd guess down, way down.
Maser wrote:
Regarding this margin discussion, here’s a story.
I was at an entrepreneur’s conference when I was young, and the discussion was about debt financing. It was the same scenario presented: well, if you can make more than you borrow, why wouldn’t you?
When real loans are taken by real players, they are much more sophisticated than simple margin loans. With a margin loan, you are not in control, you have no leverage and no negotiating power, there are only 2 parties and not a plurality of interests and diverse risks, etc.
Like business, the bottom line is this: if it was so easy, everyone would be doing it successfully. Margin, unlike even, say, an RE loan, is ruthless.
My advice is to first talk to someone you know who has ACTUALLY done it. It is not a frivolous game.
Scenario: I have $100,000 invested in VOO. The market drops 20%. Now I use $20,000 in margin at a rate of 2.5% to buy more VOO, and I have $10,000 cash sitting on the sidelines in savings etc. Explain to me how this could go wrong? Don't say it's risky. Tell me specifically how it goes wrong. I don't see it.
Computer Geek wrote:
Maser wrote:
Regarding this margin discussion, here’s a story.
I was at an entrepreneur’s conference when I was young, and the discussion was about debt financing. It was the same scenario presented: well, if you can make more than you borrow, why wouldn’t you?
When real loans are taken by real players, they are much more sophisticated than simple margin loans. With a margin loan, you are not in control, you have no leverage and no negotiating power, there are only 2 parties and not a plurality of interests and diverse risks, etc.
Like business, the bottom line is this: if it was so easy, everyone would be doing it successfully. Margin, unlike even, say, an RE loan, is ruthless.
My advice is to first talk to someone you know who has ACTUALLY done it. It is not a frivolous game.
Scenario: I have $100,000 invested in VOO. The market drops 20%. Now I use $20,000 in margin at a rate of 2.5% to buy more VOO, and I have $10,000 cash sitting on the sidelines in savings etc. Explain to me how this could go wrong? Don't say it's risky. Tell me specifically how it goes wrong. I don't see it.
It goes wrong when your margin is used up and liquidation of VOO begin with falling prices. People assume the unthinkable will not happen, but that was not the case in 2000.
Ghost of Igloi wrote:It goes wrong when your margin is used up and liquidation of VOO begin with falling prices. People assume the unthinkable will not happen, but that was not the case in 2000.
A few of you have offered this guy advice and he seems determined to fight. Sometimes you just gotta let somebody make their own painful mistakes…
Ghost of Igloi wrote:
Computer Geek wrote:
Scenario: I have $100,000 invested in VOO. The market drops 20%. Now I use $20,000 in margin at a rate of 2.5% to buy more VOO, and I have $10,000 cash sitting on the sidelines in savings etc. Explain to me how this could go wrong? Don't say it's risky. Tell me specifically how it goes wrong. I don't see it.
It goes wrong when your margin is used up and liquidation of VOO begin with falling prices. People assume the unthinkable will not happen, but that was not the case in 2000.
How does my margin get "used up"? If the market has already fallen 20%, and my margin maintenance amount is to have 50% of my original amount, that would mean the market would need to fall an additional 50% from already being 20% down. A 70% drop in the S&P500 is not going to happen in the 21st century.
I don't mean to criticize for the sake of criticizing, but you guys have given no-thought answers so far.
Computer Geek wrote:
Maser wrote:
Regarding this margin discussion, here’s a story.
I was at an entrepreneur’s conference when I was young, and the discussion was about debt financing. It was the same scenario presented: well, if you can make more than you borrow, why wouldn’t you?
When real loans are taken by real players, they are much more sophisticated than simple margin loans. With a margin loan, you are not in control, you have no leverage and no negotiating power, there are only 2 parties and not a plurality of interests and diverse risks, etc.
Like business, the bottom line is this: if it was so easy, everyone would be doing it successfully. Margin, unlike even, say, an RE loan, is ruthless.
My advice is to first talk to someone you know who has ACTUALLY done it. It is not a frivolous game.
Scenario: I have $100,000 invested in VOO. The market drops 20%. Now I use $20,000 in margin at a rate of 2.5% to buy more VOO, and I have $10,000 cash sitting on the sidelines in savings etc. Explain to me how this could go wrong? Don't say it's risky. Tell me specifically how it goes wrong. I don't see it.
I've actually been thinking about htis this morning, and checked my brokerages rules regarding buying on margin.
There's two things to consider, and we all tend to focus on the margin call, wherein the stock would need to lose 50% of NAV and he would be forced to liquidate at a loss or add more cash into his account to boost his threshold. He is banking on the SNP not losing that much. That is a bet, however you want to frame it, and is not 'no-risk' as he claimed.
Second, there's the 2.5% fee to borrow. That is what would give me pause, if nothing else. That is a lot more than most of us want to be paying and realize that it is an absolute fixed rate, while your hopes for a return of investment are not - that is unknown. Then, of course, the taxes you will either pay upon sale if cash acct. or upon withdrawl if tax sheltered accout, but point being, you got another 20% or so hit coming as some point when you eventually pay your taxes, unless in a Roth.
You could try it if it suits your risk profile. Personally, and I don't believe I am alone on this, I don't feel good about borrowing in order to possibly make some profits, and paying a premium to do so.
That said, leveraged ETFs, while not borrowing, are amplifying returns in a somewhat similar fashion, and I don't have objections to that, if done with some caution and ongoing attention.
Apple announced earnings ...
Surging
Ghost of Igloi wrote:
liquidation of VOO begin with falling prices.
We should play a game where we come up with scenarios where this could actually happen.
Near extinction meteor strike maybe?
Computer Geek wrote:
Ghost of Igloi wrote:
It goes wrong when your margin is used up and liquidation of VOO begin with falling prices. People assume the unthinkable will not happen, but that was not the case in 2000.
How does my margin get "used up"? If the market has already fallen 20%, and my margin maintenance amount is to have 50% of my original amount, that would mean the market would need to fall an additional 50% from already being 20% down. A 70% drop in the S&P500 is not going to happen in the 21st century.
I don't mean to criticize for the sake of criticizing, but you guys have given no-thought answers so far.
Who opens a margin account to basically buy and hold SPY?
Anyways, the $20k in VOO that you buy is basically collateral for the margin loan. if the value of the collateral drops low enough then you'll get margin called. Broker can usually adjust maintenance requirements too. So the answer to "what could possibly go wrong" is that whatever you're holding loses value more than you expected. Not really sure why you think there's a free lunch here.
And if you do get into margin accounts then use a real broker for adults, like IBKR or something from TD Bank like ThinkOrSwim, not Robinhood (which looks like it's not much longer for this world anyways)
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