Reddit's army of meme-stock traders can now move the values of the biggest companies in the world because hedge funds are chasing them into options trading strategies. Look what happened to Apple this week. Eric Platt and Madison Darbyshire report in The Financial Times: Investors pointed to several reasons for its strength, including the fact the company is a defensive play as uncertainty abounds over the coronavirus and as monetary policy shifts at the US Federal Reserve. Trading volumes in Apple have been impressive as mentions of the company have climbed up the ranks on Reddit message … [Read more...]

UPDATE November 30, 2021: Since we first posted this in March, stocks have continued their upward climb rising another 18%. Investors who bailed out at the March 2020 bottom and still haven’t gotten the courage to invest back in the market have forgone a 113% return. Ouch! And that doesn’t even count the capital gains taxes that were likely due when long-held positions were sold. Trying to rush for the exits when everyone else in the building is doing the same and then piling back in when the all-clear signal is given is a good way to get banged up. A long-term balanced approach that properly … [Read more...]

Just how fragile are markets? Wellington has done a report, and the results aren't promising. The supply and demand of liquidity are mismatched, and chaos could be right around the corner. Robin Wigglesworth explores the market's fragility in the Financial Times, writing: Investors have been blithely skating into the Christmas period, basking in another remarkable rally across financial markets. But the ice underneath may be thinner and brittler than many realise, as Friday’s violent sell-off showed. The past decade has been characterised by unusually calm, strong and long stock market … [Read more...]

Bloomberg's Lu Wang reports on options activity that boosted shares of Tesla in recent trading, writing: There were plenty of reasons for Tesla Inc. to rally Monday. Everything from Hertz Global Holdings Inc.’s blockbuster order to buying by passive funds and a squeeze on short sellers. But other forces were at play in goosing the gain: options traders who piled on bullish bets, and market makers who were forced to purchase shares to hedge their positions as the stock surged. In other words, the tail wagging the dog. It’s a narrative that’s come up repeatedly in … [Read more...]

I can’t believe I’m agreeing with George Soros of all people, but what he writes here is correct (except for the part about ESG investing). What’s incredible to me is George Soros has spent the last years of his life fighting tooth and nail against America. Why the change of heart? Perhaps he’s got some money stuck in China? BlackRock, the world’s largest asset manager, has begun a major initiative in China. On Aug. 30 it launched a set of mutual funds and other investment products for Chinese consumers. The New York-based firm is the first foreign-owned company allowed to do so. The launch … [Read more...]

GMO's second-quarter letter to investors, written by Ben Inker, is a master class on value investing and why value shares today look especially attractive relative to growth, aka glamour stocks. Most will likely brush off GMO's letter as the musings of a firm that has lost touch with a new paradigm in investing. "Today's growth stocks are different than your father's growth stocks," the growth bulls will explain. "It's all about innovation and disruption," as if innovation and disruption are new phenomena. Inker provides many insights on the Value vs. Growth debate, including why the … [Read more...]