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Markets still falling like whoa

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5 minutes ago, ChiTownDoc said:

Fuck.  Was hoping for a pullback to dump more in.  Good problems to have I guess...

I’m somewhat in the same boat.  I have quit a few dividends that keep piling up.  After a certain point I try to find an undervalued stock.  The last few times it’s worked but I’m not seeing anything that catches my eye.  

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2 hours ago, SDG said:

I’m somewhat in the same boat.  I have quit a few dividends that keep piling up.  After a certain point I try to find an undervalued stock.  The last few times it’s worked but I’m not seeing anything that catches my eye.  

So you take your dividends in cash, not auto reinvest and then sit on the cash to find something to invest in.
Interesting strategy

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Just now, Wally Fairway said:

So you take your dividends in cash, not auto reinvest and then sit on the cash to find something to invest in.
Interesting strategy

Absolutely.  (It’s not really cash as it goes to my brokerage account).  My strategy is to build reserves then find something I think is undervalued.  My last three have been SBUX,  KNX, & BAC.  They’ve all outperformed the market since my purchase.  

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So Surly guru's I need some help; I'm trying to figure if there is a problem that is being hidden or one that is being fixed

Why has the Fed had to pump billions (like lots and lots of billions) into the short-term liquidity markets? 
Overnight lending rates spiked in September, so the Fed threw cash at the problem .... is there a "big" bank with problems not being disclosed to the public or some other funding issue between institutions?

I'm trying not to be Chicken Little, just trying to figure it all out.

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6 minutes ago, Wally Fairway said:

So Surly guru's I need some help; I'm trying to figure if there is a problem that is being hidden or one that is being fixed

Why has the Fed had to pump billions (like lots and lots of billions) into the short-term liquidity markets? 
Overnight lending rates spiked in September, so the Fed threw cash at the problem .... is there a "big" bank with problems not being disclosed to the public or some other funding issue between institutions?

I'm trying not to be Chicken Little, just trying to figure it all out.

FWIW

 

I interact with people from most of the major banks commercial lending departments (mostly sales people, but also some market presidents, analysts and underwriters) on a fairly regular basis for work.  None of them that I have spoken with over the last 2 months have a fucking clue.

 

I read yesterday that a current theory is that the Feds removal of liquidity from the system compounded by "decay"(loss of experienced people) in the personnel and systems at major banks was the cause. 

 

Basically, there has been so much liquidity that the recent Fed tightening exposed that banks had lost the skill set needed in the Repo market.

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1 hour ago, Wally Fairway said:

...

Why has the Fed had to pump billions (like lots and lots of billions) into the short-term liquidity markets? ...

Short answer: JP Morgan

The BIS just published a report on the issue:

https://www.bis.org/publ/qtrpdf/r_qt1912v.htm

ZH highlights research showing JP Morgan was withdrawing from the market (and has been for roughly a year now):

https://www.zerohedge.com/markets/fed-was-suddenly-facing-multiple-ltcms-bis-offers-stunning-explanation-what-really-happened

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from the BIS report

Quote

At the same time, increased demand for funding from leveraged financial institutions (eg hedge funds) via Treasury repos appears to have compounded the strains of the temporary factors. Finally, the stress may have been amplified in part by hysteresis effects brought about by a long period of abundant reserves, owing to the Federal Reserve's large-scale asset purchases.

 

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So this analyst at Credit Suisse has worked for both the US Treasury and NY Fed.  He was apparently an important cog in the response team the 2008 financial crisis.  He just published an analysis of the repo market issue and says:

Quote

...
Our big picture conclusion is that the safe asset – U.S. Treasuries – is being funded o/n and therefore it depends on balance sheet to be held and printed. Balance sheet for the safe asset isn’t guaranteed around year-end and if balance sheet won’t be there, the safe asset will go on sale ...

Treasury yields will spike.

The FX swap market could be the trigger of forced sales of Treasuries around year-end, and these funding market stresses will likely pull away capital and hence balance sheet from equity long-short strategies which could spill over into a broader equity selloff...

during a Treasury selloff – that’s not the right kind of risk parity Christmas.
...

https://research-doc.credit-suisse.com/docView?language=ENG&format=PDF&sourceid=em&document_id=1081995001&serialid=3Wu3wFUMyBePtRtdFV1OMYgKjlWVo06EvleE1YFXV0o%3D&cspId=1767182447312478208&toolbar=1

 

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1 hour ago, bernorange said:

So this analyst at Credit Suisse has worked for both the US Treasury and NY Fed.  He was apparently an important cog in the response team the 2008 financial crisis.  He just published an analysis of the repo market issue and says:

https://research-doc.credit-suisse.com/docView?language=ENG&format=PDF&sourceid=em&document_id=1081995001&serialid=3Wu3wFUMyBePtRtdFV1OMYgKjlWVo06EvleE1YFXV0o%3D&cspId=1767182447312478208&toolbar=1

 

And just when I was starting to think there wasn't much to worry about....

