Stocks Thread (A/K/A STONKS THREAD)

[goofy]

@boredsocial

[riverman]

The Levine letter was so good today, how about the guy who actually did the Ackman successfully? Insane!

[feedthabeast]

So uh wtf is happening? JPY bank stonk down 25%, South Korea halting all sell orders, US futures cratered almost 3%, and btc (10%) and eth (20%) collapsed.

ETA: SPX futures only down about 1.5%.

[akm]

The hamsters running on the wheel got tired.

[commonWealth]

I’m finishing a cross country move, putting our bed together, with tomorrow pencilled in to catch back up on my portfolio, so perfect timing for this to happen.

Needed 24 more hours.

[commonWealth]

Looks like the yen is up about 3% vs the dollar in the last few days, and 11% in the last month, so that’s offsetting a lot of this.

[bbb7979]

Seems like we’ve finally broken the cycle of bad economic news paradoxically triggering a market melt up due to rate cut anticipation.

Now, bad economic news actually triggers fears we’ve waited too late to lower rates and recession is inevitable.

[riverman]

Lots of random thoughts.

VTSAX still up 11% YTD and roughly 60% since Biden took office.

I keep seeing smartish trader types say a lot of this is unwinding carry trades because the yen strengthened against the dollar, no idea if this is true.

Bond trading is fucking wild and you have to be verifiably insane to trade long term bonds.

AI mania hopefully over, that shit felt very dot com era.

Falling rates may save a lot of CRE borrowers and lenders. Also residential housing may weirdly boom with mortgages back to normal rates historically.

[boredsocial]

Nothing here I disagree with. A good time to buy stuff on sale imo. Everyone is scared so the smart thing assuming you aren’t under significant financial pressure (which you shouldn’t be, shame on you for taking on real leverage with all time high’s as soft as they were recently if you are) is to get paid to help them out of their positions.

Personally the times when I do fuck around with leverage are nearly always after the market is already off a substantial amount and then I’m buying whichever stuff I understand that is selling at the biggest discount to tangible reality available OR BRK which as the worlds largest provider of private bailouts generally does really goddamn well in a crash. I mean let’s not forget that most of BRK’s largest and most profitable positions are the direct result of supposedly bad economic cycles.

I’m also kinda hopeful that the stock market finally taking a hit is a sign that the government may switch gears from trying to slow the economy down to get inflation under control to trying to get things moving. As someone whose industry has been heavily impacted by them tapping the brakes I’m hoping this might be the beginning of the end of our recession which at 26 months and counting is already the longest since the deregulation of trucking in the 80’s.

[McTrollson]

@riverman

AI mania hopefully over, that shit felt very dot com era.

Oh man we aren’t even close to seeing the AI bubble crash yet.

Always fun to see Bitcoin price completely tethered to the stock market. Kinda thought digital gold was supposed to be the safe haven when stocks take a dive?

[hammypotter]

https://x.com/zackvoell/status/1820101641875370241?s=46&t=45vgHoZvsEXz2aWNi8tmcw

[McTrollson]

The idea that crypto would be a hedge against a market crash is so loopy. Like people who’ve just had their 401ks cleaned out are going to all rush out to by Bitcoin? With the money they no longer have?

[goofy]

Levine explains it simply as always: The Good Trades Have Gone Bad (non-paywall)

Market crashes usually have the same mechanism. People like a thing, so they buy it, so it goes up. More people like it, so they buy more of it, so it goes up more. It goes up steadily enough that people think “ehh I should borrow some money to buy even more of this thing,” so they do. Eventually a lot of very leveraged investors own a lot of the thing. Then something goes wrong with the thing, its price goes down, the leveraged investors get margin calls, and they have to sell the thing to pay back their loans. Their losses are big enough that they have to sell other things, things that were fine, to pay back their loans on the thing that went wrong. The big leveraged investors who owned a lot of the thing that went wrong also all own the same other things, also with leverage, so there is a generalized crash in the prices of the things that big leveraged investors own.

In the special case in which the big leveraged investors are banks, this sometimes leads to a contraction in credit and serious economic consequences. In the general case in which the big leveraged investors are hedge funds, it’s mostly fine.

One thing that I sometimes think about is that the big multistrategy hedge funds look to some extent like the big investment banks of 20 years ago. They are in the business of trading, for their own accounts, to meet some demand from some other, more fundamental investors. So we have talked about the basis trade, in which big hedge funds intermediate between the US Treasury (which wants to issue Treasury bonds) and big asset managers (who want to own Treasury futures). In some sense, the hedge funds are just “making a bet” on the gap between Treasury bond and Treasury futures prices. But the reason that is a sustainable business — the reason there’s a persistent gap that they can bet on — is that there is fundamental demand for the futures, and the hedge funds are getting paid to manufacture them. The index rebalancing trade is a similar story. Or the dispersion trade, in which hedge funds sell index volatility to hedgers and buy single-stock volatility from covered-call writers.
…
A multistrategy hedge fund is a business, much like an investment bank, and its business units all have to fill some economic niche. “We’ll buy Treasuries and sell futures because there’s demand for that product” makes sense, so many big hedge funds have pods that do that. “We have found a strategy that makes money using astrology” does not, probably, so there are not so many astrology pods.

And so you get crowding: The big hedge funds do pretty overlapping trades, because those are the trades for which there is demand; those are the business units that have some economic niche. “Australia wants to borrow money, Japan wants to lend money, so we will borrow yen and lend Aussie” is a very straightforward economic story, a real business function that hedge funds do via the carry trade. (“Let’s all buy Nvidia” is a slightly different story, but there again there is probably some reason for crowding.) So they do a lot of it (and not so much the reverse), and so all the big trades tend to unwind at once.

[commonWealth]

Nikkei up almost 4%

[commonWealth]

Nikkei 225 now up 6%

[commonWealth]

Make that 7.4%

[Surf]

Robinhood 24hr trading thing said it was suspended tonight, don’t think I ever seen that

[feedthabeast]

Recession canceled! Dip buyers rejoice.

[riverman]

Carry trade narrative wins?

[commonWealth]

Who’s got two thumbs, just moved to the west coast, and forgot to unload his BIL today before east coast after hours trading closed so he could buy undervalued Japanese stocks and is now annoyed?