Will S&P 500 Retest Recent Low By End of April

[LC]

Greg, I agree with everything in your post.

 

 

[Gregmal]

Greg, I agree with everything in your post.

 

We've come a long way haven't we?

[kab60]

If you folks think zero commissions have had people jump into the market, wait until you have to pay a bank to hold your deposit... I'm amazed everytime I hear of someone who's been adviced by his bank to invest in XYZ crap with real risk of principal loss because it's too costly to hold cash in a bank account... Either way, retail is still such a small of the overall market, no?

[mattee2264]

 

Yeah my impression was also that retail was an insignificant part of the market nowadays.

 

Although if retail inflows have picked up significantly I agree that is another warning sign.

 

 

 

 

[SHDL]

Some data on this:

 

https://twitter.com/bennpeifert/status/1258038489540517893/photo/1

 

As you can see there is a huge spike after commissions went to zero in October.

 

 

Addition: Here are some numbers from Robinhood...

 

 

Robinhood has always had zero commissions, and indeed there is no October spike unlike the other brokerages above. But there is a huge ramp up after the lockdowns started, which suggests that their users were big dip buyers.

[Jurgis]

Some data on this:

 

https://twitter.com/bennpeifert/status/1258038489540517893/photo/1

 

As you can see there is a huge spike after commissions went to zero in October.

 

 

Addition: Here are some numbers from Robinhood...

 

 

Robinhood has always had zero commissions, and indeed there is no October spike unlike the other brokerages above. But there is a huge ramp up after the lockdowns started, which suggests that their users were big dip buyers.

 

Well, good for retail investors if they bought stocks of good companies (and not USO) during the dip. And if they manage to hold them through whatever comes.

[SHDL]

Some data on this:

 

https://twitter.com/bennpeifert/status/1258038489540517893/photo/1

 

As you can see there is a huge spike after commissions went to zero in October.

 

 

Addition: Here are some numbers from Robinhood...

 

 

Robinhood has always had zero commissions, and indeed there is no October spike unlike the other brokerages above. But there is a huge ramp up after the lockdowns started, which suggests that their users were big dip buyers.

 

Well, good for retail investors if they bought stocks of good companies (and not USO) during the dip. And if they manage to hold them through whatever comes.

 

Yeah, although you do have to wonder what % of these guys who piled into the market in response to commissions going from $5 to $0 are really in it for the long haul...

[Jurgis]

Some data on this:

 

https://twitter.com/bennpeifert/status/1258038489540517893/photo/1

 

As you can see there is a huge spike after commissions went to zero in October.

 

 

Addition: Here are some numbers from Robinhood...

 

 

Robinhood has always had zero commissions, and indeed there is no October spike unlike the other brokerages above. But there is a huge ramp up after the lockdowns started, which suggests that their users were big dip buyers.

 

Well, good for retail investors if they bought stocks of good companies (and not USO) during the dip. And if they manage to hold them through whatever comes.

 

Yeah, although you do have to wonder what % of these guys who piled into the market in response to commissions going from $5 to $0 are really in it for the long haul...

 

I do wonder. But I tried to be positive (for my daily dose of positivism).

[Kaegi2011]

Another data point: https://www.ft.com/content/9336fd0f-2bf4-4842-995d-0bcbab27d97a

 

I'm counting ~4.5mm new accounts across RH (3mm), Schwab (600k), TD (600k), etrade (300k). 

 

Gamified’ investing leaves millennials playing with fire

Slick stock-trading apps skip over the risks for inexperienced investors

 

May 7, 2020 3:00 am by Siddarth Shrikanth

 

When US oil prices crashed into negative territory last month for the first time in history, the financial pages were filled with warnings to retail investors looking to bet on a rebound. One trader said that it was a case of “muppets vs sharks” as amateur investors became caught up in the market carnage when they tried to call the bottom for crude prices. Such stories did not halt the millennial rush.

 

The United States Oil Fund, the world’s largest oil exchange traded fund, reflected a worrying trend. On Robinhood, a trading app targeted at the young and tech-savvy, the number of users holding USO more than tripled over the three days that followed crude’s sub-zero plunge on April 20, reaching nearly 200,000, according to Robintrack. The flood of entrants came as the price of USO dropped about 40 per cent. ETFs in Europe and Asia experienced similarly large inflows as prices crashed.