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Stock market reacts to tweets; social media rules the planet

I'm going to quit worrying about the economy, the environment, interest rates, earning releases and just look to twitter for investment guidance

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So yesterday the Fed announced that they will be injecting ~$500B (yes, half a trillion US dollars) into the repo market over the next 30 days.  I expected them to take some drastic action if necessary, but I expected them to be reactive and not proactive.  They must know just how "healthy" the banking sector really is.

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I wanna short Tesla stock, and to that end, I set up a brokerage account with Vanguard.  Looks like no i gotta "borrow" Tesla stock from them and pay 9% interest to do so?  That sounds wrong.  What am I missing here?

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18 minutes ago, Parliament said:

I wanna short Tesla stock, and to that end, I set up a brokerage account with Vanguard.  Looks like no i gotta "borrow" Tesla stock from them and pay 9% interest to do so?  That sounds wrong.  What am I missing here?

Buy a PUT contract, it entitles but not obligates you to sell the stock at that price and date on the contract. If the price of the stock goes below the price on your PUT contract (or makes a big jump in that direction), the price of your contract will increase. At this point, you can choose to sell your contract off for a profit, or you can hold it to expiry where you can either 1) buy stock yourself to exercise the option or 2) sell the contract on the day of expiry, which may be slightly less profit than exercising it yourself. 

Alternatively, if the stock goes up and your contract price is farther below the current price, the value of your contract goes down. You can cut your losses and run and try to sell the contract to some other sucker, or you can HODL and hope. At expiry if your contract is out of the money, you have no obligation or liability to hold backing assets for the contract. 

Options are super different from stocks though, and are typically tracked and observed through derivitive values that track the rate of change, inflection, etc. It's just calculus applied to tracking stock trends basically. 

Edited by Captainant

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3 minutes ago, Captainant said:

Buy a PUT contract, it entitles but not obligates you to sell the stock at that price and date on the contract. If the price of the stock goes below the price on your PUT contract (or makes a big jump in that direction), the price of your contract will increase. At this point, you can choose to sell your contract off for a profit, or you can hold it to expiry where you can either 1) buy stock yourself to exercise the option or 2) sell the contract on the day of expiry, which may be slightly less profit than exercising it yourself. 

Alternatively, if the stock goes up and your contract price is farther below the current price, the value of your contract goes down. You can cut your losses and run and try to sell the contract to some other sucker, or you can HODL and hope. At expiry if your contract is out of the money, you have no obligation or liability to hold backing assets for the contract. 

Options are super different from stocks though, and are typically tracked and observed through derivitive values that track the rate of change, inflection, etc. It's just calculus applied to tracking stock trends basically. 

I am somewhat familiar with commodity trading, puts and calls.  The short sale I describe above very much reminds me of a call.  I think I prefer a put.  How do I buy those?

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So yesterday the Fed announced that they will be injecting ~$500B (yes, half a trillion US dollars) into the repo market over the next 30 days.  I expected them to take some drastic action if necessary, but I expected them to be reactive and not proactive.  They must know just how "healthy" the banking sector really is.

Are they still just buying T-bills or the longer dated treasuries?

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On 12/13/2019 at 9:09 AM, Parliament said:

I wanna short Tesla stock, and to that end, I set up a brokerage account with Vanguard.  Looks like no i gotta "borrow" Tesla stock from them and pay 9% interest to do so?  That sounds wrong.  What am I missing here?

That’s how it works 

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On 12/13/2019 at 10:30 AM, Parliament said:

I am somewhat familiar with commodity trading, puts and calls.  The short sale I describe above very much reminds me of a call.  I think I prefer a put.  How do I buy those?

First you make a roux  -  oh wait sorry, wrong thread

First you have to get approved to trade options, it's usually a quick questionnaire to determine if you are a complete idiot, felon, or scammer.
Then you log into your account - look up a TSLA quote, then somewhere on the screen (depending on who you trade with) click on the options link
and the Tesla  option chain list will come up - it looks like you can go out as far as 1/21/22 with TSLA option
- there are weekly expiration dates through the end of Jan 2020, then about quarterly thru Jan 2022, so you have to choose how far out you want your PUT to extend
- within each chain will be a list of strike prices, this is the price which you are buying the right to sell TSLA stock in the future, the higher the price the more it costs
- each chain is for a different period of time, typically the longer you want your PUT to extend the higher the price of the put (if you do some research on PUT pricing this time component is referred to as theta)

So taking a quick glance (and Tesla stock opened up at $370, over 3% today) you can buy PUT options for about:

- Jan 31,2020 expiration - $355 for $16.25 or $390 for $34.30 - if you want to look at out of the money PUTs a $300 put is $3.25
- Jan 15, 2021 expiration - $350 for $55.40 or $390 for $76.05 - if you want to look at out of the money PUTs a $300 put is $35.75
- Jan 21, 2022 expiration - $350 for $79.70 or $390 for $100.60 - if you want to look at out of the money PUTs a $300 put is $56.60

While the concept of puts & calls is fairly straight forward, the pricing and volatility swings can be large; one (of many things to keep in mind) is that theta will erode you value over time.
Do some research to understand how the trading works, I'm a "Schwab guy" and they have some decent basic understanding options reference materials.

 

tL:dr - if you want to trade options, first take a couple of $100 bills and burn them, if you don't feel like killing yourself or someone else then maybe you have the emotional stability to trade them.

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Buying options is effectively the same as paying interest.  That's fine if you're confident on not only the direction but the timing, but you are definitely paying a premium that will decay as time marches on.

The way you (almost) get around that is to trade spreads (buy an option and sell another one at a slightly higher strike price), which (while relatively simple) is beyond your current pay grade, and your broker probably won't let you do it unless you demonstrate at least a modicum of understanding about how options can be exercised as well as what happens when they expire.

Your broker MIGHT let you sell puts at strikes well below the current price (hey to boso) which basically means you agree to buy N X 100 shares of TSLA prior to the expiration of the puts you sold on the off chance that TSLA drops below the strike price of the puts.  It's sort of a fire sale approach -- "I will pay $340 per share in 100 share blocks", and if the stock doesn't drop far enough for the put to get exercised, you keep the proceeds of the sale of the puts.  You'd have to have enough liquidity in your account to cover the purchase of those N X 100 shares, which would be in excess of $30K for any reasonable strike price given today's value of ~ $376.

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1 hour ago, Wally Fairway said:

usually a quick questionnaire to determine if you are a complete idiot, felon, or scammer.

Well fuck, that rules me out....

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On 12/16/2019 at 12:41 AM, ChiTownDoc said:

Time for Russell 2000 to rally?  It’s lagged.  Thinking of dumping some coin into whatever index fund they have.  

Fssnx. Great minds and all that shit.  Of course, I don't have a fancy boat so following my strategies might not be your best bet.

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Buying options is effectively the same as paying interest.  That's fine if you're confident on not only the direction but the timing, but you are definitely paying a premium that will decay as time marches on.
The way you (almost) get around that is to trade spreads (buy an option and sell another one at a slightly higher strike price), which (while relatively simple) is beyond your current pay grade, and your broker probably won't let you do it unless you demonstrate at least a modicum of understanding about how options can be exercised as well as what happens when they expire.
Your broker MIGHT let you sell puts at strikes well below the current price (hey to boso) which basically means you agree to buy N X 100 shares of TSLA prior to the expiration of the puts you sold on the off chance that TSLA drops below the strike price of the puts.  It's sort of a fire sale approach -- "I will pay $340 per share in 100 share blocks", and if the stock doesn't drop far enough for the put to get exercised, you keep the proceeds of the sale of the puts.  You'd have to have enough liquidity in your account to cover the purchase of those N X 100 shares, which would be in excess of $30K for any reasonable strike price given today's value of ~ $376.

Or you can sell a spread, which basically means you are just selling the risk of the underlying equity landing either inside or outside of a defined range.

But again, selling premium is all about pricing risk, not direction.

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On 11/7/2019 at 4:43 PM, ChiTownDoc said:

Really is.  I’ll never get why people do this.  I think I’m a smart sumbitch but history has proven pretty much nobody is smart enough to time the market.  You may get it right once or twice but over a lifetime?  Forget about it.  

Because the market is incredibly irrational.  Makes Trump look like a nuclear physicist it's so irrational.

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1 hour ago, Not a cat said:

Fssnx. Great minds and all that shit.  Of course, I don't have a fancy boat so following my strategies might not be your best bet.

Did IWM.  Long term play.  Everything else priced fairly expensive as far as S/P/bigboy index funds.  

13 minutes ago, TwiceHorn said:

Because the market is incredibly irrational.  Makes Trump look like a nuclear physicist it's so irrational.

Is it though?  I think most Americans don’t try to time it. They set it with some level of risk and forget it.  I hope it’s only the few degenerates trying to time the market - not the masses.  I could be way off on this...

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On 12/13/2019 at 6:08 AM, bernorange said:

So yesterday the Fed announced that they will be injecting ~$500B (yes, half a trillion US dollars) into the repo market over the next 30 days.  I expected them to take some drastic action if necessary, but I expected them to be reactive and not proactive.  They must know just how "healthy" the banking sector really is.

Bailouts for the wealthy; Austerity for the rest.

Sincerely, why lend to a risky bank when the Fed will just let the banks sit their cash for 1.55%. The Fed created this damn issue and now the banks are hooked on the heroin - err, free money. What a racket. 

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Are our politicians under the impression the US economy is too big to fail? That the deficit makes no difference anymore because the US is so powerful and vital economically on a global scale? That 100, 200, 900 trillion+ deficits won't matter at all? 

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