 

Over the next week, as hopes rose for a market rebound, Robinhood users began dumping their holdings. By May 1, holdings of USO had dropped by a third just before its price showed signs of recovery. If Robinhood’s user base, with an average age of about 30, is any guide to the actions of millennial investors, many appear to have bought low and sold much lower.

 

Why were younger investors drawn into volatile commodity tracker funds, despite repeated warnings from regulators that these risky products were unsuitable for retail investors?

 

At first blush, the explanation may lie in a relative lack of confidence and investment expertise, which makes those in my generation more likely to buy a fund that promises to track a benchmark.

 

Less than half of millennials with taxable investment accounts are “extremely or very confident” in their investment decision-making abilities, according to a survey in 2018 by CFA Institute, an investment body — a share that falls to 21 per cent among millennials who do not invest.

 

A survey in 2017 by Natixis, the French investment bank, found that 65 per cent of millennials believed that index funds were inherently less risky, despite offering “no built-in risk management”, as the bank put it.

 

This is a recipe for disaster when it comes to commodity-linked ETFs such as USO, which behave differently to stock market ETFs. Investors counting on an eventual rebound in oil prices have been drawn to the simplicity of products that might appear to track the price of oil, overlooking the risks in the investment structure.

 

Chief among them is the so-called rollover risk, when the ETF has to sell expiring oil contracts and buy the next month’s. With the market in “contango”, meaning that spot prices are trading below prices for future delivery, funds can be exposed to potentially unlimited losses as they roll. Such risks can be exacerbated when investors bet on leveraged products that multiply gains and losses, and often come with steep management fees.

 

These products can catch even experienced investors off-guard. “I used to trade stocks for a living, but even I didn’t truly understand these complex commodity products,” admitted one former Goldman Sachs banker, who now invests in a personal capacity. “I took an equity ETF mentality . . . and saw my highly leveraged holdings lose 80 per cent of their value in days.”

 

New investors have been enticed by stock trading apps such as Robinhood, E*Trade, and SoFi Invest, which offer slick user interfaces, low fees and near-instant account opening. Robinhood, the fee-free trading pioneer, added 3m users in 2020, half of whom were first-time investors, while E*Trade added 363,000 mostly retail investors in the first quarter of this year.

 

“Robinhood has gamified investing. Trading is now so simple that it can be easy to make impulsive decisions,” one millennial investor in Harvard’s economics PhD programme told me. He regrets the progressively riskier bets he has made, which have run into thousands of dollars over the past couple of weeks. “The lockdown has also meant I’ve just had more time to spend on the app,” he added.

 

The apps’ in-house financial newsletters, which offer simplified takes on major market events, do not provide investment advice. But they have done little to deter poor decisions. “There is so ridiculously little demand for oil right now that we could theoretically be getting paid to fill up our own tanks,” gushed Robinhood’s Snacks newsletter on April 21, providing little information on the nature and dangers of ETFs that its army of bargain-hunting millennials were piling into that day. Such warnings remained buried in the fine print at the bottom of Robinhood’s website.

 

For all the excitement around oil, it remains far from certain that the only way is up for the industry. Investors are beginning to questionwhether oil demand will ever recover to pre-crisis levels as the climate challenge continues to rise up the agenda. For a generation that supposedly factors in social and environmental impact into financial decision-making, placing long-term bets on renewable energy might make more sense for their wallets and consciences. Just be careful what you track.

 

The author, a former journalist at the Financial Times, is studying for a joint MPP/MBA degree at Harvard’s Kennedy School and Stanford’s Graduate School of Business

 

 

[Spekulatius]

I wonder what the USO day traders do with their K-1’s next year. I don’t think most folks realize that they get a K-1, much less how to deal with a K-1 on with their tax return.

[Jurgis]

Can be interpreted positively or negatively:

 

https://www.barrons.com/articles/laid-off-workers-show-confidence-theyll-be-rehired-51588965820

[fareastwarriors]

‘Feels like we’re at the bottom’: Some executives see signs of recovery in April

 

https://www.cnbc.com/2020/05/11/business-execs-see-signs-of-recovering-in-april-after-bottom.html

[SHDL]

https://www.naaim.org/programs/naaim-exposure-index/

 

It appears that active managers were big buyers in April too but they have been trimming their long positions over the last week or so...

[SHDL]

Druck is bearish too:

 

https://www.bloomberg.com/news/articles/2020-05-12/druckenmiller-says-v-shaped-recovery-for-u-s-is-a-fantasy

 

https://www.cnbc.com/2020/05/12/risk-reward-for-stocks-is-maybe-as-bad-as-ive-seen-it-stanley-druckenmiller-says.html

[UK]

https://www.cnbc.com/2020/05/13/david-tepper-says-this-is-the-second-most-overvalued-stock-market-hes-ever-seen-behind-only-99.html

[Gregmal]

https://www.cnbc.com/2020/05/13/bill-miller-doesnt-see-market-as-dramatically-overvalued-says-amazon-could-double-in-3-years.html

 

LOL. Certainly a bit contrarian.

 

RE: Tepper, interesting the collar he put on. Bottom should be in, but we're overvalued. So his idea of fair value is somewhere between the levels we're seen in the past 6 weeks, which, given the divergences of the various indexes, one could probably deduce he's talking about the Nasdaq.

[mattee2264]

 

I don't think Bill Miller has ever seen a market he doesn't like and is bullish on airlines so go figure. Doesn't seem to have learned anything from the GFC.

 

Druckenmiller's take makes the most sense i.e. markets seem to be pricing in an overly optimistic outcome but its dangerous fighting the Fed.

 

 

[stahleyp]

I'll give Miller credit, I can't think of any other big name investor who has come out bullish over the past couple weeks.

[meiroy]

 

Bill Miller' opp. trust return since inception, w/o sales charges:

 

1. 14.4% vs S&P 14.1%

2. 12.34% vs S&P 12.98%

 

income fund:

 

1. -1.93% vs 3.16%

2. -3.78% vs 2.57%

 

 

Wouldn't bother with his opinion.

 

Next!

 

 

[SHDL]

Yeah, and even if you knew nothing about his history you have to be immediately suspicious of someone who claims the market is trading “around 17 times the consensus on bottom-up earnings for 2021.”

[sleepydragon]

“Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway.”

 

 

[stahleyp]

Guys, are you telling me people like Drunkenmiller, Buffett and Tepper know more than this legend?

 

https://www.marketwatch.com/story/suze-orman-on-investing-in-the-stock-market-amid-pandemic-just-do-it-2020-05-03

[fareastwarriors]

Guys, are you telling me people like Drunkenmiller, Buffett and Tepper know more than this legend?

 

https://www.marketwatch.com/story/suze-orman-on-investing-in-the-stock-market-amid-pandemic-just-do-it-2020-05-03

 

Her advice isn't that bad considering her audience. She has always preached to have a big emergency fund, pay down debt, and then save/invest. I used to watch her on late night CNBC. Simple but very true: "People first, then money, then things."

 

 

“You will never, ever, know the bottom. You will never, ever, know the top,” she said. “Fortunes are going to be made out of this time. So just stay calm. I can guarantee you that if you stay in and you just stick with it, three years from now you will be very, very happy that you did.”

 

Fortunes comment is a bit dramatic and 3-year time horizon might be way short.

 

 

 

‘Let’s just assume you have an eight-month emergency fund. Let’s assume you have no credit card debt. Let’s assume that you still have money coming in. You should be dollar-cost averaging every single month into the stock market.’

 

I tell my family and friends to DCA and stay invested in low cost index funds. If they can just keep with average index returns, they will have a decent retirement fund.  Keep it simple

[fareastwarriors]

Nelson Peltz says he’s bullish on a vaccine, putting new money to work and voting for Trump

 

https://www.cnbc.com/2020/05/14/nelson-peltz-says-hes-bullish-on-a-vaccine-putting-new-money-to-work-and-voting-for-trump.html

[Gregmal]

I think people(still) need to calm down with all this market is over/under valued speculation and rampant obsession with calling the next day/week's direction.

 

Some things right now are astoundingly expensive. Some things are astoundingly cheap. There is a lot thats in-between. Look at the Nasdaq vs S&P vs IWM... HUGE valuation disparity.

 

If you want to get speculative, you can, as Bill Miller correctly points out, find some easy home runs if you predicate that investment on a vaccine being found. On the other end, if there is no vaccine, you can also probably find yourself some landmines and thus avoid.

 

OMG 17x is cheap/expensive is stupid to me. I dont buy indexes and that kind of talk is only relevant if you do.